1. New dismissal rules
The fact there are new dismissal rules does not mean there has been a clean sweep of the system. On the contrary, much remains as it was. For instance, you still have to comply with the formal and content requirements for letters of dismissal, the notice period still starts on the Monday following the week in which the letter of dismissal is served (for manual workers) or on the first day of the month following that in which notice is served (for white-collar workers) and there has been no tinkering with the principles of arbitrary dismissal and abuse of law.
A. 1 January 2012 = a turning point
From 1 January 2012, when you terminate an employment contract you will always have to look and see whether the agreed commencement of the employment contract was before or after that date in order to ascertain what rules apply.
If the agreed contract commencement date is before 1 January 2012, then the "old" dismissal rules continue to apply.
If the agreed commencement of employment is on or after 1 January 2012, the new rules will apply.
The agreed date of commencement of the contract is decisive. The date of contract signature and the fact that the employment contract cannot be performed owing, say, to illness plays no role.
Example: the parties sign an employment contract on 1 December 2011, with work due to start on 15 December 2011. Because he is ill, the employee only starts work on 3 January 2012. The new dismissal rules do not apply to the contract.
What if you sign an employment contract under which work is to start after 1 January 2012 with an employee who was already employed before 1 January 2012? In that case, the old rules continue to apply if the employment contract follows on without a break or, if there is a break, this is not longer than 7 calendar days.
Example: the parties have a fixed-term employment contract covering the period from 1 March 2011 to 31 March 2012. They subsequently sign an open-ended contract under which work is to start on 3 April 2012: the interruption is less than 7 days and the effective date of the old contract was before 1 January 2012: the current rules apply.
B. Seniority as a temp can count towards calculation of the notice period
Under the new rules, notice periods are still calculated on the basis of seniority acquired at the time the notice period commences. In future, seniority acquired by the employee as a temp working for the employer will be taken into account under the following conditions:
- notice of termination is served by the employer;
- the employee is hired immediately, or with an interruption of no more than 7 days following the period of temp work with the same employer/user;
- the employee is hired for an identical position to that he previously occupied as a temp;
- the period of temp working must be uninterrupted, whereby interim periods of up to 7 calendar days in which there is no work count as periods of employment.
In any case, the total acquired seniority as a temp will only be counted for up to one year.
Example: an employee works under 10 successive temp contracts from Mondays to Fridays. He is hired immediately thereafter under an open-ended contract: the employee has an additional 10 weeks' seniority.
Example: an employee works under 10 successive temp contracts from Mondays to Fridays. Between the 5th and 6th contracts, there is a break of 1 week (including the weekends). If the employee is then hired under an open-ended contract, he will have an additional 5 weeks' seniority.
If you hire the temp for another position or if you wait more than a week to hire the temp permanently, his seniority as a temp will not count.
C. (A small) extension to the notice periods for manual workers and severance pay
Employment contracts with an agreed starting date before 1 January 2012
a) Principle
For current employment contracts, nothing changes: the notice periods to be observed are those under section 59 of the Employment Contracts Act or CBA no. 75.
b) Special severance payment
The special severance payment provision is new. The special severance payment is the successor to the crisis bonus, which comes to an end on 31 December 2011. In contrast to the crisis bonus, the entire charge of the special severance payment is borne by the National Employment Office (NEO).
Manual workers whose employment contracts running as from 1 January 2012 are terminated by their employer with a notice period that is worked or otherwise will be entitled to a special severance payment, the amount of which depends on the worker's seniority:
< 5 years EUR 1,250
5 years < 10 years EUR 2,500
≥ 10 years EUR 3,750
In the case of a part-time working schedule, these sums are calculated proportionally.
No special severance payment is due if the current employment contract is terminated by the employer:
- for urgent cause;
- during the probationary period;
- for the purposes of retirement;
- for the purposes of bridge pension;
- for workers with less than 6 months' seniority.
Where the employer is entitled to a refund of part of the hiring fee from the NEO, the worker will not receive any special severance payment. To avoid abuse with a succession of employment contracts, it is provided that dismissal by a single employer will only confer a right to the payment once per calendar year.
The further procedures for according the payment, such as the forms the employer needs to fill in, will be laid down in secondary legislation.
The draft Bill of 6 April 2011 to amend the Income Tax Code 1992 regarding work bonuses and compensation in lieu of notice (Fiscal Provisions Bill) provides that the severance payment is tax-free, just as was the case with the crisis bonus.
Employment contracts with agreed starting dates on or after 1 January 2012
a) Principle
The notice periods to be observed for employment contracts with starting dates on or after 1 January 2012 are set down in the new section 65(2) of the Employment Contracts Act. The law takes the notice periods in CBA no. 75 as a basis and applies a multiplier of 1.15 to them.
