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Historically high wage indexation: now what?

07 December 2022 Ellen Van Grunderbeek Employers

Is there a fixed indexation date for your sector? Then you are looking at historically high wage indexation. This is a reason for concern, as your wage costs will increase dramatically. As an employer, what actions can you take?

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Step 1: check whether there is a sectoral index mechanism

Each sector has different rules, therefore you should first check what your sectoral collective agreement says about wage indexation. This information can be found at Trefzeker. You will find rules on the wages you must index, as well as on the employees to whom the index mechanism applies.

If your sectoral collective agreement states that you must index both minimum and effective wages - which is often the case - you must apply the index in full.

However, sometimes there is only a mandatory indexation of minimum wages or the indexation of effective wages only applies up to a certain ceiling amount linked to a job category. There may also be different principles for certain categories. You must then check in the corporate agreements if there are options to limit the index.

Step 2: View the calendar

Additionalcompany-level indexation agreements may have been made.

Suppose that the sectoral collective labour agreement only provides for the indexation of the minimum wage, then it may be possible that the effective wages should also be indexed at a company level. If you want to amend the agreements at a company level (company collective agreement or labour regulations), you will have to sit around the table with employee representatives or go through the amendment procedure.

If there are no sectoral agreements and no agreements at a company level, and you apply indexation completely discretionary stating that it is a one-off and does not open a right in future, you may consider skipping or limiting the index.  

If it was not explicitly stated that indexation was a one-off in the past, then a custom may have arisen or caused a tacit change in your employee’s employment contract. If that was the case, and you don’t want to continue indexation, you are going to have to terminate the custom or change the employment contract. It is best to do this in writing and with reasonable notice. Note that employees can challenge the termination of use or change in terms and conditions of employment in court.

Step 3: examine the alternatives

As steps one and two taught us, you will usually have to apply indexation. However, you can reduce the wage bill by revisiting other issues, for example:

1. Not awarding a bonus

Since financial-economic conditions are not ideal, you could omit the bonus.

2. Starting wage including indexation for new employees

Are you planning to hire new employees on 1 January 2023? Then agree that indexation is already included in the starting wage. Or you could put the start date of the employment contract a bit in the future.

3. One-off wage benefits

If you grant wage benefits, you can always stipulate that they are one-off’s and do not set a precedent in the future.

4. Optimising pay packages

You can also optimise pay packages. How do you do that? By minimising the basic wage to which future indexations apply. This can be done by making part of the pay variable, for example.

Want to explore all the possibilities?

Our experts are ready to inform, advise and support you.

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Written by Ellen Van Grunderbeek

Legal advisor at Acerta

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