Despite the tax shift, labor costs remain a significant challenge. In the World Economic Forum’s (WEF) Global Competitiveness Index, Belgium ties for last place, among 140 economies, for the labor tax rate. One reason for this is that employer social security contributions are uncapped, contrary to most neighboring countries. Social charges in Belgium increase – without limit – in proportion to the salary. This matters because international companies are an important source of job creation. US companies, for example, directly employ almost 122,000 people in Belgium, representing 3% of the country’s total private sector employment. In an international comparison, the high cost of labor makes Belgium a less attractive location to create and maintain jobs, especially more senior and specialized positions.
AmCham Belgium recommends
To reduce labor cost and introduce a ceiling on employer social security contributions
- Continue lowering employer social security contributions.
- Re-introduce a ceiling for employer social security contributions to attract more highly qualified people to Belgium, in line with neighboring countries.
- Adjust the automatic wage indexation to apply only up to an agreed salary level to ensure that the wage increases are targeted at those with low incomes.
To recover from the COVID-19 crisis and set us back on the path of economic growth, in our 2020 Priorities for a Prosperous Belgium (#PPB20), we urge the newly formed Federal Government to further reduce labor costs. Our recommendations include continuing to lower employer social security contributions and re-introducing a cap on social charges. Lowering employer social security contributions will also have a positive effect on the take-home pay of employees, stimulating more people to work, and attract foreign investors to create more jobs in Belgium.
Our ambition is for Belgium to achieve a top ten position in the WEF’s Global Competitiveness Index by 2030, up from 22nd today. To climb the ranks, Belgium will need to address the cost of labor in a meaningful way. In today’s context, job creation is even more important as it will put money back into the economy, which is ultimately needed if Belgium wants to successfully navigate through the economic aftermath of the COVID-19 pandemic.
About the author
Optimistic and always willing to discuss legal and economic developments, Gauthier translates expertise from our members to new policy opportunities for the Chamber. He gets his energy from either sports or breakfast.