Over our past six years in Belgium, I haven’t written a lot about my working experience. Recently, a friend encouraged me to share my experiences, to benefit future expats or companies looking to move into the Belgian market. Please keep in mind my perspective is one of a North American working in Belgium and, more broadly, Europe. My opinions do not reflect those of my employers.
There are a lot of contractors in Belgium. This was one of the first things that struck me when I began working in the Belgian office of my previous employer. In fact, the entire Belgian organization was made up of contractors, including the management team.
In my experience, contractors were typically expensive, short-term hires brought in to fill particular gaps in experience or capabilities. It was unheard of to have an entire business unit run by contractors.
Now that I know a bit more about Belgium, I realize the employment laws and taxation rates are largely responsible for creating this environment. To really understand what I mean, we have to take a look at the perspectives of a Belgian company and a Belgian employee.
The Belgian Company’s Perspective on Contractors
Employment law in Belgium really favours the employee, compared to North America. For instance, it is very expensive to lay off employees. A severance package, in Belgium, typically requires paying multiple months of salary, depending on years of service and seniority, as well as any vacation and bonus.
This forces companies to really consider their employment needs before hiring and helps employees get back on their feet when restructuring occurs.
Further, a company must consider the full cost of an employee. The fringe benefits like: vacation, pension, health care, insurance, leased car, meal vouchers, etc. are significantly more than that of a North American employee. A small company doesn’t necessarily have the resources to absorb these kinds of costs if their business is slow.
Larger organizations also need a degree of flexibility, as they experiment with new markets or ideas.
Contractors give Belgian companies flexibility in staffing and simplify the payroll process.
The Belgian Employee’s Perspective on Contracting
On the flip-side, if you are a salaried employee in Belgium, you are subject to a tax rate of 53.5% applied to anything you earn above €32,270 a year. In fact, Belgian individuals are considered one of the most heavily taxed groups in the world. Note, if you’re from Canada reporting income from Belgium, you should use tax software to help you efficiently manage your return.
By contrast, corporate tax rates are considerably lower, so individuals have turned to contracting as a means of reducing their taxes. By creating a parent company, called a Société Privée à Responsabilité Limitée, or SPRL, and then working for that parent company, they can avoid some of the taxes (a Belgian national sport!). Therefore it can be financially advantageous for a Belgian employee to be a contractor.
By setting up strict employment laws, the Belgian government created a need for ‘temporary’ labour. Meanwhile, high tax rates have encouraged individuals to find ways to reduce the burden. In the end, the solution for both sides turned out to be contractors.
Admittedly, there are other factors that affect the number of contractors in Belgium, such as the diversity of potential employers. However, I think the employment laws and tax rates have really pushed the market towards favouring contractors.
This doesn’t mean you shouldn’t ever hire employees in Belgium. If you do, just make sure you hire a good accountant!