Seniority Termination by the employer Termination by the manual worker
< 6 months 28 calendar days 14 calendar days
6 months < 5 years 40 calendar days 14 calendar days
5 years < 10 years 48 calendar days 14 calendar days
10 years < 15 years 64 calendar days 14 calendar days
15 years < 20 years 97 calendar days 14 calendar days
≥ 20 years 129 calendar days 28 calendar days
b) Exceptions
There are possible exceptions to these notice periods in a number of cases:
the existing arrangements continue in effect, i.e. the reduced notice periods for manual workers with < 6 months of seniority (section 60 Employment Contracts Act) and any exceptional notice periods laid down by royal decree (section 61 Employment Contracts Act);
by 1 January 2013, the sectors where exceptional periods are laid down will have to examine whether the exceptional periods should be adjusted using the same multiplier as for the new notice periods. If the sector makes no proposal, a royal decree will increase the exceptional periods with effect as of 1 January 2013.
c) Special severance payment
When the employment contract of a manual worker that falls under the new rules is terminated, the worker is entitled to a special severance payment, the charge of which is borne by the NEO. This is EUR 1,250 regardless of the employee's seniority and is tax-free.
D. Reduced notice periods for more-senior white-collar workers and an end to the Claeys formula
Employment contracts with an agreed starting date before 1 January 2012
Current employment contracts for white-collar workers continue to be subject to the present dismissal rules.
The courts continue to have jurisdiction to fix a notice period where there is no agreement in relation to more-senior white-collar workers. In so doing, they can still apply the Claeys formula. However, the general expectation is that the courts will in practice be guided by the new statutory periods (see below).
Employment contracts with an agreed starting date on or after 1 January 2012
Notice periods are expressed in calendar days, and the starting point is a notice period of 30 calendar days per year's seniority.
a) Junior white-collar workers (gross annual pay < EUR 30,535)
For junior white-collar staff, nothing changes and the statutory minimum remains the rule, i.e. 3 months' notice per period of 5 years' seniority commenced.
b) More-senior white-collar workers (gross annual pay > EUR 30,535)
The new notice periods for more-senior white-collar workers are set down in 2 periods by the IPA Act:
- notice periods for dismissals prior to 1 January 2014; and
- notice periods for dismissals on or after 1 January 2014. It is not clear whether the notice periods after that date will yet reduce. Nonetheless, in the IPA Bill, a three-step evolution has been provided, spread over 2012-2013 to 2016-2017.
In the case of termination by the employer, the following notice periods apply:
Seniority white-collar worker Notice periods notices dismissal Notice periods notices dismissal
served prior to 1 January 2014 served on or after 1 January 2014
< 3 years 91 calendar days 91 calendar days
3 years < 4 years 120 calendar days 116 calendar days
4 years < 5 years 150 calendar days 145 calendar days
5 years < 6 years 182 calendar days 182 calendar days
≥ 6 years 30 calendar days per year's 29 calendar days
seniority commenced per year's seniority commenced
The court's jurisdiction and the parties' ability to fix a reasonable notice period are done away with. For new contracts, thus, this means a definitive demise for the Claeys formula, which also means that disagreements about notice periods and court disputes should in principle be a thing of the past.
In the case of termination by the white-collar worker, the notice periods are fixed at half of those needing to be observed by the employer, with a maximum limit:
Seniority of the white-collar worker Notice periods
< 5 years 45 calendar days
5 years < 10 years 90 calendar days
≥ 10 years 135 calendar days
c) Most-senior white-collar workers (gross annual pay > EUR 61,071)
For the most-senior white-collar workers, it remains possible to agree exceptional notice periods no later than the time at which employment commences, though the lower limit is the statutory minimum (3 months per period of 5 years' seniority commenced). Otherwise, the same periods apply as for more-senior white-collar workers.
In the event of termination by a most-senior white-collar worker, the same rules apply as for more-senior white-collar workers, but with a maximum limit of 180 calendar days in the case of ≥ 15 years' seniority.
Of importance is that an employer dismissing a most-senior white-collar worker is liable to the Closures Fund in the sum of 3% of the dismissal cost. How dismissal cost is to be understood and what pay components are included is not clear and will be clarified by the King. The French term (coût du licenciement) seems to suggest that it is the cost to the company of effecting the dismissal, whereas the Dutch term ontslagbedrag translates more loosely as ‘dismissal amount'.
d) Exceptions
By contrast with the rules for manual workers, the new rules for white-collar workers make it unlawful to institute exceptions to the new notice periods under a sectoral CBA.
e) Comparative example
An employer terminates the employment contract of an white-collar worker aged 45 with seniority of 5.3 years and gross annual pay of EUR 57,000:
- notice period under the Claeys formula: 8 months
- notice period under the new IPA Act: 182 calendar days = 6 months
f) Calculating compensation in lieu of notice
Compensation in lieu of notice is calculated in calendar days. For this, the IPA Act lays down the following method: current monthly salary (including benefits acquired under the contract) x 3 ÷ 91.
The IPA Act also makes express provision that, where the current monthly salary partly or wholly comprises variable pay factors, the variable part is calculated by taking the average over the previous 12 months. However, the drafter ‘forgot' to say whether what is concerned are variable pay elements that were paid or earned over the past 12 months.
