Compensation upon termination of employment and social security contributions - Return to the exemption for certain compensatory amounts linked to protected statuses

After having decided to subject almost all termination indemnities to social security contributions, the government recently changed course and decided to keep the exemption for certain protection indemnities.

Since 1 October 2013, almost all termination indemnities have been subjected to social security contributions. These included certain protection indemnities (concerning maternity and time credit, etc.) and non-compete and non-solicitation indemnities (see our Newsflash of 30/09/2013).

This reform led to an incompatibility between compensations paid upon termination and unemployment benefits (see Newsflash of 15/11/2013).

Following heavy criticism of these two measures, the government decided, by Royal Decree dated 21 December 2013, to reinstate an exemption from social security contributions for certain 'protection' indemnities (concerning maternity, time credit, etc.).

In the same light, the government eliminated, by Royal Decree dated 26 December 2013, the incompatibility between compensation upon termination and unemployment benefits. As a consequence, these compensations can be cumulated again with unemployment benefits.

The government however, did not alter its decision concerning the compensation for loss of clientele of sales representative and the non-compete and non-solicitation indemnities paid within 12 months of the end of the employment contract: these indemnities remain subject to social security contributions.

> Action point

This new regime applies retroactively from 1 October 2013. Keep this in mind for the declaration of social security contributions for the 4th trimester of 2013!