As Europe is gripped in a cost of living crisis that has seen both individuals and companies bear the brunt of rising prices, nine in ten employers have expressed deep concerns about Belgium’s automatic wage indexation.
A survey carried out by Unizo (the association of Flemish businesses) among 200 employers revealed that one-third have had to push back company investments and recruitments because of the additional budgetary constraints of automatic wage indexation, Belga News Agency reports.
In contradiction to claims of wage stagnation, Unizo director Danny Van Assche stated: “Workers’ syndicates continually claim that salaries will only rise by 0.4% this year. This is absolutely false.”
Van Assche explained that salaries are, by Belgian law, indexed automatically. This in fact means that “salaries in our country go up automatically and much more quickly than in neighbouring countries.” Citing the Belgian National Bank, Van Assche put this figure at a “13% rise between 2022 and 2024”.
This figure is corroborated by the European Commission, which forecasts a far greater rise in real-term salary costs for Belgium than in nearby countries. Unizo warns that rising salaries could stifle innovation and become a handicap for SMEs (small and medium -sized enterprises) that struggle to remain competitive in a global market.
Speaking in a televised debate, Liberal Reformist Movement leader Georges-Louis Bouchez argued strongly that Belgium’s automatic indexation does far more to protect employees from wage stagnation than in neighbouring countries.
Clients shoulder the costs
The survey also showed that 96% of SMEs were bracing themselves for wage increases. In 35% of cases, this included by delaying or scrapping completely investment projects. Half of SMEs were looking to other parts of their business to cut costs.
Three-quarters of businesses feel they have no choice but to pass their rise in costs on to clients; so far, 47% have already started doing this. However, this squeezes profit margins, which becomes unsustainable in the long term.
The employers’ organisation calls for the automatic salary indexation to be adjusted: “Exceptional times call for exceptional measures,” Unizo states. It offers a couple of solutions to help companies with the difficulties.
This could be for companies to pay lower social security costs for its employees. The second option would be to allow companies to (temporarily) not adhere to the automatic indexation laws, according to their financial means.