Report in which the committee requests to be kept informed of development - Report No 400, October 2022

Case No 3415 (Belgium) - Complaint date: 06-DEC-21 - Follow-up

Allegations: The complainants report that the Act of 26 July 1996 on the promotion of employment and protection of competitiveness, as amended by the Act of 19 March 2017, drastically limits the possibility for the social partners to freely negotiate wage increases for workers in the private sector

1. 110. The complaint is contained in a joint communication by the Confederation of Christian Trade Unions (CSC), the General Labour Federation of Belgium (FGTB) and the General Confederation of Liberal Trade Unions of Belgium (CGSLB), dated 6 December 2021. In a communication dated 14 January 2022, the complainant organizations provided additional information.
2. 111. The Government sent its observations in a communication dated 24 February 2022.
3. 112. Belgium has ratified the Freedom of Association and Protection of the Right to Organise Convention, 1948 (No. 87), the Right to Organise and Collective Bargaining Convention, 1949 (No. 98), and the Collective Bargaining Convention, 1981 (No. 154).
   • A. The complainants’ allegations
4. 113. In their communication of 6 December 2021, the complainant organizations allege that the Act of 26 July 1996 on the promotion of employment and protection of competitiveness, as amended by the Act of 19 March 2017 (hereafter “the Act”), is contrary to Conventions Nos 98 and 154 ratified by Belgium in 1953 and 1988, respectively. The complainant organizations indicate that the Act in question aims to introduce a wage moderation mechanism for the entire private sector (and for some public economic enterprises) in Belgium, and sets a maximum available margin, which can be defined as the maximum percentage authorized for wage increases negotiated at all levels of social dialogue (inter-occupational, sectoral and enterprise levels). They state that the notion of wage increases includes all measures presenting a cost for the employer, with a few limited exceptions listed in section 10 of the Act, and that the above-mentioned mechanism does not cover only wage increases in the strict sense, but also increases of social security contributions, which are the main source of social security financing in Belgium.
5. 114. The complainant organizations indicate that the amendments made to the Act in 2017 considerably tightened the wage moderation system applicable in Belgium insofar as, previously, the authorities only intervened in the absence of an agreement between the social partners on wage increases, whereas, since the legal amendment introduced in 2017, the mechanism established by the Act involves a prior, systematic and open-ended intervention by the authorities in negotiations on wage increases. The complainant organizations allege that this mechanism therefore substantially infringes the right to collective bargaining as laid down in Conventions Nos 98 and 154, insofar as it drastically limits the margins for negotiation and therefore also has adverse effect on the promotion of free and voluntary collective bargaining at all levels of social dialogue. The complainant organizations also refer to the legislative process that led to the amendment of the Act in 2017. They state in this regard that: (i) the Government at the time had consulted the social partners about the amendment of the Act, by raising the matter with “the Group of 10”, which is an informal social dialogue body at the inter-occupational level, and which brings together leaders of workers’ and employers’ organizations, but that this consultation did not formally take place through the National Labour Council, which is legally competent to give advice on social and labour matters to the authorities; (ii) this consultation with the social partners took place in November 2016, at the same time as when the social partners were to negotiate the wage margin for the years 2017–18 and the 2017–18 inter-occupational agreement (AIP), and seriously damaged the spirit of the negotiations; (iii) evidently, the social partners were not able to reach consensus regarding these legislative amendments (which were more favourable to the employers’ bench) and, as a result, were not able to formally issue an opinion; and (iv) however, since the beginning, the trade union organizers have strongly criticized the Government’s projects, which did not prevent the Government from implementing its plans to amend the Act. The complainant organizations state that the employers’ organizations, which were favourable to the Government’s plans, had made the conclusion of the 2017–18 AIP (which contained important provisions on social issues other than wages) conditional on a parliamentary vote on the amendment, and therefore the 2017–18 AIP was concluded on 21 March 2017, two days after the vote in the Parliament. The complainant organizations state that these events demonstrate the influence of the Act, as amended in 2017, on the collective bargaining process and the imbalance that it creates in this regard.
6. 115. The organizations then describe in detail the mechanism established by the Act, as amended in 2017, which comprises four successive stages.
