According to Pro-Pay, the reduced employer cost makes that Belgium remains an interesting country to hire new employees. An incentive of an amount up to € 4 000 per quarter for an indefinite period of time, will convince a lot of foreign employers to hire their first employee in Belgium. Technically, the labour cost decreases because of lower employers’ social security contributions. At the same time, there are fixed, time-limited reductions in labour costs for the second to the sixth hiring.
In Belgium, 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
An extensive reduction in the payment of employer’s social security contributions exists for a first hiring. This concession applies during the entire period of employment, hence for an unlimited period of time. The amount of the reduction of the employer’s social security contributions for the first employee is capped at € 4 000 per quarter.
For the second to the sixth hiring, a fixed time-limited reduction during 13 quarters, in labor cost is existing.
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
- An exemption up to € 4.000 per quarter 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.
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 your first employee in Belgium!
Erik Van den Eynde
Director Business Development