The basis for calculating compensation in lieu of notice could therefore still very easily give rise to a dispute.
E. Tax break for severance payments
The Fiscal Provisions Bill provides for a limited tax break on pay received in connection with dismissal, i.e.:
- the pay for notice that is worked; and
- compensation in lieu of notice.
If the employee is dismissed with a short notice period, the exemption is credited to the pay for the (too short a) notice period that is worked and not the compensation in lieu of notice.
The exemption applies to white-collar workers, blue-collar workers and company officers that are under contract to the company and amounts:
- from 2012: to EUR 425 (indexed EUR 600);
- from 2014: to EUR 850 (amount to be indexed).
The exemption does not apply in the following circumstances:
- employment contracts for a fixed term of defined work;
- termination by the employee;
- termination during the probationary period;
- termination for the purpose of retirement or bridge pension;
- termination for urgent cause.
2. Extension of crisis measures
The IPA Act extends the crisis bonus and temporary unemployment for white-collar workers under the same conditions until 31 December 2011.
Starting on 1 January 2012, both measures are incorporated into the Employment Contracts Act. As already explained above, the crisis bonus mutates into a special severance payment.
We now draw your attention to a couple of innovations.
A. Redundancy for blue-collar workers
Under the IPA Act, as from 2012, unemployed blue-collar workers will be entitled on top of their unemployment benefit to a supplement of at least EUR 2 per non-worked day, to be paid by the employer unless payment is to be made the responsibility of the Fund for Welfare Security under a generally binding CBA.
B. Temporary unemployment for white-collar workers
Temporary unemployment for white-collar workers becomes a definitive reality as from 2012.
To recall, a business in difficulties can make use of temporary unemployment for white-collar workers to suspend performance of their employment contracts (maximum 16 weeks a year) or by introducing a part-time work arrangement (2 days a week over up to 26 weeks a year).
In 2012, the conditions for being recognised as a business in difficulties will be eased:
- a substantial fall in turnover, production or orders is fixed at 10% instead of 15% by comparison with the same quarter in 2008;
- the 20% condition for redundancy among manual workers is dropped to 10%.
As before, this possibility has to be laid down in a CBA or business plan and the employer must submit a form to the NEO and inform the employees up front.
Temporarily laid-off workers receive no pay for non-working days but do receive unemployment benefit from the NEO.
From 1 January 2012, employers will have to pay a supplement on top of the unemployment benefits. The supplement cannot be less than EUR 2 (if the scheme is introduced by a CBA) or EUR 5 (if it is introduced under a business plan). In any event, the supplement may not be less than what is accorded to the manual workforce.
3. Employers, beware of wage rises!
Because employers' and employees' organisations failed to agree an IPA, the government has stepped in and fixed the maximum salary standard itself by royal decree of 28 March 2011. The salary standard is 0% for 2011 and 0.3% for 2012.
The royal decree came into effect on 1 April 2011. The maximum salary standard applies to all wage rises, regardless of whether they were agreed or approved before or after 1 April 2011.
A. For 2011 and 2012: binding rules
In 2011, contractual wage rises are proscribed. Indexation and scale rises (a wage increase or the grant of benefits further to a change of position in accordance with existing scales) do continue to be possible.
In 2012, wage rises are permitted within a maximum margin of 0.3%. These rises will have to be negotiated at industrial level, company level or under an individual agreement. Indexation and scale rises are also permitted for this period.
B. What can (or can't) you do?
For 2011, you don't have much room to manoeuvre.
You cannot just increase employee salaries without further ado or grant new (non-statutory) bonuses or benefits (like a company car, mobile phone, meal vouchers, etc.).
You can:
- increase employer contributions and premiums to industrial (social) employee pension schemes under certain conditions;
- accord employees a payment in money or in shares under application of the Act on workers' participation in corporate capital or profits;
- grant profit shares;
- reward a new work regime (e.g. a switch to night working);
- grant one-off innovation bonuses.
Some writers say that employers can (without an agreement, even verbally) grant benefits to one or more employees without breaching the royal decree since it is only if the margin as laid down is exceeded contractually that it is forbidden (at industrial, inter-industrial, company or individual level). Hence, if the margin is not exceeded contractually, but is unilateral, this is permitted.
C. What penalties are there if the salary standard is exceeded?
There is especially confusion as to what penalties might be incurred.
Straight up, you risk an administrative fine of EUR 250 to EUR 5,000.
In addition, the agreement conferring the wage rise can be held to be void by the court.
These penalties are not new. The difference from the salary standard laid down by employers' and employees' organisations, which was just a guideline, is that the new salary standard is a fixed standard and is therefore binding in nature. Previously, failure to abide by the salary standard laid down by the employers' and employee's organisations never led to proceedings by the inspectorate or in the courts.
Whether and how far the inspectorate will indeed raise action in the event of non-compliance and to what extent the penalties will, where due, actually be imposed is currently hard to predict.
