On June 9, 2016 the long-awaited Royal Decree which modifies the structural reductions which are set off against the monthly employer’s social security contributions, was finally published. Said Royal Decree is the closing piece of the tax shift which was introduced by Program Act published on December 26, 2015.
This update covers the employer’s social security contributions for employees employed in the profit industry (i.e. category 1 employees). The impact of the tax shift for e.g. employers who employ employees to whom the social Maribel applies, employers who hire their first employees or the reduction of social security contributions for self-employed workers are not discussed.
Background and concrete measures
Before April 1, 2016
Before the tax shift legislation entered into force, the basic monthly employer’s social security contributions amounted to 32,4% of the monthly gross income.
In addition, industry-based contributions, e.g. social security contributions to the Welfare Fund on industry level, and company-based contributions, e.g. contribution to the closing fund, amounting to ±2,5% in total have to be paid on top of the basic employer’s social security contributions.
Accordingly, the total monthly employer’s social security contributions amounted to ±35% before April 1, 2016.
Afterwards, structural reductions were set off quarterly against the monthly employer’s social security contributions, meaning that the effective cost before April 1, 2016 was already lower than said 35%.
As from April 1, 2016
The basic employer’s social security contributions decrease to 30,0%. Increased with the specific industry-based and company-based contributions, the monthly employer’s social security contributions amount to ±32,5%.
Furthermore, the structural reductions gradually fade out for higher incomes and will increase for the lower incomes. What level of income exactly constitutes higher or lower income depends on the quarterly salary thresholds determined by Royal Decree which moreover will evolve over the next few years.
Period as from January 1, 2018
The basic employer’s monthly social security contributions will decrease to 25%, resulting in a total percentage of ±27,5% in respect of the monthly employer’s social security contributions. As the structural reductions for higher incomes are reduced to 0 EUR as from January 1, 2018, there will be no reductions afterwards – this is often referred to as the facial social security tax rate.
For the lower incomes on the other hand, the structural reductions will remain applicable. As a result, the effective social security contributions for lower incomes will be substantially lower than the maximum basis social security contributions of ±27,5%.
Period as from January 1, 2019
As from January 1, 2019, the structural reductions for the lower incomes are further strengthened whereas they remain at 0 EUR for the higher incomes.
By decreasing the labour costs and improving the competitiveness of Belgium, the tax shift legislation aims to create new jobs. However, as the chart clearly shows the effective cost saving of the employers due to the tax shift is more moderate than generally expected.
The KPMG employment law team would be happy to help you in assessing the impact on your labour costs and in analysing what the possibilities for your company are in regards of competitiveness on the labour market.
In case of questions, do feel free to contact Jeroen Vandenbossche or Jochen Moerman of the employment law team of KPMG Global Mobility Services.