Companies are generous with purchasing power premium awards

After the corona check, companies appear to be generous again with the purchasing power premium. This makes employer organizations fear that too many employees will see the bonus as an annually recurring achievement.

Companies will have spent half a billion euros in 2023 to pay a purchasing power premium to their employees on top of the indexed wage. This is learned from a study by the business organization Unizo. That is more than the 400 million that employers spent on the corona premium a year earlier, with which they reached half of the employees.

The purchasing power premium – in the form of a consumption voucher, comparable to meal vouchers – was intended as a one-off extra of up to 500 euros in companies that were doing well despite the inflation shock. The condition was that the companies in question had made a ‘high profit’ in 2022. In the case of an ‘exceptionally high profit’, the amount could increase to 750 euros.

The interpretation of these two concepts had to be agreed between trade unions and employers at sector level. According to Unizo, this has gone wrong in one in five sectors. “Achieving a profit of 1 euro was enough to award the premium,” says Danny Van Assche, the managing director of the business organization.

This happened, among others, in the petrochemical industry, the glass industry and paper and cardboard companies. In other sectors, such as brickworks, it was sufficient that no cash flowed out of the company to award the premium.

A battle has been raging over the annual premium for several years now, which is part of the decades-long trench battle between unions and employers over wages. The latter were pushed into a carcan in Belgium.

Wages automatically rise with inflation, which protects employees’ purchasing power. However, this causes nervousness among companies that cannot simply charge more for the products they make or the services they provide. However, they need that extra income to pay their rising wage costs.

To keep wage costs under control, there is the wage standard law, which states that they may not rise faster than the average of neighboring countries. To the annoyance of the unions, the additional surcharge on top of the indexation was limited to 0.4 percent in 2021. As a compromise, a novelty was introduced: a corona premium of up to 500 euros in companies that had weathered the pandemic well.

The explicit intention was that only companies that felt comfortable enough would pay out the premium. But the unions pushed the door open a little wider and half of the employees in the private sector received the corona check, at a total cost of 400 million euros.

This also happened then, much to the annoyance of Unizo, which is not involved in every sector negotiation. ‘The unions got the most out of it at a time when that was not wise. It is even dangerous and harmful,” Van Assche said at the time.

When at the end of 2022 there appeared to be no room for a surcharge on top of the indexation due to the inflation shock, the socialist trade union ABVV canceled wage negotiations with employers. The government then again sought a compromise in a check. The employers thought they had learned their lesson and insisted on a stricter definition: only companies with a ‘high profit’ or an ‘exceptionally high profit’ were allowed to pay out the premium.

It explains the annoyance in the business world about the fact that the premium has once again been widely awarded. Moreover, there is a fear that the unions see the premium as a precedent and automatic. ‘This form of extra remuneration should never be taken for granted,’ says Van Assche.

Critics of the check also refer to the international context. At the beginning of this year, the Central Economic Council calculated that Belgian wage costs are still higher than those of sector peers in neighboring countries. They do not have the system of automatic indexation, which means that wages are only adjusted to inflation with a delay – and sometimes only partially – through trade union negotiations.

The wage dispute has not only reverberated in the federal government in recent years, but is also an important theme in the election campaign for June 9. For example, the abolition of the wage standard law is the very first point in the PS’s 1,200-page program.

On the Flemish side, both the PVDA and Vooruit advocate revising the law. The PVDA wants completely free negotiations on wage increases, but considers automatic indexation to have been achieved. Vooruit wants the wage standard law to become not binding but guiding, so that wages in sectors with high profits and productivity growth can rise more quickly.

Open VLD, CD&V and the N-VA are sticking to the wage standard, which was tightened during the Michel government, because they see it as a protector of economic activity in our country against derailing wage costs.