international employment law firm alliance L&E Global

6. Cost-Reduction Strategies

To what extent can employers implement the following cost-reduction strategies as a result of COVID-19, and what are the primary limitations on each? 

  • Furloughs.

The legal principle is (and remains at least for the time being) that holidays are fixed in mutual agreement between the employee and the employer. Most of the companies we have been in touch with take on the following approach: they request employees to plan a certain percentage of their holidays before a certain date (e.g. 70% needs to be planned before the end of September). Although we have not seen this before, we believe the employer could also request to plan all holidays before a certain date. In this case, the individual employee still has the possibility to freely choose the date of his holidays. Next, under certain conditions, it is possible to introduce a collective leave for the company or a department, during which all the employees have to take leave for a specified period. If the sector did not foresee this, such a collective leave can only be imposed by an amendment of the work rules. In any case, employers must make sure that employees can take their leave before the end of the year.

  • Salary reductions.

It is not permissible to unilaterally reduce the salary of an employee. This is an essential element of the employment contract. Therefore, an imposed salary decrease will be seen as an implicit dismissal, which constitutes an irregular termination of the employment contract. A salary reduction is allowed with the consent of the employee(s) concerned.

  • Redundancy.

It is still possible to dismiss employees. The normal rules will apply.

  • Facility closure.

The normal rules for collective dismissals and closing of the company will apply. This includes a mandatory information and consultation procedure, the negotiation of a social plan and, under certain conditions, the payment of an additional compensation.

Any questions

Ask our member firm Van Olmen & Wynant in Belgium