Indexation in cents approved by the Federal Parliament

The “indexation in cents”: what is it?

Indexation in cents means that, in principle, as from 1 June 2026, the full indexation of salaries exceeding EUR 4,000 gross monthly base salary will be capped. Salaries above EUR 4,000 gross will therefore no longer be fully indexed, but rather in two stages:

• First, the portion of the salary up to EUR 4,000 gross will be indexed by 2%.
• Secondly, the entire salary will be indexed by the difference between the actual indexation rate, where higher than 2%, and this 2% threshold (indexation cap amount).

We illustrate this with an example where the indexation rate is 3%, based on a salary of EUR 5,000 (gross amounts) (example 1):

Salary increase through indexation in cents: EUR 80 + EUR 50 = EUR 130

Difference between the salary increase under regular indexation and indexation in cents = EUR 150 – EUR 130 = EUR 20

Calculation of the wage moderation contribution:

EUR 20 + 25% (social security contributions) = EUR 25 for wage moderation

The EUR 25 difference is divided as follows:

• Half (EUR 12.50) goes to the State (= wage moderation contribution);
• EUR 12.50 savings on labour costs for the employer.

In an initial version of the proposal, no indexation would have applied to salaries exceeding EUR 4,000 gross. As this could have resulted in differences in treatment between, among others, part-time and full-time employees, the government abandoned this scenario and opted for the application of a capped indexation percentage. This was therefore amended in the final version of the indexation in cents system.

Capping indexation: a common practice at sector level

In certain joint committees (JC), such as JC 306, it has been decided that – unlike JC 200, where actual salaries are indexed – only the sectoral salary scales are indexed. In practice, these salary scales were sometimes lower than the salaries agreed at company level or the actual salaries paid. There was therefore already an actual indexation percentage that could be lower than the applicable indexation percentage.

Implementation

What is the entry into force date?

The entry into force date has been set at 1 June 2026.

This means that the largest Joint Committee in the country, JC 200, will in principle not experience the effects of indexation in cents until 1 January 2027 for the first time. Joint Committees where indexation still takes place during the summer of 2026, such as the metal industry (JC 209) or the construction sector (JC 124), will already experience the effects of indexation in cents for the first time.

We illustrate this with a concrete numerical example based on a fixed gross monthly salary of EUR 5,000 (example 2):

Salary increase through indexation in cents: EUR 40 + EUR 40 + EUR 50.40 = EUR 130.40

Difference between regular indexation and indexation in cents = EUR 151 – EUR 130.40 = EUR 20.60

Calculation of the wage moderation contribution:

EUR 20.60 + 25% (social security contribution) = EUR 25.75 for wage moderation

The EUR 25.75 difference is divided as follows:

• Half (EUR 12.87) goes to the State (= wage moderation contribution);
• EUR 12.87 savings on labour costs for the employer.

Which calculation basis is used to determine the EUR 4,000 gross amount?

To determine the EUR 4,000 threshold amount, only the fixed gross monthly base salary is taken into account. Bonuses, meal vouchers, year-end bonuses or overtime pay are not taken into account when determining the threshold amount.

What will be the final amount employers must pay to the State?

The employer must pay social security contributions on half of the EUR 20 (example 1) or EUR 20.60 (example 2) from our examples, which must be paid to the State. The employer will therefore have to pay EUR 12.50 (example 1) or EUR 12.87 (example 2) to the State, thereby reducing the savings achieved by the employer by the same amount.

However, for an amount to be considered salary by the NSSO, two conditions must be met:

• It must be granted to the employee in return for work performed; and
• The employee must be entitled to it under the employment contract, at the expense of the employer.

A strict reading of this principle leads to the conclusion that half of the amount that the employer must pay to the State does not satisfy these conditions. Logically, no social security contributions should be due on that part, but the legislator nevertheless intervened on this point. On the other hand, the employer is not required to pay the other part that would normally have gone to the employee, which also allows employers to generate savings.

Does the wage moderation contribution apply only in the case of indexation, or also in other situations?