   • Employment and competitiveness assessment report
7. 116. The complainant organizations specify that, firstly, the mechanism provides for the drafting, every two years, in even years, of a report on the development of employment and competitiveness by the Central Economic Council (CCE). In this regard, they indicate that the social partners are members of the CCE. They state that section 5, paragraph 2, subparagraph 1 of the Act establishes, however, that the first part of the report referred to in paragraph 1 “is drafted under the responsibility of the secretariat of the CCE and concerns the maximum available margins for wage increases ...”, and that although the social partners are members of the CCE, however, they are in no way part of its secretariat, which acts independently. They then indicate that the subsequent paragraphs of section 5, paragraph 2, provide an exhaustive list of all the parameters to be taken into account by the CCE secretariat when calculating the maximum available margin. They state in this regard that: (i) the secretariat of the CCE therefore has no scope for manoeuvre in calculating the maximum available margin and is strictly bound by the provisions of the Act; and (ii) the Act does not provide for any institutional role for the social partners in the drafting of the first part of this report.
   • Collective wage negotiations
8. 117. The complainant organizations indicate that, secondly, section 6, paragraph 1 of the Act provides that, “Every two years, in odd years, before 15 January, the inter-occupational agreement of the social partners shall establish, on the basis of the report referred to in section 5, paragraph 1, inter alia, employment measures and the maximum margin for wage cost increases for the two years of the inter-occupational agreement”, and that section 6, paragraph 2, provides that “the maximum margin for the increase of wage costs, referred to in paragraph 1, is the maximum available margin, as referred to in section 5, paragraph 2”. The complainant organizations state in this regard that the social partners cannot agree on a maximum margin for wage increases that is higher than the maximum available margin previously defined by the CCE secretariat on the basis of parameters imposed by the Act, and that the maximum margin for wage increases on which they agree can therefore only be lower or equal to this maximum available margin. If the social partners reach an agreement, “the margin ... shall be ... established in a collective labour agreement concluded in the National Labour Council ...”. They then indicate that, under section 7 of the Act, if the social partners decide by mutual agreement to go beyond the maximum available margin defined in the report of the CCE secretariat, the authorities will set the maximum margin for wage cost increases, in accordance with section 6, paragraphs 1 and 2 of the Act, that is, without exceeding the maximum available margin as defined in the report drafted by the CCE secretariat. The complainant organizations underscore in this regard that the maximum available margin is general in scope insofar as it is imposed on all levels of social dialogue (inter-occupational, sectoral and enterprise levels).
   • Conciliation efforts in case of failure of negotiations
9. 118. The complainant organizations indicate that section 6, paragraph 3 of the Act provides that, “if no consensus is reached between the social partners within two months of the date of the report [of the CCE], the Government shall invite the social partners to undertake conciliation efforts and shall make a proposal for mediation, on the basis of data contained in the aforementioned report”. If an agreement is reached as a result of these conciliation efforts, “the maximum available margin for wage cost increases shall be established in a collective labour agreement concluded in the National Labour Council”.
   • Setting of the maximum margin for wage increases by royal order
10. 119. The complainant organizations indicate that, where the conciliation efforts described in the above paragraph fail, section 7, paragraph 1, subparagraph 1 of the Act provides that, “in the absence of an agreement between the Government and the social partners in the month following the invitation of the social partners to engage in dialogue as referred to in section 6, paragraph 3, the King shall set, by means of an order deliberated by the Council of Ministers, the maximum margin for wage cost increases, in accordance with section 6, paragraph 1 and paragraph 2 ...”. They reiterate that section 7, subparagraph 2 of the Act also stipulates that, if the social partners decide by mutual agreement to go beyond the maximum available margin for wage cost increases defined in the report of the CCE secretariat, the authorities will set the maximum available margin for wage cost increases, in accordance with section 6, paragraphs 1 and 2 of the Act, that is, without exceeding the maximum available margin as defined in the report drafted by the CCE secretariat.
    • Period of validity of the mechanism
11. 120. The complainant organizations conclude their description of the mechanism by stating that, even if it is implemented periodically (every two years), the mechanism introduced by the revision of the Act in 2017 is for an indefinite duration and will therefore be implemented on a recurrent basis for an unlimited period of time.
