What does the cap on wage indexation or the ‘cent index’ mean?

How wage indexation works in Belgium

In Belgium, employees’ gross wages are in principle indexed automatically in accordance with sectoral rules. Each sector uses a specific mechanism for this, which ranges from annually, monthly or quarterly to automatic indexation when the relevant index threshold is exceeded. Depending on the sectoral rules applicable within the company, only the minimum wages and/or the actual wages will be indexed. The new cent index intervenes in the current wage indexation mechanisms. 

Content of the new measure

The new measure involves a cap on wage indexation. The law provides for the cap to be applied in two phases. The first phase will begin in June 2026 and will apply only to wages exceeding the threshold of €4,000 gross. In 2028, the government plans to apply the capped indexation for a second time. During this second period, the €4,000 gross threshold will be indexed.

The proposed timing means that some sectors will still apply capped indexation in 2026. Sectors for which no further indexation is planned in 2026 will not apply the cap until 2027. 

The law provides that the regulatory and statutory provisions, as well as the terms of individual and collective employment contracts and unilateral decisions, under which scale and actual wages are linked to an indexation mechanism, shall only take effect up to 2% of the reference wage, capped at €4,000 gross. This means that wages above €4,000 gross will increase by a maximum of 2% during the two periods in question. 

For Belgian employees with a reference wage of up to €4,000 gross, nothing will change in principle. Based on the available information, the current indexation mechanisms will continue to apply up to this amount.

What is the reference wage?

Whether the cap applies is assessed on the basis of the reference wage. This is defined as the gross fixed scale or contractual basic wage on a full-time basis, regardless of performance or hours worked. The reference wage does not include meal vouchers, overtime pay, performance bonuses, end-of-year bonuses, eco-vouchers, profit-sharing bonuses or allowances for night and weekend work. 

If employees’ basic pay is stated as an hourly rate, the reference wage is determined by multiplying the hourly rate by the full-time weekly working hours, multiplied by 13 and divided by 3. 

For part-time employees, the reference wage is reduced proportionally in line with their employment fraction. 

Calculation examples

The law requires only that an effect of 2% must be achieved by the end of the first limitation period, which means that various situations are possible, as sectors use different calculation methods and timings for indexation.

1. The first situation is one in which the sector provides for wage indexation of more than 2%. The indexation of wages above €4,000 gross will then take place in two stages. 

2. The second scenario is one in which the sector provides for wage indexation of less than 2%. In this scenario, the 2% cap will not yet have been reached. The cap must then be applied to subsequent indexations until the 2% threshold is reached.

3. A third possible scenario is one in which wage indexation within the sector amounts to exactly 2%. 

Impact of the cap on wage indexation

The government has two objectives with this cap on wage indexation. On the one hand, the ‘cent index’ aims to support businesses, and, on the other hand, the measure will have a positive effect on the budget. To achieve these objectives, the law provides for a special wage restraint contribution payable by employers to the National Social Security Office (NSSO). The special wage restraint contribution corresponds to half of the revenue from wage restraint, plus the employers’ contributions. The law contains a detailed formula for calculating the special contribution. The NSSO will collect the special wage restraint contribution together with the contributions for the relevant quarter.

In addition, there is a consolidated wage moderation contribution, which is also payable to the NSSO. A provisional consolidated wage moderation contribution is payable as soon as the moderating effect of the cap is achieved for the first time. When the effect is achieved for a second time, a definitive consolidated wage moderation contribution will be payable. According to the NSSO, the provisional consolidated contribution will be collected for the first time in the third quarter of 2027.