On 15 September 2014, the Belgian Supreme Court (Hof van Cassatie/Cour de Cassation) handed down a judgment concerning the payment of social security contributions due on the compensation paid by the employer for the use of an employee's neighbouring rights. At issue was the question whether the monthly fee paid by the employer in exchange for the employee's performance right must be considered as part of the employee's salary on which social security contributions are due.
According to Article 14, §1 of the Law of 27 June 1969 concerning the revision of the Law of 28 December 1944 on the social security for workers (Wet van 27 juni 1969 tot herziening van de besluitwet van 28 december 1944 betreffende de maatschappelijke zekerheid der arbeiders/Loi du 27 juin 1969 révisant l'arrêté-loi du 28 décembre 1944 concernant la sécurité sociale des travailleurs) and Article 23 of the Law of 29 June 1981 concerning the general provisions of social security for employees (Wet van 29 juni 1981 houdende de algemene beginselen van de sociale zekerheid voor werknemers/Loi du 29 juin 1981 établissant les principes généraux de la sécurité sociale des travailleurs salariés) the amount of social security contributions due by the employer must be calculated on the basis of the employee's salary.
According to Article 2 of the Law of 12 April 1965 concerning the protection of the employees' salary (Wet van 12 april 1965 betreffende de bescherming van het loon der werknemers/Loi du 12 avril 1965 concernant la protection de la rémunération des travailleurs) the salary of an employee must be defined to include all benefits in cash or with a cash value to which the employee is entitled in the context of his employment.
Pursuant to Article 35, §3 of the Law of 30 June 1994 concerning copyrights and neighbouring rights (Wet van 30 juni 1994 betreffende het auteursrecht en de naburige rechten/Loi du 30 juin 1994 relative au droit d'auteur et aux droits voisins - now Article XI.205 §4 of the Code of Economic Law), an employee performer holding performance rights (neighbouring rights) can assign the economic rights in the performance to his employer. This assignment is subject to the following conditions: (i) the assignment of rights was explicitly provided for; and (ii) the relevant performance took place pursuant to the employment agreement.
In the case at hand, a performing artist in a musical received a monthly compensation of EUR 400 in exchange for the assignment of his neighbouring rights.
In the judgment reviewed by the Supreme Court, the Labour Court of Ghent had held that the compensation for the assignment of neighbouring rights to the employer could not be regarded as salary and as a result no social security contributions were due.
The Supreme Court disagreed and overturned the judgment of the Labour Court. It held that the payment should be regarded as the compensation for the assignment of the employee's neighbouring rights in the performances in the context of his employment. Consequently, the Supreme Court ruled that the monthly compensation is, in principle, a benefit to which the employee is entitled as a result of his employment and that it thus forms part of his salary. As a result, the employer must pay social security contributions on the compensation.
The Supreme Court judgment may have significant consequences for the creative sectors, including film, theatre, newspaper and magazine businesses. Employers may now have to pay 34% social security contributions on compensations for neighbouring rights, which may result in an increase of the salary costs for employers, while employees must pay a contribution of 13,07% of the compensation received. In addition, employers may be obliged to pay a 10% fine and interests of 7% and may have to go through a regularisation procedure for the compensations paid social-security free over the last 3 years.
