Understanding Payroll in Belgium: What Global Companies Need to Know About Belgium Payroll
Leading the way for the now-common currency around Europe, Belgium is the headquarters for the European Union (EU) and the North Atlantic Treaty Organization (NATO). It is a true powerhouse of political and economic activity at the heart of the European market.
Whilst hit badly by the global economic crisis of 2008 and 2009, Belgium’s economy was getting back on track for recovery. Foreign direct investment (FDI) reached an all-time high in 2018 but dropped by 50 per cent in 2019; however, this has been linked to the uncertainty around Brexit.
More recently, Belgium’s GDP has increased slowly but surely, and forecasts were especially positive – a sign that the economic climate was gaining traction despite the global conditions. As with many countries around the world, though, the effects of COVID-19 have weighed heavily on Belgium.
It may be a relatively small country but with a population of almost 12 million, Belgium is one of the most densely populated in Europe. Within its workforce are a highly skilled and uniquely multilingual demographic that continues to uphold the country’s reputation for high-quality products. According to TIME, Belgium is the world’s fourth most productive country, making it ideal for an expanding international business to tap into.
Belgium’s open economy and reach into the European consumer market make it an ideal base for developing businesses. Plus, the government offers a variety of subsidies and incentives to foreign investors. However, its dependence to the economic situation of the EuroZone, continually shifting regulations and division across three different cultures makes it a very complex country. Exploring the following important aspects of Belgian payroll and working regulations will help you gain an understanding of how you can succeed doing business in Belgium.
Foreign investors are welcomed and treated in the same way as the local ones, and companies are not required to legally register in Belgium to deliver a Belgian payroll. Those that do choose to set up in the country can establish themselves as one of four company types: Foreign Branch Company, Public Limited Company (PLC), Private Limited Liability Company (PLLC), or Starter-Private Limited Liability Company (S-PLLC).
There are unique set-up requirements, costs, and regulatory reporting specifics involved with each structure. It is therefore vital that companies carefully assess the type best-aligned with their intended business goals. Following the submission of all paperwork, companies can generally start operating in as little as three days.
Corporate taxpayers are taxed at 25%. For small and medium-sized enterprises this is 20% on the first €100,000 of net taxable income percent. There is also a 2% crisis tax, but this is due to be abolished by tax year 2021.
Though it is advisable for companies to set up an in-country bank account from which to make payments to employees and tax authorities, it isn’t compulsory. Once a foreign company is ready to do business in Belgium, it should register with the social security authorities and obtain a VAT number. These steps can be completed through Belgium’s online ‘Ondernemingsloket’ system. Then the business will need to register for mandatory workplace insurance with an insurance agency.
Depending on whether an employee is a ‘blue-collar’ or ‘white-collar worker, Belgian labor law stipulates different entitlements and protections. Probation periods for blue-collar workers must be up to two weeks. For white-collar workers, depending on the level of salary, this must be between one month and a maximum period of six or 12 months. Multinational companies should monitor the blue-collar/white-collar distinction for changes as it is an evolving area of Belgian policy.
Depending on worker type, contract length, compensation and other considerations, employers in Belgium can offer different kinds of employment contracts (known as Contrat de travail/Arbeidsovereenkomst).
Depending on the location of the employer’s operating site, these contracts must be drawn up in French, Dutch or German. Following the successful hire of an employee, the employer must then register that person with multiple government authorities, the insurance agency, a health provider, and with Dimona – an electronic system used to track social security. Failing to declare starters and leavers via Dimona can result in fines for employers.
To legally work in Belgium, most workers from outside the EU need both a visa and a work permit. Foreigners transferring or being appointed to a company may require a special ‘Professional Card’ tied to their visa and residency status in order to work in Belgium. It’s also important to note that because there are three distinct regions in Belgium (Flanders, Wallonia, and Brussels-Capital), a work permit needs to be sought from the correct employment agency, depending on the location of the employer’s operating site.
The legal minimum wage in Belgium stands at €1,593.81 gross per month (approximately £1450; $1800). It is the fourth highest in Europe, and marginally less than its neighbors, Luxembourg and the Netherlands. Overtime for ‘day work’ employees is generally paid at 50% above the normal rate. On Sundays or public holidays pay is twice the normal rate. However, when it comes to night work in the hotel or entertainment industry, these laws do not generally apply.
The general working week in Belgium is Monday through Friday, with a maximum eight-hour workday and 38-hour workweek. After 38 hours, overtime pay is compulsory. The Belgian government has adopted the EU Working Time Directive, which limits individuals to a maximum working week of 48 hours.
Tax and Withholding Considerations
To maintain payroll compliance, employers are required to deduct withholding taxes from employee wages. They must pay withheld taxes to the tax authorities on a quarterly or monthly basis, file withholding tax returns and prepare an individual annual tax slip that is sent to both employees and tax authorities.
Filing a yearly tax return is the responsibility of the employee, whether they are a resident or non-resident. For residents, returns are generally due by 30 June and for non-residents, 30 September (for the previous tax year, ending 31 December). Later dates may apply if filing electronically.
Income tax rates vary depending on income and range from 25% to 50%. Additionally, Belgium tax changes annually at local and national levels and social security contribution rates also change every quarter.
Additionally, companies pay quarterly employer and employee contributions to the National Social Security Office, with employee contributions amounting to 13.07% of gross salary, while employer contributions average between 32-38%.
Paid Leave and Sick Leave
Belgium observes ten public holidays every year. Paid leave is generally determined by an employee’s length of service. In the private sector, if the person was employed the previous year, the employee will receive 20 days (4 weeks) of holiday if the regime is a 5-day week, and 24 days if the regime is a 6-day week.
Notably, white-collar employees receive their holiday pay directly from their employer, while blue-collar employees receive it from a social security fund financed by their employer’s social security contributions.
Sick leave is available to employees in Belgium, with 30 days of pay for white-collar employees. Blue-collar employees receive full sick pay for the first seven days. If the illness persists, a blue-collar employee will get 85% of pay from days eight to 14, with further reductions for longer periods.
Employers are entitled to pay 15 weeks of maternity leave pay, which includes two periods: a maximum period of six weeks before the expected date of delivery (prenatal), and nine weeks starting on the day of birth (postnatal). The National Health Service pays about 82% of full pay (no ceiling) for the first month, then 75% of full pay (subject to ceiling) for the remainder of the leave.
Paternity leave entitles the father or co-parent to ten days of leave, which must be taken consecutively, within four months of the birth. Employers will pay full salary for the first three days, and for the remaining seven days a mutual insurance fund will be responsible for payment, at 82% (subject to ceiling).
Belgium may be one of the most advantageous countries when it comes to setting up a new business. It is worth bearing in mind that its government has lowered the weight of business taxation over the past few years. However, as with any country, there are certain challenges as we’ve highlighted.
The regulatory lay of the land in Belgium is constantly shifting and the legal system is notoriously slow when it comes to decision-making, not to mention the different rules varying throughout the three regions. That’s why it’s more important than ever to consider a global payroll solution that can guide you through the administrative maze and to help make your expansion in Belgium as seamless as possible.
This article is for informational purposes only and not intended to convey or constitute legal or any other advice. It is not a substitute for advice from a qualified professional.