12. 121. The complainant organizations then indicate the grounds on which they consider that the above-described mechanism is, following the amendments made in 2017, contrary to the principles contained in Conventions Nos 98 and 154. They state in particular that: (i) the mechanism in question establishes prior interference by the authorities in collective bargaining, and that, while the Committee on Freedom of Association has already accepted that the authorities may intervene after the social partners have failed to reach an agreement, these hypotheses only concern, however, cases in which the authorities intervene a posteriori. They underscore that, in the present case, by setting in advance a maximum available margin for wage increases, the interference by the authorities in the collective bargaining process occurs before the collective bargaining has even started and considerably restricts, from the outset, the framework for negotiations to the detriment of the interests defended by representative organizations of workers; (ii) the unilateral establishment by the authorities of parameters to determine maximum wage increases is contrary to the criteria of the Committee on Freedom of Association, for which “the determination of criteria to be applied by the parties in fixing wages is a matter for negotiation between the parties”, and that the social partners should indeed be allowed to determine for themselves the parameters to be taken into account in determining the maximum wage increase; (iii) these parameters and their implementation restrict the maximum available margin to the extent that there is little incentive for representative organizations of employers to negotiate; (iv) by unilaterally imposing the parameters for the calculation of maximum wages increases, with no possibility of deviating from them and by determining in advance and in a mandatory manner a maximum available margin, the authorities seriously and permanently undermine the autonomy of the parties in collective bargaining; the complainant organizations add that section 7, subparagraph 2 of the Act particularly illustrate the restriction by this legislation of the autonomy of the parties in negotiations, in that it goes so far as to allow the authorities to destroy any agreement reached between the social partners that would establish a maximum wage increase higher than the maximum available wage margin calculated in accordance with section 5, paragraph 2, by the CCE secretariat; and (v) as long as wage increases are limited by legislation, there is little incentive for representative organizations of employers to make use of collective bargaining, which creates an imbalance between the parties, and which prevents the achievement of balanced and satisfactory agreements for all the stakeholders concerned.
13. 122. In the light of the foregoing, the complainant organizations state that the mechanism that is the subject of the present complaint has adverse effects on the promotion of collective bargaining, and refer in this regard to the practical implementation of the mechanism since 2017, indicating that: (i) while an inter-occupational agreement, including in relation to wage increases, was reached in 2017–18, this agreement (which was the result of Collective Labour Agreement No. 119 concluded on 21 March 2017 within National Labour Council) was concluded against a backdrop of great mistrust by trade union organizations regarding the new mechanism established by the Act of 26 July 1996; (ii) the complainant organizations have since continued to voice strong criticism regarding the mechanism in question, and no inter-occupational agreement on wages was reached for the period 2019–20, and therefore the Government itself had to impose the maximum margin for wage increases through the adoption of a royal order; (iii) in turn, as the trade union organizations were not able to accept the constraints imposed by the Act in question, no inter-occupational agreement on wages was reached for the period 2021–22, and the Government therefore once again had to impose the maximum margin for wage increases by means of a new royal decree; and (iv) it is feared that the next round of inter-occupational negotiations scheduled for the period 2023–24 will not be successful in terms of the determination of wage increases if the Act of 26 July 1996 is not amended so as to, in particular, respect the principles contained in Convention No. 98.
14. 123. In order to illustrate the effects of the implementation of the legislative mechanism on the ability of the social partners to agree on wage increases, the complainant organizations refer specifically to the horticulture sector. In this regard, they state that: (i) the horticulture sectoral agreement for 2017–18 provided for a greater wage increase for seasonal and casual workers, in order to bring into line, by 2025, these wages with the minimum wage of the lowest category in the subsector concerned; (ii) the maximum wage margin established for 2017–18 at an increase of 1.1 per cent prevents this harmonization of applicable wages; and (iii) the social partners wishing to conclude agreements that exceed the maximum wage margin imposed risk being penalized under section 9, paragraph 1, subparagraphs 4 to 6, of the Act, which provides that “an administrative fine of between €250 and €5,000 may be imposed for employers who do not respect the obligation [not to exceed the maximum wage margin authorized]. ... [This] fine shall be multiplied by the number of workers concerned, with a maximum of 100 workers.”
15. 124. In a further communication dated 14 January 2022, the complainant organizations refer firstly to the situation of an enterprise in the service voucher sector (personal services paid for by means of a state-recognized voucher) to illustrate the restrictive effects of the legal competitiveness safeguard mechanism on the implementation of collective agreements at the sectoral and enterprise levels. The complainant organizations indicate that Belgium has a mechanism to grant temporary reductions of social security contributions for enterprises that introduce a collective reduction of working hours for an indefinite period. In certain conditions, the wages of part-time workers must also be equalized following the introduction of this collective reduction of working hours. The enterprise concerned, however, failed to adapt the wages of numerous part-time workers, while at the same time benefiting from reductions of social security contributions. The complainant organizations indicate that, as the enterprise was not willing to provide a solution at the enterprise level, the trade union organizations, in order to eliminate this unfair practice, demanded and obtained, during the 2019–20 sectoral negotiations in the service voucher sector, the inclusion in the sectoral collective agreement of a requirement for enterprises to equalize the wages of part-time workers. The complainant organizations state that the enterprise in question refuses to apply this sectoral agreement, stating that the sectoral agreement is contrary to the Act of 26 July 1996, and that it is willing to assert this position before the courts if the trade unions take legal action to demand compliance with the sectoral agreement freely negotiated by the social partners.
