As early as last October, Flanders´ Chamber of Commerce and Industry (VOKA) predicted that January 2023 would prove to be a difficult month for many companies, since a lot of them had fixed energy contracts that would be coming to an end at that time. In addition to this there is the indexation of salaries, which represents an enormous extra cost, one that will often be impossible to pass on to the customers. All of this means that companies will have to look for internal solutions and/or ways to economise. Last autumn ´stormy weather´ (i.e. layoffs and restructurings) was already forecast a number of times for 2023.

In this newsletter we will review the means that you as a company can deploy in order to keep salary costs manageable. First we explain the measures that do not require cuts to the workforce. For the sake of completeness, we conclude with the various forms of redundancy for economic reasons.

I. Taking vacation and compensation for overtime hours

When there's too little work to be done in your company, you can, as the year advances, ask your employees to take outstanding vacation days and/or compensatory rest days. Certainly at the end of the year this is the path that should be pursued first. Attention: you cannot require them to do so (unless certain collective agreements have been adopted on this, such as e.g. the taking of collective vacation days during the Christmas period, minimum number of days in slow/summer periods). The taking of compensatory rest and the management of leave periods can be especially useful.

II. Changing salary and working conditions

If you do not wish to or cannot reduce the workforce directly, the following measures can also be considered :

  1. Collective or individual working time reduction. The collective working time reduction - via a Collective Bargaining Agreement (CBA) on company level or via a sector CBA that is not declared to be generally binding - can be coupled with a pro rata reduction in salary. The nice thing about this method is that you keep the workforce intact. The employees all (temporarily) work somewhat less, in the hope of jointly weathering the storm in this way. The drawback of course is that a CLA can only be concluded with the approval of the trade union, as a result of which this measure will automatically be linked with other things that the trade union wants to see modified, assuming that they are open to this approach at all. Moreover, these days it might be very difficult to convince the trade union or individual employees to agree to any reduction in the working hours and their salary. After all, these days employees are struggling with high energy bills too. Along with such collective and individual working time reductions, one can also look at a more efficient spreading of the working hours (small flexibility, sliding work schedules, etc.).
  2. Reduction of the salary costs. We understand that many employers are looking for ways to keep their salary costs manageable. However, simply dropping the indexation is not an option. What should be looked at carefully is how the indexation is regulated within the sector. In some sectors indexation is limited to certain groups of blue-collar/white-collar workers. Reducing the salary before or after the indexation is only possible subject to approval of the employee involved and subject to respect of the minimum salaries. Changing benefits in kind also requires their agreement. In some cases, the granting of a mobility budget or greening of the company cars in place of a classic diesel-powered company car can improve things in the future. We are also seeing more and more companies that are amending their car policy and limiting the fuel cards. In any case, it makes good sense to regularly review the salary packages and - if necessary only for the starters - to adapt them to the changed market conditions.

III. Amicable payment plan with the National Social Security Office

When you hit a period where it's difficult to get all of your invoices paid, you as an employer can also ask for a deferment on paying the national social security contributions via an amicable payment plan.

As a result of the economic consequences of the energy crisis, the NSSO is currently even offering an exceptional arrangement under which no sanctions apply for certain contributions (in contrast to the classic payment plan, which does include potential sanctions in the payment terms). You can apply for an amicable payment plan for a maximum of 24 months, provided that you substantiate the reasons for your request and prove that it is indeed the energy crisis which is causing payment difficulties for your company.

IV. Intra-group posting

If you form part of a group of companies, one possible solution is to have your employees temporarily do work for a different company within the group (naturally in so far as this other company actually has sufficient work available . . .).

