Belgium: The European country where dismissal is the second most expensive
Laga’s International Dismissal survey was published for the first time in 2009. Today, Laga has revealed the main findings of the second edition. It has not only updated the first one, but also expanded the scope in two respects. First, this time the survey covers 25 countries (rather than 18 in the first edition). Secondly, the new study contains a quantified comparison of the costs that dismissing employers have to bear, a unique and unprecedented exercise. The figures explain the cost of dismissal in 22 of the 25 surveyed countries and postulate four possible scenarios. The study has determined the average sum that an employer has to spend in each surveyed country in order to dispense with a person’s services and to close the file definitively without any court intervention.
Belgium comes second in the ranking of countries where dismissal costs are highest, and is the only State today where a legal difference remains between blue and white collar workers.
Among the survey’s various case examples, Belgium is the most expensive country after Italy with regard to dismissal of white collar workers. It is interesting to note that the average cost of dismissal of a white collar employee is significantly higher for the employer than in the neighbouring countries (and in the majority of the other surveyed countries), but that the situation is quite different when it applies to a blue collar worker. For an employer who dismisses a blue collar worker, the cost is appreciably lower in Belgium than in the neighbouring countries (and in most of the surveyed countries). The distinction between blue collar workers (deemed above all to do manual work) and white collar workers (whose work is primarily intellectual) has been debated for about twenty years in Belgium and Europe. In this respect, Belgium is Europe’s worst in class – this difference of status has disappeared in all other countries.
Nicolaas Vermandel, Partner-Lawyer at Laga, explained: “With regard to Belgium, we notice that, in the context of the survey, the term employee is systematically associated with that of a white collar employee. Belgium is indeed the last country to maintain a difference between blue and white collar workers, especially when it comes to dismissal rules. A difference however that is disputed by the Constitutional Court’s judgement of 07 July 2011, which clearly states that the distinction is no longer acceptable and that parliament must act urgently - before 08 July 2013 - to put an end to it. Otherwise, there is a threat of social chaos. If the law is not changed, dismissed blue collar workers, with effect from 08 July 2013, will be able to claim the same rights as their white collar colleagues in similar situations. Among other elements, there are major differences in the protection against dismissal and in particular in the period of notice to be observed (with the corresponding cost due by the employer).”
Irrespective of the legal inequalities between white collar and blue collar workers, employers will also have to deal with many other extra-legal elements, such as the granting of certain advantages to one of the two categories (luncheon vouchers, for example) or the same advantage to both categories under different conditions (group insurance at a preferential rate for white collar workers, for example). Thomas Martens, Senior Associate at Laga, added: “We know that the Office of the Minister of Labour is formulating a proposal for the harmonization of the two statuses. But the exact content is not yet known.”
Under the effect of the economic crisis, several Eurozone countries have recently adapted their dismissal rules, or are in the process of doing so (e.g. Italy and Spain). In practice, it is a question of making dismissal less expensive for the employers, immediately or in the longer term. In addition, the local courts of certain states are now more inclined to accept dismissal on economic grounds, because of the current economic climate. This in particular is the case in Spain and Sweden. In practice, this trend will result in a reduction of severance pay for the individual and of the charge that it represents for the company.
This international survey on the cost of dismissal has led to Laga’s formulation of specific proposals for a new legal framework which include employer costs. The proposal that is closest to the average cost of a dismissal in the rest of Europe consists of a notice of 20 days per started year of service with the dismissing employer.
Other relevant survey-related findings:
- In most countries, an employer’s ability to enact a dismissal is limited and often subject to strict formalities. Belgium is one of the few countries where the employers’ dismissal power remains absolute: they are not required to justify their decisions to dismiss employees, and there are no specific formalities to be carried out that could affect the relevant costs.
- In 80% of the countries, there is no (or little) difference between the costs of dismissal on personal or economic grounds. The cost of dismissal will however vary significantly in Bulgaria, Denmark, Poland, Slovakia and the Czech Republic.
- In every country, seniority (the length of service within a certain company) is the key factor of the severance pay calculation. The cost increases pro rata to the years of service with the dismissing employer. Nicolaas Vermandel specified: “It is clear that the length of service in Belgium as in many other European countries, will constitute a significant component in the determination of a reasonable notice period. One has to wonder however whether a limit should be set, e.g. at 10 or 15 years of service, in order to cap the dismissal cost.”
- In approximately half of the surveyed countries, additional compensation is added to the notice period and/or payment in order to arrive at a final agreement with the dismissed person (and thus to avoid recourse to justice, with all the cost-related and procedural risks that it entails).
(1) Austria, Azerbaijan, Belgium, Bulgaria, Croatia, Czechia, Denmark, Germany, Finland, France, Hungary, Italy, Latvia, Lithuania, Norway, Netherlands, Poland, Romania, Russia, Slovakia, Slovenia, Spain, Sweden, Switzerland and the United Kingdom.