December payroll – Important actions to consider

With the end of the calendar year around the corner and the holiday period coming up, there are a number of things for companies to consider from an HR / payroll perspective. In this alert, we want to summarize the “points of attention” at year-end which are often overlooked or where misconceptions are common.
 

Replacement days for public holidays

For public holidays which coincide with a day of non-activity within the company (generally on a Saturday and Sunday) a replacement day must be determined. For 2023, New Year’s Day is a Sunday and Armistice Day is a Saturday and will need to be replaced in the majority of companies.

While this can be determined on a sectoral level (rarely applied), it’s usually decided on company level, in consultation with the works council, the union representatives or the employees in a collective way. If no decision is taken in that regard on a collective level, the employer can agree on the replacement days individually with each employee.

In absence of any agreement, the next day of normal activity within the company is used as a replacement day (e.g., New Year’s Day would be replaced with Monday January 2nd).

The replacement day must be communicated to the employees before December 15th (dated and signed bulletin posted in a location accessible to the employees, annexed to the work regulations and communicated to the labor authorities).
 

Transfer of time off

An annually recurring question is what to do with time off that is still open at the end of the year. A good rule of thumb in that regard is that only time off which is granted based on an (individual or collective) agreement is transferrable.

Below, you will find an overview of the rules which are applicable in the majority of cases (specific circumstances of an individual case or sector/company level exceptions are not taken into account):

December recalculation for vacation pay

Belgian vacation rights are built up during vacation service year X, to be taken during the following year, vacation year X+1. 

When the work regime of an employee who has built up vacation rights during vacation year X is reduced in year X+1 (e.g. from full-time to a part-time of 80%), the following needs to be taken into account:

• The number of vacation days (with single vacation pay) is pro-rated in accordance with the reduced work regime;
• The double vacation pay, if not yet paid out, will be calculated based on the new part-time salary (usually in May or June).

In other words, the employee may receive single and double vacation pay in vacation year X+1 which is lower than they would receive if they still worked full time. As a result, a recalculation of the single and double vacation pay is required in December to ensure the employee receives the full vacation pay to which they are entitled based on their employment during vacation year X. This is the so-called first December recalculation.

Additionally, if the change in work regime does not take place as from the beginning of January, a part of the vacation rights which the employee accrues during vacation service year X+1 will also be based on the original work regime (full time in the example we mentioned), and a part will be based on the reduced work regime (80% in our example). As a result, in those cases, a second December recalculation will be necessary in vacation year X+2.

Consequently, a reduction in an employee’s work regime can lead to the requirement for a December recalculation during the year in which the reduction in work regime took place, as well as in the next year.
 

Looking forward: indexation January 2023

Sectors where wages are indexed only once a year (often starting in January) are heading for a historically high indexation of more than 10% in January 2023.

The latest prognosis at time of this publication is 10,84% for JC 200, the largest joint committee in the country. While this is not yet the final number, it is clear that the high inflation of the last and coming months is causing unprecedented wage indexations and a substantial increase of labor cost for employers.
 

Key takeaways

Given the above, the following actions are advised:

• Determine the replacement days for public holidays based on process relevant for the company and communicate it to the employees by December 15th;
• Remind employees that they are obligated to take their time off before the end of the year, and that generally speaking only extralegal vacation days can be transferred (in line with the relevant policies or agreements);
• Determine if a (first or second) December recalculation is needed for any employees and instruct your payroll provider.

In case of any questions with regard to your specific company or a specific employee, please do not hesitate to reach out to us via payrolloperate@be.ey.com