Skipping indexations: myth or fact?
In its judgment of 27 February 2025,[1] the Brussels labour court ruled that an employer in the insurance sector was entitled to unilaterally terminate the company practice of indexing full gross monthly wages exceeding the highest sector-level pay scale. According to the court, the employer had served notice in time to the employees about its decision to terminate this company practice. The employees, who had sought retroactive payment of indexed salaries from 1 January 2023, had their claims dismissed. What are the practical implications of this ruling? Can employers from now on skip indexations?
I. Framework of the indexation mechanism in Belgium
Employing personnel in Belgium involves following the much-debated mandatory wage indexation mechanism, which implies that wages must be adjusted in line with the rising cost of living, and so helps preserve employees’ purchasing power.
However, although every employee is entitled to an indexation of their wages, the implementation modalities (i.e. when and to what extent the salaries will be indexed) may vary since wage indexation rules are not determined at the national level, but at the sector level through sector-specific collective bargaining agreements (CBAs).
II. The dispute before the court
The employees here came within the scope of joint committee n° 306, which is the joint committee (JC) for the insurance sector.
While in most other sectors (like JC n° 200) the sector CBAs provide for indexation of the minimum wage(s), the sector-specific pay scales and the wage(s) actually earned by the employees, this is not the case in JC n° 306. In JC n° 306, the sectoral provisions only require indexation of minimum wages and sector-specific wage scales, not of the actual full gross wages paid to the employees.
However, within the company, there was a long-standing practice of indexing the actual full gross wages paid to the employees, which went beyond the sectoral provisions’ requirements.
Following the high inflation rates in 2022 and 2023 that were set to have a huge impact on the employer’s wage cost, the latter unilaterally decided to discontinue this company practice and to implement a wage index ceiling. In June 2021, the employer announced its intention, starting from 1 January 2023, to only index monthly wages up to 5,400 EUR (the highest sector-level scale). The portion of wages above 5,400 EUR would no longer be subject to indexation as from that date.
A number of high-earning employees, supported by the unions, challenged this decision and brought the case to court; they claimed arrears of salary, and argued that they had a right to full wage indexation beyond the sector-specific wage scales.
III. The ruling
In its judgment, the labour court emphasized that in JC n° 306, there is no sectoral provision requiring indexation of the actual full gross wages.
The court confirmed that there was a company custom in place that provided for wage indexation above the sector-level pay scale.
However, the court ruled that an established company custom can be unilaterally revoked by the employer if made with proper notice. The court concluded that the custom had been validly and effectively terminated as the employer had communicated its intention to end the custom as early as June 2021, which meant there had been a “reasonable notice period” given to the employees.
The arguments that the employees invoked, namely that (i) the company custom was effectively incorporated in the employees’ employment contract, (ii) that the indexation was part of the employees’ “agreed remuneration” and that (iii) a “verbal” employment contract provided for indexation of the full salary, were rebutted by the court.
The employees have lodged an appeal against this decision.
IV. Conclusion: somewhere between myth and fact
The answer to the question whether employers can from now on skip indexations is nuanced.
Indeed, the case presented to the Brussels’ labour court is exceptional in the sense that it concerned an employer pertaining to one of the very few joint committees where the sector CBA does not provide for the indexation of the wages actually earned by the employees. Therefore, the practice in the company to also index the part of the wages exceeding the sector-level threshold, was a mere “company custom” that could be unilaterally revoked by the employer if the employees were served sufficient notice.
The situation is different for employers pertaining to joint committees in which the sector CBA requires indexation of the salaries actually earned, as is the case in most joint committees. These employers cannot ‘ignore’ such sector-level CBAs, since doing so would constitute a criminal offence.
[1] Labour court Brussels, Dutch-speaking section, 27 February 2025, Role number 23/1164/A, unpublished.
If you would like further information or assistance regarding this topic, then please contact Philippe De Wulf (Philippe.DeWulf@altius.com) or Emma Van Caenegem (Emma.VanCaenegem@altius.com).
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