Federal government reaches budget agreement for 2026: what does it mean for you?

The federal government has reached a budget agreement for 2026. To shape the 2026 budget and get the multi-year budget in order, the agreement also includes further labour market reforms. 

The measures have yet to be passed into law and officially approved and published. We will update this blog as soon as we know more. 

Further reintegration of long-term sick employees

First, the government is further committed to reintegrating long-term sick employees. Several measures have already been taken in recent years to reintegrate long-term sick employees into the labour market faster, with shared responsibility between the various parties involved. Now there is a plan on the table to get 100,000 long-term sick employees back to work. 

It was previously announced that from 1 January 2026 - and subject to certain conditions - employers (except for supported employment companies for their target group employees) with an average of 50 employees must pay a solidarity contribution. It amounts to 30% on sick pay during the second and third month of incapacity for work. According to the recently concluded budget agreement, this obligation will be extended: employers will have to pay the contribution for not two, but four months. From 1 January 2027, this solidarity contribution will also be further increased to include the fourth and fifth months of incapacity for work. Exactly how and under what conditions this will happen is not known as yet.

The work bonus

The strengthening of the work bonus will be accelerated. The summer agreement already announced that the work bonus would be gradually increased, with the aim of making the gross minimum wage equal to the net minimum wage by 2029. The budget agreement now shows that this increase will be felt more quickly: starting next year, employees entitled to the work bonus will already receive around €50 in extra take-home pay.

Indexation

DThe application of indexation is partially restricted. An 'index in money' will be introduced in 2026 and 2028 for employees with earnings over €4,000 gross per month. This measure will also apply to those receiving benefits of more than €2,000 gross, although the rules already adopted concerning the temporary non-indexation of certain pensions must be taken into account. The index in money cannot be applied in other years, so not in 2027 or 2029, for example.

In terms of wages, a ceiling of €4,000 therefore applies.

• Gross wages below €4,000 are indexed in the usual way, namely via a percentage index.
  Example: an index of 2% when exceeding the pivot index.
• From €4,000 gross, the index in money is applied. This means that no percentage indexation will be calculated on wages above €4,000.
  Minister Vandenbroucke illustrated this with an example: someone with a gross salary of €5,000 gets the same index increase in euros as someone with €4,000 - about €80.

For now, it remains to be seen whether the index in money will be calculated based on existing sectoral agreements, or whether one general fixed amount will be set for pay increases above €4,000 (like the €80 mentioned earlier).

Several sectors - such as JC 200, the Auxiliary Joint Committee for Employees, among others - traditionally index in January. The question is therefore whether the legislation will be ready on time and whether these sectors will have to apply the index in money immediately. There are also sectors that index several times a year, such as JC 124 (construction) and JC 326 (gas and electricity). The question also arises for them as to exactly how and when the index in money will be introduced.

Furthermore, according to the Planning Office, the pivot index will be exceeded in January 2026. Depending on the sector, wages are subsequently indexed in the first, second or third month after that excess. The timing of the legislation is thus crucial to know which indexation rule should be applied at which time.

For employers, moreover, this risks becoming a double calculation exercise. On the one hand, they have to determine how much an employee gets based on the index in money. On the other, they also have to calculate how much they have to pass on to the government. Indeed, even if the employer applies the index in money for the employee, they still have to pay half of the 'regular percentage' indexation. That part - after deducting the amount granted through the index in money - does not go to the employee but is passed on to the government. How this will be done in practical terms still needs to be worked out.

Adjustment to planned pension reform

New pension reforms were already launched in the summer agreement. An important part of this is the extension of early retirement options. There will be an additional option to retire at 60, provided that the individual can prove they have completed 42 years of employment. In this regard, each year of service must consist of 234 days effectively worked. The budget agreement refines this measure by providing that periods of illness will also count as days worked to meet that 234-day requirement.

It also tightens the conditions for existing early retirement schemes. The year of service condition has increased from 104 to 154 days per year. The coalition agreement already envisaged a solution for the first year of employment, when employees often do not accumulate enough days. The budget agreement now states that 104 days will be sufficient during the first year of work.

Finally, the pension malus - the reduction of the pension amount in case of retirement before the statutory retirement age - will also be adjusted. Its introduction will be delayed by a year to 2027. Pensioners who have worked half-time for at least 35 years (156 days per year) and can demonstrate a career of at least 7,020 days will not receive a malus. Again, some equivalent periods, such as illness, care leave, maternity leave and temporary unemployment, will be included as days worked.

What about all the other measures in the summer and Easter agreements? 

The government has already reached an agreement on measures from these various agreements, such as flexi jobs, (voluntary) overtime and the adjustment to the rules on night work in the logistics and related sectors. With that, the major decisions have been made. The draft texts to implement these plans are now going through the legislative process. Some drafts have already been tabled in parliament, others are before the Council of State or other advisory bodies for advice, and some texts still need further discussion in the Cabinet.

The conclusion seems all too clear: reforms are coming. The question does remain as to when exactly they will come into force - from 1 January 2026 (possibly retroactively) or at a later date after all.