16. 125. The complainant organizations then refer once again to the parameters established by the Act for the calculation of the maximum available margin for wage cost increases. After having reiterated that, in accordance with the Act, as amended in 2017, the social partners do not have the competence to determine these parameters, which would be contrary to Conventions Nos 98 and 154, they report the inappropriateness of the criteria chosen, highlighting in particular that: (i) the relative position of Belgium’s hourly wage cost compared with that of other countries is distorted by the failure to take into account the reduction of employers’ contributions and wage subsidies paid using public funds; and (ii) only absolute hourly wage costs are compared, without taking into account work productivity, which is higher in Belgium than in neighbouring countries. The complainant organizations add that, while the social partners have succeeded in agreeing on a 5 per cent phased increase of the minimum wage between 2022 and 2026, this agreement will not be enough to make up for the delay caused by the wage moderation policy, which resulted in a 4 per cent decrease in the real inter-occupational minimum wage between 2009 and 2019.
17. 126. The complainant organizations state lastly that the wage-fixing mechanism at the inter-occupational level should be indicative rather than imperative, as was the case prior to the 2017 reform. They state that: (i) the rigidity created by the current Act does not make it possible to address the sometimes very different economic realities depending on the sector, and that an indicative wage standard would allow space for catching up in low-wage sectors, in particular regarding an increase in minimum wages and operations aimed at creating and sustaining jobs thanks to the reduction in working hours with maintenance of wages; and (ii) before the 2017 reform, slight excesses in certain sectors were always offset by more limited wage agreements in other sectors, with the wage standard having generally never been exceeded between 1996 and 2017.
    • B. The Government’s reply
18. 127. In its communication dated 24 February 2022, the Government firstly provides information on the background to, grounds for and mechanisms of the Act of 25 July 1996. The Government indicates that, in the context of Belgium’s integration into the European Economic and Monetary Union and the Eurozone, the Belgian Parliament voted to adopt the Act in 1996, in order to avoid slippage of competitiveness rather than correct such slippage ex post as had been the case under the previous legislation. The Government specifies that, in each odd year, before 15 January, on the basis of the report referred to in section 5, paragraph 1 of the Act, the joint agreement of the social partners determines, in particular, measures in favour of employment and the maximum margin for wage cost increases for the two years covered by this agreement. It states that, in this context, a distinction should be made between the procedure to calculate the maximum available margin and the procedure to set the maximum margin for wage cost increases.
19. 128. Concerning the calculation of the maximum available margin for wage cost increases, the Government indicates that: (i) the procedure, substantially amended in 2017, provides for the intervention of the CCE secretariat, which drafts every two years, in even years, a report concerning the maximum available margins for wage cost increases and wage cost handicap in Belgium compared with three neighbouring reference countries (Germany, France, the Netherlands); (ii) the CCE secretariat must, when calculating the maximum available margin, follow the legal provisions set out in the aforementioned section 5, with no possibility for derogation; and (iii) the procedures and calculations to be carried out by the CCE in accordance with the new section 5 include protective measures (safety margin), measures to reduce the wage handicap that has accumulated since 1996 (correction term), and measures to take into account not only the forecasts of increases for the two years to come, but also the wage cost increases observed in the last two years, while comparing each time these data with the reference countries. The Government states that the reform introduced in 2017 concerning the above-mentioned mechanism aimed, as indicated in the introductory summary of the Bill, to “eliminate the wage cost handicap in relation to our three neighbouring countries before the close of the legislative session, in consultation with the social partners”.
