Download article in original language : BE0512304FFR.DOC
Two influential bodies responsible for monitoring the Belgian economy and for advising on economic policy - the Central Economic Council (de Centrale Raad voor het Bedrijfsleven) and the National Bank - have recently expressed their dissatisfaction with the competitiveness of the Belgian economy. As a result, they have called for, among other measures, a reinforced policy of wage restraint and a greater focus on innovation. In the latter policy area, from 2006 onwards, there will be a new tax benefit for companies which reward employees who come up with innovative ideas.
Labour costs hamper competitiveness
The Central Economic Council (Conseil Central de l’Économie/Centrale raad voor het bedrijfsleven, CCE/CRB), which includes both employers and unions, has published its annual report on the development of labour costs, employment and training efforts. This annual report compares the situation in Belgium with that of its three neighbouring countries - France, Germany and the Netherlands - in each of these three areas. As provided for in the law regarding the safeguarding of competitiveness of 12 July 1996, the report carries out an interim analysis of the current national wage agreement (2005-2006).
According to CRB data, during the 2004-2006 period, labour costs per hour worked seem to have increased more rapidly in the Belgian private sector compared with the average cost per hour worked in the three neighbouring countries, which are also the most important competitors. Over the three-year period, labour costs per hour worked rose by 2.9%: by 0.8% in 2004 and by 2.1% in 2005-2006, more or less evenly distributed over the two years. In a joint statement, national employer associations pointed out that this situation places a competitiveness handicap on the Belgian economy which must be dealt with. The government has asked the social partners to propose appropriate measures before the end of the year; otherwise it says it will take matters into its own hands in accordance with the provisions of the forenamed legislation regarding the safeguarding of competitiveness.
Call for wage restraint and more innovation
The bleak news about Belgian wage progression was further emphasised by the National Bank (Banque Nationale de Belgique/Nationale Bank van België, BNB/NBB), which called for more vigorous wage restraint. According to National Bank economists, the Belgian economy is being hampered by poor growth, which has led to fears of an increasing government deficit. Furthermore, they predict that this growth will face even greater pressure as labour costs in Belgium are likely to grow more rapidly next year. Despite a slight growth in employment, the unemployment rate is not expected to decrease, due to the demographic growth of the labour supply.
The National Bank’s Governor, Guy Quaden, is calling for a Competitiveness Pact along the lines of the Generation Pact, something which is still stirring up union feelings. It is necessary to make structural changes in political economics. Thus, this pact should refer to 'all-in' wage agreements, where real wage increases must be lower if inflation turns out to be lower than expected. Likewise, employers must work more towards innovation.
The issue of innovation is also starting to come to the forefront more frequently in Belgium’s (tripartite) social dialogue. Traditionally, innovation was seen as a matter for the employers. The only area where it has been discussed among the social partners in Belgium is in relation to education and training. However, increasing thought is being given to the necessity of establishing links between labour relations and the innovation system. On the Flemish side, the Flanders Social and Economic Council (Sociaal-Economische Raas van Vlaanderen, SERV) is preparing an opinion on this innovation policy, in cooperation with the Flemish Science Policy Council (Vlaamse Raad voor Wetenschapsbeleid).
Innovation bonus with tax advantages
Meanwhile, the federal government has decided to introduce an innovation bonus from 2006. The bonus will allow companies to reward creative employees who come up with innovative ideas. The scheme will be supported by the government via a one-year exemption from personal taxes and from employer and employee social contributions (Law laying down various provisions pertaining to the social dialogue, 3 July 2005, Article 28-30). It is estimated that the value of the bonus will be trebled as a result of this exemption. The impact of the measure will be assessed at the beginning of 2007. Based on the results, it will be decided on whether or not to continue this creativity bonus scheme.
There are a number of conditions and restrictions linked with the awarding of this exemption for the innovation bonus:
- the object of the bonus must relate to an innovation or a novelty that takes a concrete form in the company, for example, a (request for the) making of a prototype;
- the innovation must be the result of a spontaneously formulated idea; therefore, it cannot simply derive from a specific request from a client;
- the bonus cannot be given in place of wages (fixed and/or variable);
- it is only valid for permanent staff;
- the total amount of innovation bonuses paid cannot be in excess of 1% of the company’s total payroll;
- the bonus can only be awarded to a maximum of 10% of the employees (and a maximum of three people in a company with less than 30 staff);
- the innovation bonus cannot be higher than the employee’s monthly wages;
- the criteria, procedures and identification of the project to which innovation bonuses relate, must be made public within the company;
- the Ministry of Economic Affairs must be briefed and there is a duty of disclosure to the National Office for Social Security (Office National de la Sécurité Sociale/Rijksdienst voor Sociale Zekerheid, ONSS/RSZ) of the amounts and the beneficiaries of the innovation bonuses.
Employers support innovation scheme
In preparation for, and with a view to promoting, the fiscally advantageous innovation bonus, the Belgian Federation of Employers (Fédération des Entreprises de Belgique/Verbond van Belgische Ondernemingen, FEB/VBO) carried out a survey among its members following the launch of the innovation bonus scheme. Around 200 companies (mostly SMEs) participated, accounting for 85,000 jobs in Belgium. Just under half of the companies surveyed appear to have an internal policy in place to encourage the innovation process. However, the policy has only been outlined recently and is still relatively unstructured. When it comes to promoting innovative ideas, 83% refers to the general company structure, 28% have innovation incorporated into the HR assessment system, 22% use a suggestion box and 14% organise a competition. The FEB’s study concluded that better communication throughout the company and the design of more formal procedures for gathering ideas are key challenges.
Furthermore, the study shows that one in five companies already rewards employees who make suggestions for improvement in some way or other. Overall, it is deemed to be a profitable investment. Some 21% of companies, particularly R&D intensive companies, say they award fringe benefits or bonuses to employees who have innovative ideas, most often in the form of a one-off amount. However, some companies use other forms of compensation, e.g. increases in the department’s research budget, the handing out of a present or a prize. On average, the bonuses amount to EUR 1,500, although there are significant differences between companies.
The promotion campaign set up by the FEB in support of the innovation bonus is based on the conclusion that close to 70% of companies are not aware of the new bonus, whereas, once they know it exists, 60% are interested.
Commentary
The Belgian wage system is struggling, particularly in comparison with Belgium’s neighbouring countries, which have negotiated vigorous wage restraints. Since 1996, Belgium has had legislation in place that ought to provide guidance for adjusting wage agreements. The problem is that this adjustment has still not been put into practice. Questions have arisen over what form it should take. The law specifies that the social partners should take the first move. Unfortunately, this joint effort is expected at a time when relations between both parties are bad due to differences in opinion over the so-called 'Generation Pact'. Since October, unions have been protesting over the matter. On the positive side, the focus on innovation in this discussion is growing and the (tripartite) social dialogue is also trying to play its role. Traditionally, it has been difficult to incorporate the focus on innovation into this dialogue, however, this seems to be changing. The innovation bonus is the first (experimental) outcome of this discussion. (Guy Van Gyes, HIVA-KU, Leuven)