The temporary blocking of the wage indexing (“index jump”) is a fact!

1. Automatic adaptation of the wages to the evolution of the index – a unique system

The automatic adaptation of the salaries to the evolution of the index, implemented by the industrial relation partners at the level of the national sectors, is in Europe, and even worldwide, a nearly unique system. This is a very sensitive achievement for the trade unions and any interference from the government is not tolerated.

The system leads to automatic wage increases, causing an automatic increase of the wage discrepancy with the surrounding countries and a proportionate decrease of the competitiveness of the Belgian companies.

The Belgian government – extremely against the will of the trade unions – took already some measures in the past in order to reduce the detrimental economic consequences of the system. Most of those measures could be pushed through because of the high moral authority, that the acting politicians had with the labor unions.

2. The “index jump” is a fact

Even though not supported by the labor unions, the government “Michel I” included the “index jump” in its coalition agreement. No sooner said than done!

The “index jump” was established by the brand new Act regarding the promotion of employment of 23 April 2015 and published in the Belgian Official Gazette on 27 April 2015.

The “index jump” of 2% is mainly meant to narrow down the wage discrepancy with the neighboring countries

The Act foresees an “index jump” of 2%, which is mainly meant to narrow down the wage discrepancy with the neighboring countries. In order to make this measure possible, the health index will be blocked for a certain period. The consequences of that measure will differ per sector.

3. How will the “index jump” be implemented?

Our index mechanism relies on the “health index”, i.e. the average of the value of the consumer price index, calculated on the basis of the price evolution of goods and services, exclusive of a.o. alcohol, tabaco and fuel. Moreover, this health index is smoothened by taking in to account the average value, calculated over 4 months.

As from April 2015 the smoothed health index will be blocked at the level of March 2015 (or 100,66). A reference index will be established, i.e. the mathematical average of the health indexes of the last 4 months, multiplied by 0,98. The blocking remains applicable as long as the reference index does not exceed the smoothed index of March 2015. This means that the blocking of the indexing of the wages will remain applicable until the moment the reference index will have increased with 2%. The non-compliance with the “index jump” will be criminally sanctioned.

For the sake of completeness, the block applies, except for the sectoral index mechanism, also for the social allowances and public services.

4. Negative indexing is excluded

The law stipulates explicitly that the smoothed health index may absolutely not lead to a decrease of wages during the blocking period (as from 1 April 2015 and the reference month). Since several joint labour-management committees have their own index systems, a negative indexing would have been possible. Therefore the legislator has excluded this himself.

5. Consequences by sector

The index systems differ from sector to sector: some sectors index on fixed moments: on a monthly basis (e.g. JLMC 117 of Petroleum Industry and Trade), every 2 months (e.g. JLMC 308 of the Mortgages, Savings and Capitalization, JLMC 310 of Banks), every 3 months (e.g. JLMC 124 of Construction industry), every 6 months (e.g. JLMC 121 of Cleaning) or yearly (e.g. JC 200 the Additional Joint Labour-Management Committee for the White-Collar Workers).

The existing index mechanisms, applicable in the sectors, will continue to apply, taking into consideration the reference index of May 2015

The existing index mechanisms, applicable in the sectors, will continue to apply, taking into consideration the reference index of May 2015.

6. What does this mean in practical terms?

The “index jump” freezes the indexing of the wages until the reference index (the smoothed health index of March 2015 x 0,98) reaches the figure of 100,66. As of that moment, the several classic index mechanisms will be applicable again. Consequently, by way of example, it is expected that the wages applicable in JLMC 200 will increase again with 0,43% on 1 January 2016.

This way the employers will economize 2% of wage increase, which they should have granted without the “index jump”. By taking this measure, the government aims at an improvement of competitiveness of the Belgian companies and hopes thereby to create thousands of new jobs.