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Article

11 min read

How to Reduce Payroll Costs in Belgium

Global payroll

Global expansion

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Author

Shannon Ongaro

Published

October 09, 2024

Last Update

January 31, 2025

Table of Contents

Key factors impacting payroll costs in Belgium

Proven strategies to reduce payroll costs in Belgium

Legal considerations for cutting payroll costs in Belgium

Common payroll mistakes employers make in Belgium

Industry-specific payroll reduction tactics in Belgium

Outsourcing payroll services to reduce costs in Belgium

Optimize payroll with Deel

Key takeaways
  1. Why payroll expenses in Belgium tend to be higher: strong local labor laws, high tax rates, and mandatory social contributions.
  2. What strategies businesses can implement to reduce payroll costs, including optimizing workforce structure, offering flexible work options, outsourcing tasks, automating payroll management, and taking advantage of government incentives.
  3. How third-party payment management solutions with automation capabilities like Deel can streamline processes and ensure compliance, leading to cost savings.

Payroll costs can be a significant expense for organizations, particularly in countries with complex legislation and high employer costs, such as Belgium. This means that reducing payroll costs is a priority for businesses, which makes cost-effective payroll management essential for organizations' profitability.

Effective payroll cost reduction in Belgium requires compliance with local laws. Proven methods include strategic workforce management, claiming any government incentives you're eligible for, and investing in innovative technology such as Deel's integrated payroll solution.

In this article, we'll explore some of the main factors that determine the cost of payroll management in Belgium, and outline proven cost-saving strategies, common employer errors, and legal considerations.

Key factors impacting payroll costs in Belgium

Payroll costs in Belgium are influenced by several key factors, including stringent local labor laws, tax rates, and mandatory employment benefits. Employers must thoroughly understand these to effectively manage costs:

  • Local labor laws: Employers in Belgium must comply with the country's comprehensive labor laws that cover wages, working hours, employee rights, and more. Employers must also adhere to sector-specific collective bargaining agreements, including salary scales and increments.
  • Mandatory contributions and tax rates: Belgium imposes high taxes and mandatory contributions on employers. For example, Belgian employers must make social security contributions to the ONSS/RSZ (Office National de Sécurité Sociale / Rijksdienst voor Sociale Zekerheid) to fund health insurance, pensions, workplace accident protection, and family allowances. The employer contribution rate can range from 25% to 45% of gross salary, depending on industry sector and wage levels. This rate is higher than many in neighboring countries, increasing payroll costs.
  • Insurance obligations: Employers may be required to fund insurance coverage, such as job-related risk insurance or supplementary health insurance.

Payroll expenses can vary between regions and industries. For example, Wallonia, Flanders, and Brussels levy varying regional taxes and premiums, and sector-specific collective agreements can increase costs.

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Proven strategies to reduce payroll costs in Belgium

Employers in Belgium can implement several strategies to achieve payroll cost reduction while complying with legal requirements:

  • Optimize workforce structure: By restructuring your workforce to include temporary or part-time employees, you can increase agility and reduce your social contribution obligations, as these are proportional to working hours.
  • Offer flexible working: Supporting remote working or flexible work schedules can reduce your real estate costs and allows businesses to increase or decrease their workforce based on workload variations and requirements.
  • Outsource non-core functions: Administrative and supporting roles can be effectively outsourced, lowering direct employment obligations and associated payroll costs.
  • Automate payroll management: Employing comprehensive payroll software with automation capabilities like Deel ensures compliance with local laws and streamline complex payroll tasks. This reduces labor hours spent on repetitive administrative tasks and minimizes errors that can incur significant penalties.
  • Government incentives: Belgium offers certain hiring incentives and tax breaks for employers, such as reductions for employing workers under the age of 26 and individuals experiencing long-term unemployment.

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When implementing payroll reduction strategies, Belgian companies need to remain compliant with local regulations, such as:

  • Wage laws: Employers must pay at least the minimum wage under Belgian law. You're also obliged to adhere to industry-specific wage scales that are defined by collective agreements.
  • Termination procedures: Companies must follow certain procedures when downsizing, including notice periods and severance compensation.
  • Compliance regulations: Employers must strictly adhere to Belgium’s robust employment laws on working hours regulations, paid leave entitlements, health and safety requirements, and more.

Failure to comply with these legal frameworks, such as through wrongful termination or employee misclassification, can have serious legal and financial repercussions.

Common payroll mistakes employers make in Belgium

Several common errors can increase payroll costs or cause legal issues in Belgium:

  • Misclassifying employees: Incorrectly categorizing employees as independent contractors to sidestep social security contributions can result in substantial penalties.
  • Failing to track overtime: Employers must accurately record employees' working hours as failing to compensate them for overtime can lead to legal disputes and incur retroactive wage payments.
  • Neglecting compliance: Updating payroll processes to align with changes in tax laws, collective agreements, or social contributions is vital. Belgian companies may face fines or legal action in the case of outdated or incorrect payroll calculations.

To prevent these mistakes, employers should implement regular audits, stay informed of regulatory changes, and consider implementing comprehensive global payroll systems to ensure compliance.

Industry-specific payroll reduction tactics in Belgium

Payroll management presents industry-specific challenges and opportunities for businesses in Belgium:

  • Tech: Increasingly, tech companies employ remote or gig workers, reducing overhead costs associated with full-time employment. They invest in globally-compliant payroll software to manage a distributed workforce efficiently.
  • Manufacturing: Emphasis is on workforce flexibility through temporary contracts, enabling manufacturers to adjust labor needs seasonally without incurring heavy payroll costs. Automation of repetitive tasks also contributes to cost savings.
  • Retail: Retailers frequently employ part-time staff to align with fluctuating customer demands. Leveraging extended working times during peak periods can optimize labor costs without breaching legal limits.

Outsourcing payroll services to reduce costs in Belgium

Outsourcing payroll management allows Belgian companies to strategically lower administrative costs, mitigate compliance risks, and focus on core business functions. For instance, global payroll solutions like Deel streamline pensions, social security, and tax reporting in adherence with local laws.

Optimize payroll with Deel

Deel’s global payroll management platform is a cost-effective solution that integrates with your existing HR systems to streamline local and global compliance. Deel automates payroll processing, boosting efficiency, and minimizing errors and administrative burdens. The solution centralizes global payroll operations and leverages insights from localized experts..

Disclaimer: This article is for informational use only and shouldn't be considered legal, business, or tax advice. Consult an expert for guidance on your specific case.

FAQs

Employers can reduce payroll costs by providing flexible work options, outsourcing tasks, automating payroll processes, and exploring government incentives.

Automation minimizes labor hours, reduces errors, and ensures compliance, resulting in cost savings.

Yes, incorrect practices can lead to penalties. It's crucial to comply with wage laws, termination procedures, and employment contracts.

Tech, manufacturing, and retail industries benefit due to their operational flexibility and workforce structuring options.

Outsourcing reduces administrative burdens and ensures compliance. This can cut costs and allows teams to refocuson core business areas.

Incentives such as reduced contributions for employers that hire young workers or long-term unemployed individuals lower payroll tax obligations.

Adjusting benefits is possible, but must comply with local labor laws and collective agreements to avoid legal repercussions.

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About the author

Shannon Ongaro is a content marketing manager and trained journalist with over a decade of experience producing content that supports franchisees, small businesses, and global enterprises. Over the years, she’s covered topics such as payroll, HR tech, workplace culture, and more. At Deel, Shannon specializes in thought leadership and global payroll content.

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