Payroll in Belgium: Comprehensive Guide for Employers

Belgium has a free-enterprise economy supporting its entrepreneurial culture. Opening up a new business is relatively easy in this upper-middle-income country. According to the World Bank report 2020, it ranks 46 out of 190 countries in the ease of doing business index. The nation falls in the category of high OECD countries, and its GDP is 599.88 billion USD. Different industries, like manufacturing, FMCG, etc., contribute significantly to the country’s GDP. However, the service sector remains the primary contributor. 

Belgium has a robust economy, creating around 0.03% of the world’s total capital inflow. The country is a member of the European Union and decides on several trade and other economic policies across Europe. The country’s tax structure is relatively easy to understand, making it simpler to establish businesses in Belgium. Thus, the firms setting up their offices in the country will not have a problem setting up a payroll system in Belgium. 

You can get in touch with a Global PEO like Multiplier to understand Belgium’s payroll policies and procedures. 

How Is Payroll Calculated in Belgium?

Payroll plays a vital role in the working of every company. Therefore, once your company is incorporated within Belgium territories, you must set up payroll in Belgium. 

Employers must first understand the fundamental difference between gross and net salaries of an employee. 

Gross salary is the aggregate amount an employer needs to pay his employees in return for their services. The gross salary is the overarching term that includes the cash component of the employee’s salary and several other benefits like social security contributions, taxable benefits, income tax, etc. The net salary is the final amount employees get in their bank account after deductions like taxes, social security contributions, etc. 

Some other components included in the payroll are:

• Travel allowance: Employees are given a daily stipend if they work for a business requiring a lot of travel. The employees must also avail of mobile phone allowance, car-related allowance, etc., according to their company’s policy. 
• Social security contribution: The social security component plays a crucial role in payroll processing in Belgium. Employees pay 13.07% of their gross pay towards social security, while employers contribute around 27%. These contributions go towards pensions, sickness, invalidity, and unemployment coverage.
• 13th-month salary: A 13th-month pay depends on the Joint Labour Committee. Employers generally pay the 13th pay salary at the end of the year. Some employers also opt to include half the 14th month’s salary. 
• Taxes: Belgium follows a progressive tax rate ranging from 25% to 50%. The tax rate goes higher with the employee’s income. 

While creating payroll in Belgium, employers must consider other factors like minimum wage, working hours, overtime, employee benefits, etc. 

Important Elements of Salary Structure in Belgium

There are different components of the salary structure in Belgium. Some components include:

Cost to Company (CTC)

The Cost to Company (CTC) has all the components of a salary structure. Some components of the CTC include gross salary, net pay, allowances, deductions, etc. It is the cost the company has to bear annually for hiring an employee. 

Gross salary

Gross salary is calculated before deducting taxes or other applicable deductions. The gross salary includes taxes, bonuses, and other differentials. 

Net salary

The net salary is the amount the employee receives after all deductions. This is the amount the employee receives in their bank account after every payroll cycle.

Basic salary

The basic salary is the primary element of salary in Belgium. Several other components are calculated from the basic salary. The primary salary forms around 40% of the gross pay. It is determined before calculating additional factors like bonuses, overtime, etc. 

Allowances

Belgium is quite flexible in terms of allowances. Employees enjoy different allowances like Per Diems (daily allowance), car and fuel allowance, home working allowance, telephone expenses allowance, etc. 

Bonus

As per the Belgium Labor Code, most employees are entitled to a 13th month’s pay. The 13th month’s pay is calculated by taking 1/12th of the annual basic wage. Bonuses are a part of the employee’s gross pay. 

How to Set Up a Payroll in Belgium

You must establish a few steps for payroll processing and then define a standard Belgium payroll process. Once you have incorporated your company in Belgium, you can begin setting up the payroll for your company. Some necessary steps involved in the process are

Step 1:

The company should be incorporated in Belgium. You can contact a notary to help you with the entire process. You must have a valid incorporation certificate before you begin payroll processing. Additionally, you must get the Articles of Association published in an Official Gazette.

Step 2:

Employers must incorporate all the official documents in either of the three languages: French, German or Dutch. The choice of language will depend on the company’s location in Belgium.

Step 3:

Once the company is registered, you need to open a bank account for your company within Belgium to make all the payroll-related contributions.

Step 4:

You need to register your company to all the country’s tax systems and bodies that manage social security systems. You must also register all your employees with these bodies.

Step 5:

You need to check all your employee’  work schedules to calculate the total number of hours they have worked. You can calculate the overtime pay for all your employees based on the number of hours.

Step 6:

Calculate all your employees’ gross and net salaries. You must also consider all the applicable deductions.

Step 7:

Once you have calculated the salary amounts, a payroll structure in Belgium gets established.

Step 8:

You need to decide on a payroll cycle for your company. It can be monthly, weekly, or bi-weekly based on the labor laws and the company’s internal policies.

Step 9:

You also need to finalize a date to make all the tax payments to the Government. You also need to pay the payroll taxes to relevant authorities.

A Step-by-step Process of Payroll Operations in Belgium

Kickstarting a payroll in Belgium can be cumbersome as it involves different activities. However, you can simplify the procedure by taking a step-by-step approach. Some steps you can adhere to are:

1. Select the payroll system

Companies have different options when choosing a payroll system. You can either perform the entire process manually or hire a third party to manage the whole payroll function for you. However, if you decide to go with manual payroll processing, you must onboard resources who know how payroll works in Belgium. 