20. 129. Concerning the procedure to set the maximum margin for wage cost increases, as described in sections 6 and 7 of the Act, the Government indicates that: (i) the social partners are responsible for initiating negotiations on the basis of the CCE report; (ii) since the 2017 reform, their agreement must be made official by means of a collective labour agreement concluded within the National Labour Council; (iii) the Federal Government only intervenes when the negotiations and the mediation proposed by the Federal Government fail, and, in the absence of an agreement between the social partners on a maximum margin for wage cost increases, the margin is set by a royal decree deliberated in the Council of Ministers. In the light of the above, the Government states that: (i) the social partners are always the first to retain control of the negotiations, even if the negotiations are regulated, with regard to the determination of the maximum margin for wage cost increases; (ii) even though the Government can also intervene when the agreement reached between the social partners is not in line with the maximum margin set by the CCE, the fact remains that it is always possible to establish a dialogue; and (iii) it should be underscored that the Government itself is committed to respecting the standard established by the CCE, which means that if the standard is set at a specific percentage, this percentage will be respected, regardless of its value. The Government also states that the successive royal orders adopted since 2011, which unilaterally set the wage standard, were issued later and later in their respective years in order to give the social partners every opportunity to reach an agreement (28 March for the Royal Order of 2011; 28 April for the Royal Order of 2013; 19 April for the Royal Order of 2019 and 30 July for the Royal Order of 2021).
21. 130. The Government then states that the maximum margin for wage cost increases cannot be increased by labour agreements at the intersectoral, sectoral, enterprise or individual level. Failure to respect the maximum margin for wage cost increases can be controlled by the social inspection services, which may, in the case of violation, draw up a report. However, only an administrative penalty is established for individual employers who have not respected the maximum margin for wage cost increases. Employers’ and workers’ organizations concluding agreements that exceed the maximum margin for wage cost increases cannot be penalized.
22. 131. The Government states that, as from 1996, the Act introduced an advanced form of coordination of wage costs into the Belgium wage-fixing and collective bargaining system, by using the instrument to balance the following macroeconomic objectives: (i) maintain cost-based competitiveness in a globalized economy and in the euromarket (where currency devaluation is no longer possible); (ii) stimulate employment in a country that is heavily dependent on exports; and (iii) obtain, through labour, a fair share of the growing national income thanks to sectoral negotiations (with a positive impact on domestic consumption).
23. 132. The Government also states that recent international studies, led particularly by the Organisation for Economic Co-operation and Development (OECD), have highlighted the importance of such a coordination, in particular with regard to social inequality. Belgium is therefore a country in which wage inequality is extremely low, and furthermore, this inequality has remained very stable.
24. 133. The Government indicates that this form of coordination is used in an institutional system which greatly facilitates collective (wage) and sectoral negotiations, and which has a well-developed system for determining sectoral base wages by means of collective agreements using wage scales and an indexation guaranteed by collective agreement. The Government wishes to underscore the importance of not considering the instrument in isolation, but to take into account how it fits into a broader set of institutions and regulations that support and facilitate the Belgian collective bargaining system.
25. 134. The Government then refers to the effects of the legislation as amended by the Act of 19 March 2017 on the right to free and autonomous collective bargaining. It states in this regard that: (i) the legal procedure creates a balance between the objective of protecting competitiveness and promoting employment, while ensuring the inclusion of the social partners in each of the stages of the process; (ii) the legal procedure allows the social partners to determine, through collective bargaining, the maximum margin for wage cost increases, and it is only in the absence of consensus between the social partners or in the event of failure to comply with the legal framework that the Government is authorized to intervene; (iii) the absence of consensus between the social partners at the inter-occupational level may eventually lead to a deadlock in negotiations at lower levels, with the Committee on Freedom of Association having admitted in this regard that, in the case of prolonged and unsuccessful negotiations, intervention by the authorities may be justified, if it becomes clear that the deadlock cannot be resolved without their initiative; (iv) despite the criticism of the legislative amendment introduced in 2017, the social partners were able to reach an agreement for the period 2017–18 in conformity with the new legal provisions, even though it is true that, in the two subsequent cycles of negotiations, the social partners did not reach an agreement within the framework of the amended Act; and (v) the statistical data available show that the number of collective agreements concluded at the sectoral level has not decreased since 2017, and these collective agreements continue to address a wide range of issues.
26. 135. The Government then states that the legal mechanism for calculating the maximum margin for wage cost increases does not include all the elements relating to wage costs insofar as, in accordance with section 10 of the Act, the following elements are not taken into account for the calculation of wage costs: (i) profit-sharing bonuses, as defined by the Act; (ii) increases in the payroll resulting from the rise in the number of persons employed in full-time equivalents; (iii) payment in cash or in stocks or shares to workers, under the Act of 22 May 2001 regarding the participation of workers in the capital of enterprises and in the creation of a beneficiary bonus for workers; (iv) the contributions paid as part of pension schemes that meet the requirements established by the Act of 28 April 2003 on supplementary pensions; (iv) the one-off innovation premium established in section 28 of the Act of 3 July 2005; and (v) the Corona bonus to temporarily support workers' purchasing power for a maximum of €500, which is included in the Royal Decree of 21 July 2021, and which can be negotiated at the sectoral, enterprise or individual level.