Based on the current text, it appears that employers are liable to pay a wage moderation contribution for all employees entering service after 1 June 2026, even though these employees are in principle not subject to indexation.

In practice, this means the following for an employee falling under JC 200, whose salary is indexed every 1 January of the relevant calendar year:

An employee starts employment on 2 June 2026 and receives a fixed gross monthly salary of EUR 5,000. This salary will only be indexed for the first time on 1 January 2027, meaning that the employee will not receive an indexed salary.

Although the employee – in accordance with the indexation rules – does not receive an indexed salary in June, the legislator nevertheless applies a fictitious indexation. Specifically, it is assumed that an indexation of 2.21% occurred on 1 January 2026, increasing the reference salary, for example on 2 June 2026, from EUR 5,000 to EUR 5,110.50. By applying indexation in cents, this increase is limited to EUR 5,090.50. Based on the result of these fictitious indexations, a wage moderation contribution of EUR 12.50 is due.

Example 3:

Salary increase through indexation in cents: EUR 80 + EUR 10.50 = EUR 90.50

Difference in salary increase between regular indexation and indexation in cents = EUR 110.50 – EUR 90.50 = EUR 20

Calculation of the wage moderation contribution:

EUR 20 + 25% (social security contributions) = EUR 25 for wage moderation

The EUR 25 difference is divided as follows:

• Half (EUR 12.50) goes to the State (= wage moderation contribution);
• EUR 12.50 savings on labour costs for the employer.

It follows that the wage moderation contribution system is not exclusively linked to the application of indexation in cents at regular indexation moments. The original purpose of this contribution is to compensate for the impact of wage increases on social security revenues – indeed, the lower salaries are, the more limited social security contribution revenues become.

However, it follows from the draft Programme Law that the wage moderation contribution also applies outside the framework of the indexation mechanism, notably to employees entering service after 1 June 2026. This implies that indexation in cents will have a structural and permanent effect of increasing employer costs.

The same applies, for example, to employees who, after 1 June 2026, receive a salary increase bringing them above EUR 4,000.

Can the application of indexation in cents be excluded at company level?

The legislator has introduced an anti-abuse provision to combat the non-application of wage moderation. The Programme Law expressly provides that its provisions must be applied. Any clause to the contrary is considered null and void, meaning that the legislator intervenes strictly in the application of sectoral collective bargaining agreements.

Depending on the circumstances, however, it may be possible to introduce an alternative arrangement aimed at preserving employees’ purchasing power. A temporary reduction of the base salary may be agreed between the parties, followed by an adjustment through the granting of bonuses or other remuneration benefits. However, account must always be taken of the new rule limiting the use of lump-sum benefits in kind to 20% of the annual gross salary (including benefits in kind, bonuses, etc.) after deduction of employees’ social security contributions.

Are there implications for other remuneration benefits?

Yes, this will affect holiday pay and, among other things, the year-end bonus of employees whose gross salary exceeds EUR 4,000, because these amounts are calculated on the basis of the base salary. These amounts will be lower because the base salary will increase less than under a regular indexation system.

In supplementary pension schemes that use the statutory salary ceiling for the calculation of contributions (DC/CB) or benefits (DB), the reduction in indexation will have an even greater impact. The underlying rationale of these schemes is that persons whose salary exceeds the statutory pension ceiling do not accrue a statutory pension on the excess portion, and the supplementary pension compensates for this. The reduction in indexation results in contributions or benefits increasing less rapidly than they would under regular salary indexation. This applies to all pension plans, but the effect is amplified in pension plans that operate according to a progressive rate formula. Employers could theoretically offset this by aligning the reference salary with the amount that would have resulted from normal indexation, but they are certainly not obliged to do so.

Conclusion

At first sight, indexation in cents will have a positive effect on the high labour costs faced by Belgian employers, but in the longer term it is more likely to increase employer costs. In addition, the complexity of the system is also increasing.

Do not hesitate to contact a member of the Employment & Benefits team, we will be delighted to assist you!