2. Payroll policy

A payroll system has several nuances; all your employees must know them. You must create a document that enlists all the payroll policies, like the conditions for payment of allowances, limits on benefits, payroll processing cycle, etc. All these policies will drive the payroll process in the company.

3. Register the employees to the payroll portal

There are different payroll portals to aid you with payroll processing. You must ask all your employees to register themselves to the portal. The portal will collect all the employee details. You need to enter the following points while registering employees:

• Number of employees
• The payroll cycle you want to follow
• Name of the employee, date of birth, and other personal information

4. Open salary bank accounts

The company must help all employees set up their bank accounts once they have registered to the payroll system. All the salary payments are directed to these bank accounts. 

5. Verify the timesheets and calculate the payroll

Before calculating the salaries payable to all your employees, you need to check their timesheets. The timesheets will give you the number of hours they have worked, overtime, unpaid leaves, and others.  

Post that, you need to consider the expenses the employees have incurred while working for the company. These expenses include travel costs, mobile charges, etc. You can then add the reimbursements to the calculation. The amount for such reimbursements is calculated based on the company policy. Once you chalk out all the elements, you can calculate the gross and the net pay.

6. Cross verification

Before you pay out the salaries, make sure that you double-check all the information  added to the payroll system. You can also check the tax records and complete the payroll reconciliation. Once you cross-verify all the information and figures, you can process all the employees’ salary payments. 

7. Hand over the pay slips

Employers should provide all their employees with either a digital or a printed pay slip. The payroll slip includes the payer and payee details, i.e., the employer and the employee. Also, it will contain all the salary components like the gross pay, tax deductions, etc. 

8. Maintain a payroll record

You must record all the payroll-related transactions in a payroll record. You must keep the records for at least ten years as they prove that all the employees are paid on time. 

Payroll Contributions

The payroll contributions in Belgium are made of different components. Some significant contributions are:

Minimum wage

Every employee is liable for legal minimum wage in Belgium. Different industries have different minimum wage standards, but a national minimum wage is also in place. Currently, the minimum wage in Belgium is 1,842.3 Euros per month, 22,108 Euros per year.

There are no hourly rates for minimum wages as most companies in Belgium follow a monthly payment system. Additionally, if you are hiring an intern for your company, you must pay them a minimum of 751 Euros per month.

Overtime

Employees who work beyond 11 hours a day or 50 hours a week are entitled to overtime pay. Generally, overtime is paid at 50% of the regular salary. However, if the employee works on a Sunday or a public holiday, they are entitled to a payment equivalent to twice their regular pay. 

Employee Contributions

The employees contribute 13.07% of their gross pay towards social security. These contributions go towards different components. These components include

Employer Contributions

Employers must contribute to the social security system in Belgium for their employees. They pay around double what their employees pay to the system, i.e., 27%. These contributions are credited to ONSS or Office National De Sécurité Sociale. 

Taxes

Taxes are an essential component of the payroll structure in Belgium. All employees must pay an income tax on the amount they earn. The taxes on income are considerably high in Belgium. However, the Government provides several services like free public transport, drinking water, etc., in return for the taxes that employees pay.

The tax slabs followed in Belgium are enclosed in the list below:

The employees also must file a tax declaration at the end of the year. Also, if a person has any income from other countries, this will be taxed in Belgium. However, if the income comes from a country that is a part of the European Union, there is no need to pay the tax again. 

Social Insurance

Belgium has a reliable social insurance system. The employees and employers make monthly contributions, and employees can enjoy several benefits such as

• Sickness benefits
• Unemployment allowances
• Disability benefits
• Pensions
• Family allowances

Payroll Cycle

Like most European countries, Belgium follows a monthly payroll cycle. The employers are usually paid on the last day of every month. Once the salary is credited to the employees, they receive their pay slips. Employers must record all the payroll transactions.

Belgium Payroll Options for Companies

A company in Belgium can choose any payroll option depending on its budget and  requirements. Some of these options are

• Internal payroll: Companies with well-equipped resources to manage a payroll system must opt for an internal payroll. You need a big team to manage all the payroll activities if you decide to handle the payroll internally.
• Remote payroll: This option is ideal for companies with a parent firm. You can add all your employees to your parent company’s payroll system and then get them processed monthly.
• Outsource: You can outsource the entire function to a payroll processing business. However, you will have to investigate all the compliance issues by yourself.
• PEO: You can contact a global PEO company like Multiplier to look after the entire payroll processing. This will help you focus on your primary business in Belgium.

Entitlement and Termination Terms

You must mention the terms of termination and entitlement in the employment contract for all your employees. However, if you terminate an employee who has been working in the company for more than six months, you need to give them a valid reason for such termination. If the employer fails to provide a reason, it will have to pay the employee an amount equivalent to their two weeks’ salary. 

The employer can ask the employee to serve a notice period, or they can choose to remove them right away by paying for indemnity. 

Belgium Payroll Processing Company

Expanding into a foreign country like Belgium can be complex. Also, setting up the payroll system can add to the complexity. You must get in touch with an individual or a company that has expertise in setting up a payroll system in Belgium.

Several companies are working in the space. You can get in touch with Multiplier, a global PEO who can help you with the entire process. 

How Multiplier Can Help with Global Payroll?

Payroll processing can get cumbersome while setting up a company in a new country. You must comply with the Labor Law and other local regulations while setting up a payroll. You can choose to focus on business expansion and let a global PEO like Multiplier take care of your payroll system. 

All our experts are aware of the Belgian labor laws, and they can set up a fully compliant payroll system for your company. We practice precision in all payroll processing steps, and can take care of the entire process single-handedly.