Attention: in principle, posting personnel to an employer (even intra-group) is prohibited, unless one of the exceptional statutory regimes is invoked. For example, an intra-group posting of personnel can be valid organised:

  • By means of concluding a three-party agreement (with the other group company and the respectively involved employees) and reporting this agreement to the Social Inspectorate.
  • Secondly, one can also look at whether certain profiles might be shared with other (group) companies by setting up a co-employership or by organising/providing services in such a way that the costs can be reduced.
  • Finally, outsourcing or spinning off of certain services, by transferring these activities to a different (group) company - subject to complying with certain formalities - is also a possibility. Note, however, that company-law aspects will have to be taken into account here.

V. Temporary unemployment for economic reasons

When there is temporarily no work (or only an inadequate amount), you can use the following forms of temporary unemployment for both blue-collar and white-collar employees:

  1. Temporary energy unemployment: For the period from 1 October 2022 through (provisionally) 31 March 2023, energy-intensive companies can use a special system due to economic causes. This procedure is "simpler" than the general one, and provides for a higher unemployment benefit for the employees involved.
  2. Temporary unemployment due to economic reasons: Until 31 December 2022 you had more flexible transitional measures that partially mitigated the changeover from the system of temporary unemployment due to corona to the classic system of economic unemployment. Since 1 January 2023 these measures have lapsed and the general system of temporary unemployment for economic reasons has come back into operation.

The terms and conditions of this general procedure depend on whether your employees are blue-collar or white-collar. Before you can allow white-collar employees to enjoy temporary unemployment for economic reasons, your company must have been recognised as a "company in difficulties" (10 % reduction in turnover or 10 % more temporary unemployment amongst the blue-collar employees or unforeseen circumstances). For both blue-collar and white-collar employees, the absence of sufficient work must be a temporary or conjunctural problem, not a structural one. By invoking the temporary unemployment due to economic reasons, the government helps to avoid a dismissal because of a temporary shortage of work.

VI. Redundancy

When none of the above measures offers any solace, as an employer you may nevertheless be forced to fall back on the most extreme measure: redundancy for economic reasons.

This can take place on three levels:

  1. Individual redundancy: you can terminate an employee's individual employment contract by giving an advance notice period, or by cancelling the contract subject to the payment of a compensation in lieu of notice. The justification for the dismissal has nothing to do with the work performances of the employee per se, but finds its cause in economic reasons that are substantiated. Make sure that you have assembled a sufficiently detailed redundancy file, on the basis of which the economic reasons for the dismissal can be demonstrated. In this way, you avoid that the redundant employees can claim an additional compensation due to manifestly unreasonable redundancy.
  2. Multiple redundancy: In some sectors a specific procedure applies if you wish to dismiss several employees at the same time but you do not (yet) fall under a collective redundancy. It is therefore very important that you check in advance whether a CLA on multiple redundancy applies in your sector.
  3. Collective redundancy: There is a collective redundancy if, during the course of a period of 60 days (to be counted from day to day) a minimum number of employees within your company are dismissed for economic or technical reasons. The required number of employees differs depending on the specific formalities. For example, the stage of collective redundancy is reached more quickly in the law on the collective redundancy compensation and the law on the formation of an employment unit and SWT [stelsel van werkloosheid met bedrijfstoeslag = system of unemployment with company supplement] than it is in the so-called Renault Act, the law regulating the duties to provide information and engage in consultation.

VII. Tip

If you are experiencing difficulties, thoroughly analyse all possible solutions. Our restructuring team is available for brainstorming sessions where all the pros and cons of each option can be discussed before any strategic decision is taken.

Naturally, we would also be delighted to assist you further with advice and/or the elaboration of an action plan, templates and the necessary documentation.

This is #3 in a series of newsletters from our restructuring practice (which brings together all the know-how from our corporate advice, insolvency, M&A, finance and HR practice)

  1. Must do´s for directors of troubled companies https://schoups.be/nl/news_items/must-dos-voor-bestuurders-van-ondernemingen-in-moeilijkheden
  2. Transposition of European Restructuring Directive initiated https://schoups.be/nl/news_items/omzetting-herstructureringsrichtlijn-in-gang-gezet

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.