27. 136. The Government then recalls that indexations and wage scale increases are guaranteed under the Act of 1996, and that the wage increase established by the legal mechanism that is the subject of the present complaint will therefore be added to any indexations and wage scale increases. In this regard, Belgium is, in contrast with its three neighbouring reference countries, the only one with an automatic wage indexation mechanism guaranteed by collective agreement. The procedure established by the Act since 1996 is applied every two years. During each round of negotiations, a new standard calculated on the basis of objective economic elements will be set each time, and this standard will therefore be of a temporary and variable nature.
28. 137. By way of conclusion, the Government states lastly that: (i) as recognized by the complainants, the process gives the social partners the opportunity to set the wage standard, and thus, the social partners maintain a key role in the determination of the wage standard; (ii) although collective bargaining is regulated by the Act, numerous measures are taken to sustain the living standards of workers; (iii) the wage indexation mechanism guaranteed by collective agreement in the context of protecting the purchasing power of Belgian workers is of particular importance; (iv) as wage scale increases continue to be authorized, and section 10 of the above-mentioned Act provides that certain elements are not taken into account for the calculation of wage cost increases, the social partners maintain their freedom to negotiate wage-related issues; and (v) social dialogue on other subjects continues to take place, and collective bargaining is not limited only to negotiations on wages.

C. The Committee’s conclusions

1. 138. The Committee observes that the present case concerns the Act of 26 July 1996 on the promotion of employment and protection of competitiveness, as amended by the Act of 19 March 2017, which provides for the adoption, every two years, at the intersectoral level and with the participation of the social partners, a wage standard consisting of the setting of a maximum margin for wage cost increases which then applies to the different levels of collective bargaining in the country. The Committee notes the complainant organizations’ allegations according to which the effect of this Act, particularly since its revision in 2017, is to drastically restrict the possibility for the social partners to freely negotiate the wage increases of workers in the private sector, which is therefore contrary to the principle of free and voluntary collective bargaining established by the ILO instruments ratified by Belgium. The Committee observes that the Government maintains that the mechanism, the purpose of which is to obtain a balance between the protection of competitiveness and the promotion of employment, continues to give an important role to the social partners in the determination of wage increases, and that the Act in question cannot be evaluated separately from the whole system of collective relations in Belgium, which recognizes the central role of negotiation and consultation between the social partners.
2. 139. The Committee notes that the complainant organizations’ allege that the above-mentioned legal mechanism implies, in particular since the 2017 reform which the workers’ organizations had rejected, a priori, systematic and open-ended intervention by the public authorities in negotiations concerning wage increases in the private sector. The Committee notes the complainant organizations’ indication that: (i) the negotiations at the intersectoral level between the social partners, established since 1996 by the Act, on the setting, every two years, of a maximum margin for wage cost increases, are, since the 2017 reform, preceded by a report established by the secretariat of the Central Economic Council (CCE), which calculates, on the basis of criteria listed exhaustively by the Act, without the participation of the social partners, the above-mentioned maximum margin; (ii) these calculation criteria imposed unilaterally by the Act are distorted by the failure to take into account the reduction of employer contributions and wage subsidies paid using public funds, and labour productivity, and therefore, it is not possible to make an accurate comparison of the real cost of labour in Belgium and its neighbouring countries; (iii) throughout the intersectoral negotiations following the calculation made by the CCE secretariat, the social partners are required to respect the margin thus defined, and cannot agree on a higher maximum wage cost increase; (iv) where the social partners decide to exceed the maximum margin calculated by the CCE secretariat, their agreement will be cancelled by the authorities who will unilaterally set the maximum available margin in accordance with the calculation made by the CCE secretariat; and (v) under the threat of penalties, the maximum margin for wage cost increases is then imposed at all subsequent levels of negotiations (sectoral and enterprise).
