A new royal decree was published today in the Belgian State Gazette1, providing that several termination indemnities will be subject to social security contributions (withholding of 13.07% employee social security contributions and payment of approximately 35% employer social security contributions) as from 1 October 2013. Before, these indemnities were exempted from social security contributions.
This change will increase the cost to a company when paying out such indemnities.
It concerns e.g. the following:
Compensation for loss of clients (sales representatives)
The special compensation for loss of clients which a sales representative receives in most cases when terminated by his or her employer, on top of any compensation in lieu of notice, will be subject to social security contributions as from 1 October 2013.
Non-compete/non poaching compensation after termination
As from 1 October 2013, compensation further to a non-compete/non poaching agreement entered into between an employer and an employee after termination will be subject to social security contributions. This concerns:
- compensation paid directly or indirectly by an employer to an employee;
- further to an agreement entered into within a period of 12 months after termination of the employment contract;
- in which the former employee commits:
- not to perform activities similar to those performed in the framework of the employment contract, either on his/her own behalf or for a competitor of the employer, or
- not to poach/solicit personnel or independent contractors of his/her former employer, either on his/her own behalf or for a third party.
Protection indemnities
Certain categories of employees are entitled to special protection against dismissal (pregnant women, employees on career interruption or time credit, parental leave, etc.). However, if they are dismissed on these grounds, as from 1 October 2013, this protection indemnity will be subject to social security contributions.
We are at your disposal should you have any questions in this respect.
Footnote
1 Royal Decree of 24 September 2013, published in the Belgian State Gazette on 27 September 2013.