One of the biggest challenges of the Belgian labour market is to retain older employees longer in employment. To address this issue, the Belgian legislator restricted the legal possibilities for early retirement, and adopted several measures to "reactivate" older employees in employment, among others by dissuading garden leave periods for employees of 55 years or older.

Dissuading garden leave by introducing activation contributions

As a reaction to the increased restrictions to early retirement, some employees instead put older employees on garden leave until their legal retirement age. By "garden leave", we mean the agreement whereby employees are exempt from their obligation to perform work with preservation of (a part of) their salary.

To dissuade this increasing practice, the Belgian legislator introduced the payment of additional social security contributions, called "activation contributions", during some periods of garden leave of employees of 55 years or older.

When will activation contributions apply?

They will in principle be due, on top of the regular social security contributions, for each quarter of a year during which an employee of at least 55 years old did not perform any work for his or her employer, unless some of the exceptions to be discussed below apply.

The activation contributions are due on a quarterly basis, and are reflected in a certain fixed percentage of the employee's gross quarterly salary. The fixed percentage varies depending on the age on which the employee was initially put on garden leave, and remains the same until the employee reaches the age on which he can legally take up (early) retirement.

The lower the employee's age at the start of the garden leave, the higher the amount of the contribution:

Age on the start of the garden leave Activation contribution % (applicable until legal (early) retirement) Min. quarterly activation contributions
Before 55 years 20 % 300 euros
Between 55 and 58 years 18 % 300 euros
Between 58 and 60 years 16% 300 euros
Between 60 and 62 years 15 % 225,60 euros
After 62 years 10 % 225,60 euros

Exceptions, exemptions and percentage reductions

Exceptions

The law enumerates the exceptional circumstances in which the activation contributions will not apply:

  • When the employee did not perform any work during a quarter of a year due to the application of a legal ground for suspension, due to which the execution of his or her employment contract was fully suspended (e.g. sickness leave, full-time time-credit leave, maternity leave, etc.)
  • When the employee is put on garden leave during the course of a notice period
  • When the employee was initially put on garden leave before 28 September 2017
  • When the employee was put on garden leave in application of collective bargaining agreements, submitted at the labour authorities' registry office before 28 September 2017, or, for employees working in the public sector, in application of specific sectoral arrangements concluded before 28 September 2017

Permanent or temporary exemptions

Employers can also be permanently or temporarily exempt from the payment of activation contributions in the following circumstances:

  • Permanent exemption, applicable during the entire garden leave period: when during the first 4 quarters of a year of the garden leave, the following conditions are all met:
    1. The employee is required by his or her employer to follow a training course, organized by the employer
    2. This training course meets the requirements determined in the Flexible and Workable Work Act ("FWW") (see our previous publication of 25 January 2017 for further detail in this regard)
    3. The costs of this training course are at least equal to 20 % of the employee's annual gross salary before the garden leave period
    4. The employee effectively followed the offered training course
  • Temporary exemption per quarter of execution of other work: activation contributions are not due per quarter of a year of the garden leave period during which the employee started new work for another or other employer(s), or started activities as a self-employed contractor, and when the work or self-employed activity meets the following conditions:
    1. The new work or self-employed activity was carried out during the entire quarter of a year
    2. The working time or self-employed activity time equals at least 1/3rd of an FTE. The activities to be considered as "self-employed activities equalling at least 1/3rd of an FTE" are however still to be legally defined by royal decree
    If these conditions are met, no activation contributions will be due by the initial employer which initially put the employee on garden leave for the relevant quarter of a year. They will however become due again if after the said quarter of a year, the employee would no longer execute his or her new work or new self-employed activity.

Temporary percentage reduction

Employers can moreover benefit from a temporary reduction of the aforementioned activation contributions, if i) during a period of 4 consecutive quarters of a year, ii) the employee on garden leave was for at least 15 days required by his or her employer to follow a training course, meeting the requirements laid down in the FWW (see above).

If these conditions are met, the employer is eligible for a reduction of 40% of the applicable activation contributions during the relevant 4 consecutive quarters of a year.

Entry into force

The activation contributions will apply as of 1 January 2018 to all garden leave periods, except where the aforementioned exceptions or exemptions would apply.

Action points

Where possible, only put employees aged 55 years or older on full-time garden leave during the performance of a notice period.

Employers could also envisage putting employees on a "part-time" garden leave.

*The legal reforms discussed in this publication are not definitively approved by Parliament yet, and may be subject to change.