According to Pro-Pay, Belgian payroll provider, it remains possible to benefit from reduced employer cost for a first employee until the end of 2020. Labour cost decreases because of lower employers’ social security contributions for the first till the sixth new hired employee, under condition the company never hired an employee before in Belgium. At this point of time, it is uncertain if the advantage of reduced employer cost will continue after 2020.
The rate of social security contributions an employer pays in respect of a white collar employee’s wage is currently 25% on average.
The social security contributions for employers differ according to the type of employee, the sector of industry, total headcount of the company and certain special contributions linked to the Joined Industrial Committee (JIC).
On top, a lot of social security reductions might be applicable; again these will depend and vary according to the sector of industry. The two most important and most common reductions are:
- Structural reduction of employers’ social security contributions.
- Reductions linked to specific categories of employees like elderly workers, etc.
Reduced employer cost for new employers
Reduction payroll cost
For a first employee, an extensive reduction of the employer cost is applicable until 31 December 2020 in the form of almost full exemption from employer’s social security contributions. This employer cost concession applies during the entire period of employment, hence for an indefinite period of time. On top, it is applicable for white collar workers and for blue-collar workers.
For the second to the sixth hiring in 2020, a fixed time-limited reduction during 13 quarters, in labor cost is existing also until 31 December 2020. At this moment, it is uncertain that this payroll advantage will remain next year.
Something good to know is the fact that in case of first hires, the entitlement to the reduction of the social security contributions does not necessarily need to be applied for the employee who once opened the right to the reduction. Pro-Pay can transfer the advantage of the reduction to another employee if this would be more advantageous from a financial point of view.
For the first employee
- Almost complete exemption for indefinite period
For the 2nd – 6th employee
- Quarter 1-5:
- 2nd employee = reduction of € 1 550 per quarter
- 3rd – 6th employee = reduction of € 1 050 per quarter
- Quarter 6-9:
- 2nd – 6th employee = reduction of € 1 050 per quarter
- Quarter 10-13:
- 2nd – 6th employee = reduction of € 450 per quarter
The benefit of these social security reductions is exclusively for new employers, which means they have to meet following conditions:
- The company has not been subject to the Belgian social security scheme for the 4 quarters preceding the employment of your first employee;
- The company is or was not linked to another company which already employs or employed personnel in Belgium over the past 12 months (a shared shareholder, director or member of management and similar location, activities, clients, etc.).
How can employers get this interesting reduction? Employers have to contact their payroll provider that will handle the required administration during the start-up of the payroll.
Reduced employer cost in euro
Let us take an example of an employer resorting under Joint Industrial Committee 200 (JIC 200). The Auxiliary Joint Industrial Committee for white collar employees or Joint Industrial Committee 200 represents more than 54 000 companies and over 400 000 white collar employees in Belgium.
For an existing employer, the annual salary cost of a first employee with a monthly gross salary of € 3 000 represents an annual budget of € 51 510. This budget is excluding the cost of any extra-legal benefit.
The financial picture of a new employer hiring a white collar worker with the same monthly gross salary of € 3 000 looks different:
- For the first hired employee, they only need a budget of € 42 540. This is a reduction of the employer cost of € 8 970 per year.
- For the second new hired white collar worker, the benefit totals up to € 13 750 after 13 quarters.
- For the third till the sixth new hired white collar worker, an employer saves the amount of € 11 250 per employee, after 13 quarters.
This employer cost reduction in payroll is one of the reasons why a lot of foreign employers are interested to start business in Belgium, and hire a first employee in Belgium. Especially if you know that the creation of a legal entity is not always necessary in Belgium. It is possible to register the foreign company as an employer with the Belgian authorities.
As far as we know, this government incentive will come to an end on December 31, 2020. In other words: hesitate no more and bring your business to Belgium in 2020!
A payroll provider like Pro-Pay, that is focusing on international employers will assist you with the administration related to the start-up of a payroll. Send me an email if you are interested to hire you first employee in Belgium!
Erik Van den Eynde
Director Business Development