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Your pay costs as a foreign employer

Employers | 02 October 2020 | Written by Ju Tung Chiu

As a foreign company that has entered the Belgian market, you must now perform a first pay calculation. No easy matter if Belgian legislation is new to you.

Your pay costs as a foreign employer
One of the most common questions is how much it actually costs to recruit a Belgian employee. You will also undoubtedly want to know how much your Belgian employee will retain of their gross salary after the deduction of all social costs and taxes.

Gross-netWhen it comes to the gross-nett calculation the Belgian system is quite similar to most other countries. The nett salary is calculated by deducting the social security costs (RSZ/NSSO), tax (Retention tax) and special deductions from the gross salary.
Gross salary
     - Social security (13.07%)
     - Retention tax
     - Special deductions

How much is left from your employee’s gross salary now that all charges have been deducted? Sadly, there is no clear answer to this question. Indeed, the amount of retention tax depends on the employee’s marital status (married, unmarried) and the number of dependents. These two factors can affect the nett salary quite significantly. The special contribution is also variable, as it depends on the employee’s pay level and the annual taxable family revenue.

Below, we use an example to illustrate how the situation affects the employee’s salary:
  Unmarried Married, 3 dependent children
Gross salary €3,000 €3,000
Social security (13.07%) €392.10
Retention tax €598.88 €349.88
Special deductions €27.51 €27.51
NETTSALARY €1,981.51 €2,230.51
The employee’s contribution is always 13.07% based on the entire gross salary. In other words, there are no limits.

Cost for the employer But what about the employers’ costs? The Belgian government is aware that the Belgian pay cost has always been one of the highest in Europe. In the past, the employer’s costs equalled 35% of the gross salary. Thanks to the tax shift this cost has now been reduced to 25%. Other reductions have also been put in place to reduce the costs even more. The most important and interesting reduction for new employers is undoubtedly the first employee reduction. This means that you are exempted from paying a basic employer contribution for your first employee to whom Belgian social security rules apply. Don’t delay, because the request must be submitted before 31/12/2020! There are also other lump discounts which apply when hiring a 2nd to 6th employee.
Need help in starting up your business in Belgium? Contact Ju Tung Chiu

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