3. 140. The Committee notes the complainant organizations’ indication that the wage moderation mechanism described: (i) significantly restricts, from the outset, the framework for negotiations to the detriment of the interests defended by representative organizations of workers, reduces the incentive for representative organizations of employers to make use of collective bargaining, which creates an imbalance between the parties; (ii) seriously and permanently damages the autonomy of the parties in collective bargaining by unilaterally imposing parameters for the calculation of maximum wage increases, with no possibility for derogation, and by allowing the authorities to determine in advance and in a mandatory manner a maximum available margin; (iii) has a damaging effect on the promotion of collective bargaining, as demonstrated by the absence of inter-occupational wage agreements for the periods 2019–20 and 2021–22, the maximum margin for wage increases having been imposed unilaterally in both cases by the authorities by means of royal orders, as provided for by legislation in this case; (iv) prevents, for example in the case of horticulture, the implementation of sectoral agreements with the aim of re-evaluating the wages of categories of particularly vulnerable workers such as seasonal and casual workers; and (v) in general, does not enable different sectors of activity to respond to the sometimes very different economic realities that they face, and does not leave sufficient space for catching up in low-wage sectors, which highlights that an indicative standard would be preferable in this regard.
4. 141. The Committee notes that the Government recalls firstly that the main objectives of the legal mechanism setting the maximum margin for wage cost increases are to protect cost-based competitiveness in a globalized economy and in the euromarket, and to stimulate employment in a country which is heavily dependent on exports, and which has a wage-cost handicap in comparison with its direct neighbours. The Committee notes that, after having described the different stages of the legal mechanism, the Government states that: (i) even if these negotiations are indeed framed by the Act and are based on the report of the CCE secretariat, the social partners retain the initiative for negotiations on the wage standard; (ii) the Federal Government intervenes to set the wage standard only in the event of failure of negotiations between the social partners and of the mediation proposed by the Federal Government; (iii) even though the Government can also intervene if the agreement concluded between the social partners is not in conformity with the maximum margin set by the CCE, it still remains possible to establish a dialogue: (iv) even if agreements were not reached after two subsequent rounds of negotiations, the social partners succeeded, within the framework of the mechanism reformed in 2017, in adopting, by consensus, the maximum margin for the period 2017–18; and (v) the wage standard, adopted either by agreement of the social partners or by a royal decree, has a two-year period of application and is therefore not permanent.
5. 142. The Committee also notes the Government’s indication that the legal mechanism for the calculation of the maximum margin for wage cost increases does not include all the elements relating to wage cost insofar as, under section 10 of the Act, the following elements are not taken into account for the calculation of wage cost: (i) profit-sharing bonuses, as defined by the Act; (ii) increases in the payroll resulting from the rise in the number of persons employed in full-time equivalents; (iii) payment in cash or in stocks or shares to workers, under the Act of 22 May 2001 regarding the participation of workers in the capital of enterprises and in the creation of a beneficiary bonus for workers; (iv) the contributions paid as part of pension schemes that meet the requirements established by the Act of 28 April 2003 on supplementary pensions; (v) the one-off innovation premium established in section 28 of the Act of 3 July 2005; and (vi) the Corona bonus to temporarily support workers' purchasing power for a maximum of €500, which is included in the Royal Decree of 21 July 2021.
6. 143. The Committee notes the Government’s indication that wage indexations and wage scale increases (that is, the existing wage increases according to seniority, age, normal promotions or individual category changes, provided for by a collective agreement) are guaranteed by the Act, and that the wage increase established under the legal mechanism that is the subject of this complaint will therefore be added to any indexations and wage scale increases. The Government states in this regard that, compared with its neighbours, Belgium is the only country with an automatic wage indexation mechanism that is guaranteed by collective agreement. The Committee notes lastly the Government’s indication that: (i) the coordination of the wage standard at the intersectoral level which is the subject of the present case cannot be examined in isolation from the institutional system in which it is incorporated, which greatly facilitates collective and sectoral (wage) negotiations, and which provides a highly developed system for the determination of sectoral base wages through collective agreements; (ii) the statistical data available show that the number of collective agreements concluded at the sectoral level has not decreased since 2017, and that these collective agreements continue to address a wide range of issues; and (iii) social dialogue on other subjects continues to take place, and collective bargaining is not limited only to negotiations on wages.
7. 144. The Committee notes the different elements provided by the parties. It notes that it is clear from the concordant descriptions of the complainant organizations and the Government, that the mechanism setting the wage standard at the intersectoral level, which was established in 1996 and reformed in 2017, and which aims to establish, for a period of two years, the maximum margin for wage cost increases, comprises the following stages: (i) in each even year, the CCE technical secretariat calculates the above-mentioned maximum margin on the basis of criteria exhaustively listed by section 5 of the Act; (ii) based on this calculation, the social partners enter into negotiations to set the maximum margin, with any agreement by the social partners being incorporated into a national collective agreement (section 6, paragraph 2 of the Act); (iii) where negotiations are unsuccessful, the Government facilitates a dialogue and mediation process between the social partners (section 6, paragraph 3 of the Act); and (iv) if mediation fails, it is for the Government to set the maximum margin, and its decision gives rise to the adoption, in the Council of Ministers, of a royal order (section 7, paragraph 1 of the Act). The Committee notes that the parties also agree on the fact that both the social partners, in the event that they conclude an agreement, and the Government in the case of the adoption of a royal order, cannot exceed the margin calculated at the beginning of the process by the CCE secretariat (section 7 of the Act), and that the final margin set is of general application to the different levels of negotiation under the threat of penalties for the employers concerned.
