International employment developments impacting US companies

Written on 14 Jan 2015

Belgium

It has been a while, but Belgium finally has a a pro-business government again and the measures which have been proposed regarding employment law and social security clearly demonstrate its stated aim of promoting growth and competitiveness. The measures include, among other things, decreasing the social security rate, eliminating the wage handicap and making working time more flexible. Some of the projected changes have already been adopted in new legislation, others still need to be.

Summarized broadly, the list below gives an overview of the new and forthcoming measures which will impact companies doing business in Belgium from an employment perspective.

Social Security

By the end of this government’s four year term (2018), the social security contributions due in Belgium will have decreased to a base rate of 25% (instead of the current 35%). In addition, companies have previously been exempt to a limited extent (on a lump sum basis) from social security contributions for their first five hires in Belgium. The extent of this exemption has been increased, effective as from 1 January 2015.

Wages

Wages in Belgium have been disproportionately high in comparison to other countries such as France, The Netherlands and Germany. This is due in part to a mandatory index linked annual increase which has applied previously. The government has committed to eliminating this perceived handicap during its term, which will include eliminating that mandatory index increase for 2015, . Save for indexations on a sector basis in 2016, no other salary increases will be permitted if the effect is that the total salary cost for a company becomes higher.

Simplification of employment terms

The rules regarding work duration, working hours and flexible working are to become more flexible. In addition, rules around teleworking will be reviewed and adapted, with the aim of providing for a better work-life balance and solving existing mobility problems.

Career breaks

The government also plans to streamline the existing labyrinth of rules with regard to career breaks and parental leave. Conditions to be satisfied in order to qualify for a career break, and more precisely for replacement income during that break (paid by social security), will become more stringent. The new government has stated an intention to remove the employee’s ability to take career break without a statutory defined reason (such as the care of a child, or care of a sick person).

Tax breaks

Companies actively undertaking R&D and innovation in Belgium will be pleased to note that the existing tax exemption for research will be maintained (giving an effective 80% exemption). The government has also announced that it will examine whether it might be appropriate to increase the benefit of this incentive.

France

New conditions for French working time for executives

In France, the maximum legal duration of work is 35 hours per week. Any additional time worked above this threshold is considered overtime and must consequently be remunerated at an increased rate.

A more flexible working time scheme is often used for executives who are independent in the organization of their work. These executives may benefit from a lump-sum remuneration agreement called “forfait-jours” which is based on a fixed number of working days per year (usually 218 working days per year). Where this working time scheme is applied, the executives benefit from extra rest days called “RTT days” instead of overtime pay (usually around 10 RTT days per year) to account for the lack of overtime.

The use of the forfeit-jours scheme is only permitted when:

  • A valid collective agreement provides for it. The collective agreement will either be (i) entered into at the level of the sector of activity of the company (e.g., the collective bargaining agreement applicable to consulting and engineering firms and most companies working in tech, media and comms (“SYNTEC”)), or (ii) entered into at company level between the employer and the trade union representatives within the company; AND
  • An individual agreement is entered with the relevant executive to cover this allocation of working time, usually directly in the employment agreement.

Since 2011, the French Supreme Court has held on numerous occasions that forfait-jours arrangements have been void because the applicable collective agreements did not provide sufficient guarantee as to a particular claimants’ right to health and rest time.

In practice, these decisions have entailed severe financial consequences for relevant employers as the affected employees were entitled to request payment of overtime for the past three years in respect of any hours worked beyond the usual threshold of 35 hours of work per week.

New requirements for collective agreements providing for forfait-jours arrangements

Pursuant to the recent French Supreme Court’s case law, in order to be valid, collective agreements providing for forfait-jours arrangement should clearly include the following guarantees:

  • An obligation on the employer to track the number of days of work and compliance with the minimum legal rest time (i.e., 11 consecutive hours of rest per day and 35 consecutive hours of rest per week) for each relevant executive;
  • An obligation that the appropriate line manager hold at least one meeting per year with the relevant executive to discuss their workload, their working time organization and the length of their working days.

These requirements must not only be specifically provided for in the applicable collective agreement, but must also be carefully applied in practice.

Advice

In view of the strict position of the French Supreme Court, companies with executives in France should take the following action:

(a) confirm whether they have forfait-jours arrangements in place with their executives; and if so
(b) carefully verify that the following two criteria are met: (i) the applicable collective agreement provides for forfait-jours arrangements and otherwise complies with the requirements set by the Supreme Court; and

(ii) the requirements imposed by the Supreme Court are applied in practice within the company.

If one of these criteria is not met, there will remain a risk that the affected executives later ask for overtime payments retrospectively for up to 3 years. Also, the executives may be entitled to ask for the constructive dismissal of their employment contract, which would then require the payment of additional indemnities by the company.

As the position of the French Supreme Court is now becoming quite well-known among executives in France, we recommend that companies assess their compliance, and to the extent necessary implement, these new requirements as quickly as possible.

Netherlands

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Hong Kong

An amendment to the Employment Ordinance has been proposed under which fathers will be given 3 days of paternity leave, which they can choose to take separately or together, within a period starting from 4 weeks before the expected date of delivery to 10 weeks after the actual date of birth. It is hoped that the amendment will be passed into law by the end of the year. The amount of paternity leave proposed is pretty meagre as compared with other countries, but it represents progress in the development of the employment regime in Hong Kong, which is otherwise relatively laissez-faire.