In 2015, the Belgian government eliminated the differential contractual treatment between blue collar and white collar employees. The main result of this streamlining will be a substantial reduction in the cost of firing employees. The government also increased the retirement age from the current age of 65 to 66 as of 2027 and 67 as of 2030. It remains to be seen whether these changes will be sufficient to cover the growing pension costs of an ageing population.
Under the plan various schemes of early retirement before the age of 65 will be gradually phased out, and unemployment benefits will decrease over time as an incentive for the unemployed to regain employment. Historically, unemployment benefits have not expired and some unemployed have lived off the benefits indefinitely. As a cost saving measure during 2015 budget negotiations the government and labor agreed to skip the 2015 automatic wage adjustment, but the process of automatic wage indexation is scheduled to resume in 2016.
Wage increases are negotiated by sector within the parameters set by automatic wage indexation and the 1996 Law on Competitiveness. The purpose of automatic wage indexation is to establish a bottom margin that protects employees against inflation: for every increase in consumer price index above 2 percent, wages must be increased by (at least) 2 percent as well. The top margin is determined by the competitiveness law, which requires the Central Economic Council (CCE) to study wage projections in neighboring countries and make a recommendation on the maximum margin that will ensure Belgian competitiveness. The CCE is made up of civil society organizations, primarily representatives from employer and employee organizations, and its mission is to promote a socio-economic compromise in Belgium by providing informed recommendations to the government. The CCE’s projected increases in neighboring countries have historically been higher than their real increases, however, and have caused Belgium’s wages to increase more rapidly than its neighbors.
Belgian labor law provides for dispute settlement procedures, with the labor minister appointing an official as mediator between the employers and employee representatives.
The Belgian labor force is generally well trained, highly motivated and very productive. Workers have an excellent command of foreign languages, particularly in Flanders. There is a low unemployment rate among skilled workers, such as local managers. Enlargement of the EU in May 2004 and January 2007 facilitated the entry of skilled workers into Belgium from new member states. However, registration procedures were required until mid-2009 for entrants from some new EU member states. Non-EU nationals must apply for work permits before they can be employed. Minimum wages vary according to the age and responsibility level of the employee and are adjusted for the cost of living.
Belgian workers are highly unionized and usually enjoy good salaries and benefits. Belgian wage and social security contributions, along with those in Germany, are among the highest in Western Europe. For 2015, Belgium’s harmonized unemployment figure was 8.4 percent, below the EU28 average of 10.5 percent (OECD). High wage levels and pockets of high unemployment coexist, reflecting both strong productivity in new technology sector investments and weak skills of Belgium's long-term unemployed, whose overall education level is significantly lower than that of the general population. In Brussels and Wallonia, youth unemployment exceeds 25 percent, while the unemployment levels of the non-native Belgian populations are even higher. As a consequence of high wage costs, employers have tended to invest more in capital than in labor. However, the current government has pledged to reduce the costs of labor through its tax shift program, which aims at substantially reducing the social security employment costs for employers. At the same time, a shortage exists of workers with training in computer hardware and software, automation and marketing, increasing wage pressures in these sectors.
Belgian's comprehensive social security package is composed of five major elements: family allowance, unemployment insurance, retirement, medical benefits and a sick leave program that guarantees salary in event of illness. Currently, average employer payments to the social security system stand at 35 percent of salary while employee contributions comprise 13 percent. In addition, many private companies offer supplemental programs for medical benefits and retirement.
Belgian labor unions, while maintaining a national superstructure, are, in effect, divided along linguistic lines. The two main confederations, the Confederation of Christian Unions and the General Labor Federation of Belgium, maintain close relationships with the Christian Democratic and Socialist political parties, respectively. They exert a strong influence in the country, politically and socially. A national bargaining process covers inter-professional agreements that the trade union confederations negotiate biennially with the government and the employers' associations. In addition to these negotiations, bargaining on wages and working conditions takes place in the various industrial sectors and at the plant level. About 51 percent of employees from the public service and private sector are labor union members. A cause for concern in labor negotiation tactics is isolated cases where union members in Wallonia have resorted to physically forcing management to stay in their offices until an agreement can be reached. In 2015 and again in 2016, the employee organizations and the trade unions failed to reach an agreement preventing aggressive tactics such as blockading entrances to business parks and setting up roadblocks.
Foreign firms, which generally pay well, usually enjoy harmonious labor relations. Nonetheless, problems can occur, particularly in connection with the shutting down or restructuring of operations. During 2015, the country witnessed several one-day symbolic strikes or work slowdowns, which were largely politically-inspired and not directed at particular firms or industries. These labor actions did not appear to affect foreign (including U.S.) firms any more than Belgian firms in recent years.
Firing a Belgian employee can be very expensive. An employee may be dismissed immediately for cause, such as embezzlement or other illegal activity, but when a reduction in force occurs, the procedure is far more complicated. In those instances where the employer and employee cannot agree on the amount of severance pay or indemnity, the case is referred to the commercial courts for a decision. To avoid these complications, some firms consider including a "trial period" (of up to one year) in any employer-employee contract. Belgium is a strict adherent to ILO labor conventions.
Belgium was one of the first countries in the EU to harmonize its legislation with the EU Works Council Directive of December 1994. Its flexible approach to the consultation and information requirements specified in the Directive compares favorably with that of other EU member states.