Upcoming changes to the settlement of leave holiday pay
24 Oct 2023
In the Belgian Official Gazette of 18 October 2023, the Royal Decree of 28 September 2023 was published, which modifies the way that leave holiday pay – paid out to white-collar workers at the end of their employment agreement – is settled with their new employer. This new settlement method will apply as of 2024.
Background – leave holiday pay
In Belgium, an employee’s holiday entitlements in any given year are determined in relation to their actual employment (or periods that are equalised as such, e.g. days of illness) during the preceding year. As such, if the employment agreement of a white-collar workers comes to an end, they’ll be entitled to leave holiday pay from their (former) employer, the amount of which covers:
the holiday entitlements they built up in the preceding year but didn’t yet take up during the current year and;
the holiday entitlements they started building up in the current year, but won’t be able to take up during the next year due to the employment agreement coming to an end.
The employee receives a holiday certificate – detailing i.a. the amount of paid leave holiday pay and outstanding days of leave – which they hand over to their new employer. As the employee received leave holiday pay for built up holiday entitlements, they in fact already received (part of) their holiday pay for the days of leave they'll take up with their new employer. The new employer can therefore, within certain limits, deduct the leave holiday pay, as detailed on the holiday certificate, from the holiday pay it itself is required to pay.
Current practice
Although the holiday regulations seemingly prescribe that this deduction is done proportionally for the leave single holiday pay, each time the employee takes up a day of leave with the new employer, it’s been a widespread practice for decades to deduct the entire (single and double) leave holiday pay in one go from the employee’s remuneration in the month when the new employer pays out the double holiday pay. Recently, however, this practice has come under fire because – as far as the settlement of the leave single holiday pay is concerned and depending on the specific circumstances – it could violate the provisions of the Wage Protection Act. Moreover, the practice of deducting the entire leave holiday pay in one go also frequently results in the employee in question receiving a significantly lower monthly salary in the month of settlement.
New method of settling leave single holiday pay
Taking into account the above, the National Labour Council proposed a new system of settling the leave single holiday pay, which has now been formalised by the Royal Decree of 23 September 2023. Note that nothing changes with respect to the settlement of the leave double holiday pay: this must still be deducted from the double holiday pay as calculated by the new employer.
The new system provides for a two-stage settlement of the leave single holiday pay:
Each time the employee takes up a day of leave that's covered by the holiday certificate, the (new) employer will pay the (new) single holiday pay, but will deduct a lump sum amount equal to 90% of the gross daily salary for the month in question;
In December (or at the earliest at the end of the (new) employment agreement), it will be verified whether the 90% deductions throughout the year were sufficient to settle the entire leave single holiday pay and corrections will be made if necessary.
Going forward, the holiday certificates will also have to mention this new settlement method. In addition, employers must, upon request, thoroughly inform their employee about the calculation method and settlement rules that were applied.
From blue-collar worker to white-collar worker
For the sake of completeness, note that the above explained new method of settling leave holiday pay will also apply for the settlement of holiday pay that’s required when an employee changes employment status from blue-collar worker to white-collar worker.
Key takeaway
As from 2024, the adjusted settlement method for leave single holiday pay will have to be taken into account by companies and their payroll offices. If you have any questions regarding this new method, don’t hesitate to reach out: we’d love to hear from you.
