Extension of the salary concept for social security purposes – the future goes back… Employment Law (Corporate), Belgium

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Extension of the salary concept for social security purposes – the future goes back…

In the framework of the efforts by the Belgian government to combat social security fraud, the salary concept for social security purposes was extended as from 1 October 2013 to all indemnities due as a result of the termination of an employment agreement. By a Royal Decree of 21 December 2013, the Government has now again partly repealed this change with retroactive effect as from 1 October 2013. The NSSO has very recently updated its administrative instructions.

Before 1 October 2013

By a Royal Decree (RD) of 24 September 2013 (published in the Official Gazette on 27 September 2013), the salary concept for the purposes of Belgian social security was modified. The changes took effect as from 1 October 2013 and were applicable for every payment – falling within the scope of the RD – which was made as from 1 October 2013.

Before 1 October 2013, merely all indemnities which were due by an employer to an employee as a result of a breach of his legal, contractual or statutory obligations were exempt from social security contributions. The exemption was repealed as a result of the RD of 24 September 2013. Hence, practically all indemnities resulting from the termination of an employment agreement became subject to social security contributions including:

  • compensation paid as a result of breach of the dismissal protection for pregnant employees, time credit, educational leave, filing of a complaint for moral harassment, having made remarks in the framework of the implementation of new work regulations or other indemnities due by an employer for breach of his legal, contractual or statutory obligations
  • the clientele indemnity
  • payment under a non-competition or a non-solicitation agreement, paid directly or indirectly by the employer within 12 months after termination of the employment agreement, ….

As from 1 October 2013 retroactively

However, by Royal Decree of 21 December 2013 (published in the Official Gazette on 31 December 2013, with retroactive effect as of 1 October 2013), the Government has now again (partly) repealed some of the changes implemented by the RD of 24 September 2013.

As a result, the indemnities due by an employer, for example for breach of the dismissal protection for pregnant employees, time credit, educational leave, filing of a complaint for moral harassment, moral damages or other indemnities due by an employer in the case of breach of his legal, contractual or statutory obligations, are nowagain free from social security contributions– as from 1 October 2013, i.e. as if they were never subject to them.

Only the following indemnities due in the case of breach of legal, contractual or statutory obligations by an employer remain subject to social security (as from 1 October 2013):

  • compensation in lieu of notice
  • compensation due by the employer in the case of a termination by mutual agreement
  • compensation due by an employer in the case of breach of the dismissal protection for personnel or union representatives

but also:

  • the clientele indemnity
  • payment under a non-competition or a non-solicitation agreement, paid directly or indirectly by the employer within 12 months after termination of the employment agreement

Only very recently, the administrative instructions of the NSSO were updated, and employers were informed of this change. The NSSO instructs employers not to mention the (once again) exempt indemnities on the multifunctional declaration for the last quarter of 2013. The deadline for this multifunctional declaration is 31 January 2014. Should you be an employer who has already filed a multifunctional declaration, taking any exempt indemnities into account for the calculation of social security contributions, it is advisable to contact your case worker at the social security administration/payroll agency. An amended declaration will then be prepared (probably by the authorities off their own bat).

In addition, the 13.07% employee social security contributions retained by the employer on these amounts should be paid (back) to the relevant employees. Moreover, the applicable withholding taxes must be calculated and withheld from the latter amount and transferred to the tax authorities accordingly.

Please do not hesitate to contact us should you require further information.