International Labor & Employment Law Committee Newsletter

Issue: May 2012

Editor: Tim Darby | European Editor: Paul Callaghan |Canada Editor: Gilles Touchette |Asia and Oceania Editor: Ute Krudewagen


New Legislation Passed Protecting Older Employees in Corporate Reorganizations

Filip Saelens, Partner Loyens & Loeff and Kris De Schutter, Senior associate, Loyens & Loeff

Two important measures to increase the number of older employees by discouraging employers from terminating them, especially in the framework of a collective dismissal, have been set by The Mosaic Act (the Act) of March 29, 2012. Companies that do not comply with this legislation may face financial sanctions.

First Measure

The first measure relates to the cost of early retirement schemes. Until 2013, early retirements for employees aged 50 and over are eligible for reduced social security contributions by the employer. However, from 2013, the age at which workers may be eligible for such reduced social security contributions will increase to a range between 52 to 55 and the percentage of reduction will be stair-stepped.

Thus, The government has taken a serious measure to discourage such early retirement schemes by increasing the employer's costs. The following social security contributions will be due from employers on top of the monthly payment of about 50% of the difference between the last net salary and the unemployment allowance. The monthly payment payment will be made until the age of 65.

Age early retirement schemeNew social contributions
greater than 52100% (instead of 50%)
52 less than or equal to 5595% (instead of 40%)
55 less than or equal to 5885% (instead of 30%)
58 less than or equal to 6055% (instead of 20%)
less than 6025% (instead of 10%)

Second Measure

In order to limit the impact of a collective dismissal on older employees, the Act also obliges employers to respect an "age pyramid" when selecting employees affected by a collective dismissal. The number of dismissals in the case of a collective dismissal must be spread proportionally over three categories of employees:

  • Category 1: employees younger than 30 years of age;
  • Category 2: employees between 30 and 50 years of age;
  • Category 3: employees older than 50 years of age.

Within each of these categories, the number of employees affected by the collective dismissal should be determined in proportion to the number of employees in this category at company level.

Three specific deviations to this general principle have been implemented:

  1. A 10% deviation margin per category is allowed;
  2. Employment contracts for a definite duration or for a specific work that expires at the agreed end date are not taken into account for the determination of the age pyramid; and
  3. Employees with a "key function" can be excluded from the application of this new legislation. However, there is currently no legal definition of a "key function."

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New Legislation Passed Protecting Older Employees in Corporate Reorganizations | National Regulations Push for "Democratic Management" of All Enterprises | Continued Work after Termination Deemed by Shanghai Court as New Employment | Requiring a Non-Workman to Perform Certain Duties of a Workman Does Not Amount to Unfair Labor Practice, Supreme Court Holds | Supreme Court Rules against Deemed Confirmation of Employment of a Probationary Employee | Establishments Are not to be Grouped Together for Retirement Provident Fund Purposes Merely Because Different Family Members Own Them All, Court Holds | Allowances to all Employees Are to Be Included in Calculating Provident Fund Retirement Plan Contributions, Court Holds | Backpay Agreed on In Settlement is to Be Paid Without Employee Proof He Did Not Obtain Further Employment Following Termination, Supreme Court Rules | Proposed Law on Sexual Harassment at Workplace Delayed | Employee Consent Is Pre-Requisite to Business Transfer Deals | Rules for Issuance of Employment Permits to Foreign Nationals Amended | Fixed Bonus to Be Included in Ordinary Wage, Supreme Court Rules | Amendments to Labor Code Proposed Reducing Some Employee Protections and Increasing Some Employee Benefits

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