8. 145. The Committee notes that, while the mechanism described is part of an established practice of concertation on wages at the intersectoral level, the results of which are then applied to the different levels of negotiation in the country, the reform introduced in 2017 significantly amended some of these aspects. In this regard, the Government recognizes the existence of limits on the freedom to negotiate of the social partners with regard to wage increases, in particular the obligation to respect the maximum margin calculated at the beginning of the process by the CCE secretariat. The Committee observes, however, that the parties’ views diverge on the extent to which the autonomy of the parties is restricted, on the one hand, and the temporary nature or otherwise of these restrictions.
9. 146. Concerning the first point, the Committee notes that, as indicated by the parties, in accordance with the legislation in force, the social partners cannot agree on a wage standard providing for an increase higher than the maximum margin for wage cost increases established in advance by the CCE technical secretariat, which is calculated on the basis of criteria listed exhaustively by the Act. In this regard, the Committee notes that section 2 of the Act defines the wage cost increase as “the increase in nominal terms of the average wage cost per worker in the private sector” and that, in this context, the wage cost is defined by the same provision as “all remuneration in cash or in kind paid by employers to their employees for work completed by the employees during the period of reference ...”. While noting that section 10 of the Act establishes that certain payroll increases listed exhaustively are not included in the calculation of the maximum margin, the Committee observes that the elements described indicate the existence of a significative restriction of the ability of the social partners to autonomously negotiate wage levels in the private sector. In this regard, the Committee recalls that it is for the parties concerned to decide on the subjects for negotiation, and that determination of criteria to be applied by the parties in fixing wages (cost-of-living increases, productivity, etc.) is a matter for negotiation between the parties and it is not for the Committee to express an opinion on the criteria that should be applied in fixing pay adjustments [see Compilation of decisions of the Committee on Freedom of Association, sixth edition, 2018, paras 1289 and 1465.] Recalling that Belgium has ratified Conventions Nos 98 and 154, the Committee also underscores that it has considered that measures taken unilaterally by the authorities to restrict the scope of negotiable issues are often incompatible with Convention No. 98; tripartite discussions for the preparation, on a voluntary basis, of guidelines for collective bargaining are a particularly appropriate method of resolving these difficulties [see Compilation, para. 1290].
10. 147. Concerning the temporary nature or otherwise of the restrictions on free negotiation of the maximum margin for wage cost increases described above, the Committee observes that, while the wage standard adopted every two years is not, by definition, permanent, the mechanism which allows for the setting of the standard, and which is the subject of the present complaint, is, however, continuous in time insofar as, in accordance with the legislation in force, it governs for an indefinite period of time the successive exercises for setting the maximum margin of wage cost increases. In this regard, and while duly taking into account the characteristics of the present case (participation of the social partners in the setting of the maximum margin, possibility of negotiating certain defined aspects of remuneration in addition to this margin, wage indexation mechanism), the Committee recalls that it has considered that if, as part of its stabilization policy, a government considers that wage rates cannot be settled freely through collective bargaining, such a restriction should be imposed as an exceptional measure and only to the extent that is necessary, without exceeding a reasonable period, and it should be accompanied by adequate safeguards to protect workers’ living standards [see Compilation, para. 1456].
11. 148. In the light of the foregoing, and taking duly into account the tradition of dialogue that characterizes collective labour relations in Belgium, the Committee requests the Government to take, in full consultation with the social partners, the necessary steps to ensure that the social partners are able to freely determine the criteria on which to base their negotiations on wage increases at the intersectoral level, and the results of those negotiations. The Committee requests the Government to keep it informed of any developments.

The Committee’s recommendation

1. 149. In the light of its foregoing conclusions, the Committee invites the Governing Body to approve the following recommendation:
   • The Committee requests the Government to take, in full consultation with the social partners the necessary steps to ensure that the social partners are able to freely determine the criteria on which to base their negotiations on wage increases at the intersectoral level, and the results of those negotiations. The Committee requests the Government to keep it informed of any developments.