Suspension notice period during temporary unemployment due to COVID-19

26 May 2020
Subject Tax alert
Jurisdictions Belgium

A legislative proposal was submitted to the Belgian Chamber of Representatives on the 29th April, in order to suspend the notice period for dismissals given by employers before or during the period of temporary suspension of the employment contract due to corona. The legislative procedure is currently in its final phases, with the proposal set for approval in the plenary meeting of parliament. Subject to the input by the Council of State (Raad van State/Conseil d’Etat), the law will become effective upon its publication and the key elements of this legislation are now evident.

This is an important evolution that needs to be taken into account by employers during these times, where the impact of COVID-19 measures on our economy may force companies into containing workforce costs by reducing headcount in the company.

As the core principles of the incoming legislation are now clear, the further impact in practice of the legislation can be found here below.

The notice period and suspension of the employment contract

In the event an employment agreement is terminated, the employer is to serve a notice period to the employee during which the employee continues to work and receive salary, ending the contract at the expiry of the notice period without further dues. Alternatively, the employer can elect to immediately terminate the contract and pay a severance payment in lieu.

In a number of cases of an employer served notice period, non-execution of the employment contract will suspend and thus prolong the duration of this notice period. Well known examples thereof are when the employee falls ill or is absent on annual leave.

The temporary unemployment that under the current corona-crisis proliferates, obviously also is a form of non-execution of the employment contract. This type of temporary unemployment did in fact not suspend the notice period.

As such, employees in temporary unemployment who are served notice to their contract, would see their notice period continue during the period they are in temporary unemployment.

The current legislative proposal seeks to challenge this, in light of the special circumstances of the crisis, as a protective measure towards affected employees.

Legislative proposal: consequences for employers

What does this mean in practice and what do you need to know as an employer?

Suspension of the notice period

First of all, the new rules apply to all future dismissals and all dismissals that have already taken place, but where the notice period is still running.

The new law would apply as from 1st March 2020 to 30th June 2020.

Any notice period served by the employer after 1st March 2020 and still running on 5th May 2020 will be suspended during the period of temporary unemployment. This means an employer has the choice between having the employee complete the notice period after the temporary unemployment has ended, or alternatively terminate immediately and pay the severance payment in lieu. Obviously, in the latter case, taking days of temporary unemployment into account to lower the severance payment is not permissible. Severance payments will need to be granted based on the normal salary of the employee, absent of temporary unemployment.

Partial payment to employees falling outside the scope of the law

Since the particular period as referenced above to which the suspension is applicable, some employees will fall outside the scope of the initiative. To mitigate financial impact for these employees, extra measures have been put into place.

Indeed, employees who were served a notice period by the employer either starting before 1st March 2020 or ending before 5th May 2020 - if served after 1st March 2020, will not see their notice period suspended due to temporary unemployment after 1st March 2020.

To mitigate the financial impact for these individuals, of the job loss in combination with the temporary unemployment, the employer is required to compensate the wage loss. I.e. the employer is to pay the full wage stipulated in the employment contract, minus the amount of the benefit already received because of the temporary unemployment.

In this way, it is ensured that employees for whom the period of temporary unemployment does not suspend their period of notice, will receive their full income for the duration of the contract.