Employability enhancing measures: good incentive, bad enforcement?

By Pieter De Koster


One of the lesser commented provisions of the famous Single Status Act of 26 December 2013 ('SSA') - which is known to have harmonized dismissal rules for white- and blue-collar workers in Belgium - is the requirement, in case of dismissal, to have one-third of the termination package (expressed in notice period or termination compensation) awarded to the dismissed employee in the form of employability enhancing measures. This rule comes into play on 1 January 2019 (art 92-93 SSA).

1. This requirement applies to all employees with a notice period of 30 weeks or more. Yes, these are the employees who, under the new dismissal rules, are entitled to outplacement services. As we know, the value of such outplacement services are, for an amount equal to 4 weeks' compensation, deducted from the termination package. The SSA spells out that the value of those outplacement services counts towards the requirement of 'one-third employability measures'.
It is not too clear from the text of the SSA whether the requirement applies to all dismissals effected from 1 January 2019 onward, or simply applies to all dismissals with effect still in 2019 (also encompassing dismissals on notice effected in 2018 or before, with notice running into 2019). The amended French text of the social security regulations (imposing an extra tax, see below) leads us to believe that the former interpretation is to prevail. In any event, all dismissals and redundancies are covered, irrespective of the age of the employee or the context of the dismissal (individual, multiple or collective dismissal).

2. As such, on the face of it, this new rule is quite laudable, as it appears to address issues on employment and dismissal policy that were highlighted by many: too high termination cost, only linearly composed of financial benefits, with no forward-looking approach to new employment, with no incentive whatsoever to enhance employability or functional mobility of redundant employees, etc. If part of the termination package is to be spent on such measures, one can only approve. Indeed, as such, measures to enhance employability could lead us to some form of 'flexicurity', as practiced successfully in some other EU Member States.

This new rule may also give a new impetus to employee restructuring bargaining. Since the rule reserves one third of statutory (?) termination entitlements to services, thereby in principle reducing the financial package due to affected employees, it remains to be seen whether in corporate practice this will generate stronger focus on employability measures (and actually reduce the cash benefits) or will rather provoke a cost increase, whenever unions would succeed in keeping the same financial benefits as before, topped up with the services required by law.

3. Whatever the future will bring, in terms of implementation and enforcement, there are a few hurdles along the way:
First, it is unclear which measures would count towards the requirement other than the well-known outplacement services. In the preparatory works to the SSA, reference is made to tailored vocational training and individual career coaching. This all sounds nice, but what does it mean? Lacking a more structured, organized (and quality ensured) framework for such services, it appears hard to impose such measures, let alone sanction non-compliance. If companies are to spend one-third of overall termination cost (for those with longer service) on such services, these services better be good, since we are talking a 'market' of some hundreds of million EUR.

Second, since SSA requires industry bargaining for this rule, companies cannot simply decide themselves which measures would qualify for the requirement. There need to be industry-wide collective bargaining agreements (per sector of industry) setting forth such measures, their terms and conditions. Unfortunately, at this point in time (17 December 2018) - and to our knowledge - there are no such CBA's in effect at all, in any sector of industry in Belgium. So, companies are simply not able to comply, with less than two weeks to go.

Thirdly, and most importantly, in line with Belgian tradition, non-compliance with the requirement is sanctioned financially: failure to apply (such pre-approved, but non-existing) employability enhancing measures leads to an additional social security charge of 3% (plus 1% to be borne by the employee). This charge is levied on the one-third portion of the termination package. So, in other words, for an employee with a gross termination package of 150,000 EUR, this sanction means 1,500 EUR tax for the company and 500 EUR to be borne by the employee.

Until further notice, i.e. the conclusion of industry CBA's or the administration condoning a failing regulatory system, this additional charge will be due from Q1 2019 by all companies dismissing employees with 30 weeks' notice or more.

So, at this moment, a praised concept for modernizing employment laws and policies in this country (through employability enhancement) is being kept under water because the system of collective bargaining is apparently not working. That is a shame. In any event, one minor suggestion for 2019: whenever the ONSS would come around to collect the additional charge, I would advise companies to call in the Belgian State, the Ministry of Work, as third-party defendant for indemnification, based on its failure to act.