The socialist and liberal unions recently rejected the 2011-2012 draft interprofessional agreement (IPA), a cross-industry framework agreement concluded every two years that covers a number of important employment-related issues, such as the applicable percentage by which wages can be increased. Due to rejection of the IPA, this percentage has been fixed by means of a royal decree. Based on this royal decree of 28 March 2011, the applicable percentage for 2011 and 2012 is 0% and 0.3%, respectively. It should be noted that this provision is not related to the automatic indexation of salaries, which continues in effect based on the applicable industry-level collective bargaining agreements. In addition, wages can still be increased further to the application of existing salary scales.

Moreover, certain types of benefits, i.e. profit-sharing plans and employee participation in a company's capital and profits, contributions to so-called social pension plans, and one-shot innovation premiums within the meaning of the Act of 3 July 2005, are not taken into account for the purpose of determining whether an employer complies with this percentage.

When an IPA is approved by the unions, its provisions are generally deemed to carry the weight of a gentlemen's agreement, meaning they are not legally binding. However, the above percentages are now of mandatory application as they have been fixed by means of a royal decree, which entered into force on 1 April 2011. In other words, all wage increases in excess of the applicable percentages are unlawful. Thus, employers could refuse to grant wage increases due pursuant to a collective bargaining agreement if doing so would cause them to violate the terms of the royal decree. Moreover, employers can be fined for failure to comply with these percentages.

Needless to say, these new provisions could jeopardise the implementation of attractive employee compensation and benefits policies. Indeed, in the present context, it is not clear whether employers can continue to grant employees unilateral increases, benefits such as non-recurring bonuses, etc.