What are the pros and cons of Employer of Record (EOR) in Belgium? Global employers with expansion plans to start with employees in Belgium all ask the same question. In what way am I going to get employees to work for me? Today there are two common options: using services of an Employer of Record (EOR) or become an employer yourself. How do global employers make the right decision?
Contents
How Employer of Record (EOR) Services Work
In general, using an Employer of Record (EOR) service can simplify the hiring and management of employees without needing to establish a local entity or hire a team of legal and HR professionals. However, the Belgian labor market has specific characteristics and regulations that differ significantly from countries like the USA, the UK, and the Netherlands. Here is a general overview of how EOR services work and some key points that will help you understand the pros and cons of Employer of Record services in Belgium:
Consultation and Contracts
An EOR begins by understanding your specific needs and drafting employment contracts that comply with local labor laws. These contracts ensure all legal requirements are met from the start.
However, in Belgium, drafting an employment contract between the EOR and the employee is problematic if the employee works under the instructions of a third party (the factual employer, who is the EOR’s client).
Onboarding and HR Support
The EOR handles in general all aspects of onboarding, from collecting necessary documents to setting up payroll. They also provide continuous HR support, managing employee relations to ensure a smooth working relationship between you and your new hires.
In Belgium, while the EOR can assist with practical matters during onboarding, it cannot handle documents related to instructions between the employee and EOR. This responsibility lies with the company employing the individual.
Payroll, Compensation and Benefits, and Compliance
The EOR oversees payroll operations, manages employee benefits, and ensures full compliance with local tax laws and employment regulations. This means your company doesn’t need to keep up with changes in tax rules or labor standards, in most countries.
In Belgium, employment and wage conditions are determined by the joint industrial committee based on the employer’s activities, not by the EOR’s joint industrial committee. Consequently, wage calculations by the EOR might not be accurate. It’s essential for employers to stay informed about Belgian labor laws as they bear the responsibility.
Termination Procedure
If termination becomes necessary, the EOR manages the process to ensure it is conducted fairly and legally according to local employment laws. This helps avoid the complexity and costs of incorrect terminations.
In Belgium, the dismissal will be initiated either by the client/employer or the employee, as the EOR has no insight into the employee’s performance.
Risks of Using an Employer of Record in Belgium
Consider the pros and cons of EOR in Belgium. Companies should be aware of the potential risks associated with using an EOR as a third party in their relationship with employees in Belgium. It’s crucial to understand local labor regulations to ensure compliance and avoid legal complications. In case of conflict, one risks serious convictions.
Key Considerations for Foreign Companies
Check out the pros and cons of EOR prior to starting your activities in Belgium.
- Legal Compliance: Ensure all employment practices adhere to Belgian laws and regulations to avoid penalties.
- Employee Management: Maintain direct management and authority over your employees to comply with local employment regulations.
- Expert Consultation: Seek advice from local legal and HR experts to navigate the complexities of Belgian employment laws.
By understanding and respecting these regulations, businesses can ensure a smooth and lawful operation in Belgium while effectively managing their workforce.
Solution for Clever employers looking to start payroll in Belgium
Becoming employer is easy
Starting a payroll in Belgium is not as complicated or expensive as you might think. Unlike many other countries, Belgium does not always require a company to create a legal entity for running payroll. Non-Residential Payroll (NRP) also called payroll for an employer without establishment in Belgium are fully legal.
And in general Belgian employers rely upon payroll providers for managed payroll services, which which simplifies matters for global employers.
Register as an Employer without Establishment in Belgium
Foreign companies can register as employers with Belgian authorities, even without a local establishment. Often this is called non-residential payroll. This means the foreign entity will be recognized as the legal employer. However, it’s important for foreign employers to seek tax advice to ensure they meet all conditions to be exempt from corporate tax in Belgium. Most often, a simple nihil corporate tax declaration can be sufficient.
Appoint a Social Mandate Holder
Employers without a Belgian establishment must appoint a social mandate holder based in Belgium. This person will keep the social documents at a Belgian address. The employer must notify the head of the social inspectorate of this mandate by registered letter before drafting the social documents.
Reduced Labor Costs for New Employers
Belgium’s hourly labor costs are high compared to other EU countries. However, new employers can benefit from reduced costs for their first employees. The reduction applies to the first three new hires, provided the company has never hired an employee in Belgium before. The reduction can be up to € 3.100 per quarter for the first employee, and this benefit applies throughout the employment period.
By following these steps, you can efficiently start payroll in Belgium and take advantage of cost reductions for new employers.
The Pros and Cons of Employer of Record (EOR) in Belgium
By evaluating the pros and cons of EOR in Belgium, you will improve the success rate of your expansion. Complete the contact sheet below if you have questions.