We sighed a collective sigh of relief when the Belgian government finally reached the budget agreement last week. The negotiations had been really difficult, which is not surprising considering the challenges the government faces: €8 billion had to be found somewhere to keep Belgium’s debt at an acceptable level (acceptable as in not driving us Belgians straight to bankruptcy).
The relief was short-lived however, as details of some of the budgetary measures were released. One measure that has Belgian employers scratching their heads is the government’s decision that automatic wage indexation will not be fully implemented on two occasions during this legislative period.
Belgium indexes wages to inflation as part of its wage setting framework, on the basis of indexation mechanisms included in collective labour agreements that vary from sector to sector. This has created challenges in recent years, as high inflation levels have led to higher wages and this has been affecting Belgium’s international competitiveness.
January is traditionally the time when there are wage increases in a lot of sectors due to the automatic link to the index. The most notable sector in this regard is Joint Committee 200, which represents the largest number of employees in the country. However, under the new budget agreement, on both 1 January 2026 and 1 January 2028, only wages up to €4,000 will be indexed (the salary above €4,000 will not be increased). Companies will have to transfer half the benefit they derive from this measure to the state. This €4,000 ceiling will only apply to the first 2% of the index in a year. It will affect employees with a gross salary above €4,000, which is about 40% of Belgian employees.
The measure will only apply twice, but it will have a snowball effect on employees’ wages for the rest of their career with the same employer. In addition to the immediate impact, the measure will also have an indirect effect on subsequent indexations because these will be calculated on a lower gross salary each time.
While the measure may sound challenging enough to those of us who still have nightmares about their maths exams, things are about to get even worse if we zoom in on the fine print:
- Timing: In Belgium, the principle of cost-of-living indexation is not laid down in legislation, but in collective labour agreements that vary from sector to sector. The majority of 1.2 million employees should receive their annual indexation on 1 January. Half of them are employees in Joint Committee 200 who, according to the latest forecasts, can expect 2.22% indexation. If the law introducing this measure is not in place on 1 January 2026, many employees will still receive the normal, full indexation of their wages in January. What happens then?
- Diversity: Each sector applies indexation at different times: some annually in January, others whenever the index is exceeded, or even monthly. How will the measure be implemented in those sectors where salaries are index-increased at irregular intervals throughout the year?
- Salary: How will the €4,000 be calculated? Monthly base salary only, or will holiday pay and thirteenth month pay also be included in the calculation of this amount? What about overtime pay?
The coming weeks should bring more clarity on this topic – or at least we hope so. One thing is certain though – and that is that this measure is a classic “compromise à la belge” – some political parties had entered the budget negotiations demanding that indexation be completely frozen for the coming years, which was unacceptable to others. And so we ended up with this compromise, which is a logistical nightmare waiting to happen …
