Foreign workers are cheaper

Fable or fact?

As an International Talent Solutions Partner, we've been hearing it for years: "Ah, your people come from abroad, so that foreign labor is cheaper than Belgian labor, great!" But is this really the case? European Union nationals can travel freely within the Union but therefore cannot be employed just anywhere, here are some important nuances to understand.

There is still a large supply of undeclared work in the labor market (construction, horticulture, domestic services,...) leading to investment migrants, people who have the intention to return once they have earned enough. The opening of EU borders has not led to disruption but rather to strengthening and growth of the economies of EU countries. Workers from other member states have hardly displaced local workers or depressed local wages, nor do they cause additional pressure on social services. Rather, they fill shortages on the labor market or perform functions that the local Belgian worker is no longer able or willing to perform.

The opening of borders was intended to push labor migration in a legal direction: such as countering labor abuse, exploitation, distortion of competition, undeclared work, fake statuses and so on.

So are foreign workers cheaper?

When employing a foreign worker in Belgian salaried/ temporary employment, the employer must respect all the pay and working conditions that it applies to its own permanent Belgian employees. So a foreign employee works under the same conditions as his Belgian colleagues. And here you already have part of the answer, although we need to nuance this, as there are other forms of employment applicable in Belgium to provide a complete answer.

There is another (semi)-legal avenue: the "free movement of services."
The famous posting where self-employed persons and companies within the EU are allowed to perform assignments in other EU member states. For example, Portuguese workers commissioned by a Portuguese company can be working in Belgium without a work permit in a perfectly legal way, assisted by workers from Ukraine or Belarus ( Non-EU countries) if they are also registered in the Portuguese company. These Ukrainian or Belarusian workers would not be allowed to be employed in Belgium without a work permit without this construction.

In this case, the contractor must be responsible for housing and relocation costs and must comply with a minimum core of Belgium's labor law: Collective Labor Agreements, minimum wages, working hours, paid overtime, vacation pay and safety regulations. The European Posting of Workers Directive has been defining these wage and working conditions for some time and has been transposed into Belgian law that came into effect on July 30, 2020.

So where is that difference and the other part of the answer to this question?

To do this, we need to zoom in on social security contributions and tax returns. These happen, with "free movement of services" in the sending state, Portugal in our example. In most cases, these declarations and contributions are (much) lower in EU countries other than Belgium.
This then leads to the well-known competitive advantage, making it seem in this case that the same worker is cheaper for a Belgian company, than someone in Belgian employment or via a Belgian temporary contract. In reality, this worker should receive exactly the same wage package as your permanent employees. However, because they do not contribute to Belgian social security and taxation, you have the idea as a company that they are cheaper and therefore receive a lower wage. But nothing could be further from the truth. The "cheaper" part of the "free movement of services" is not in the lower wage package, but in the fact that these employees do not contribute to Belgian social security and taxation.

Until now, the free movement of workers within the EU has been a subject of discussion and transitional measures that will surely blossom again in the future, when the economy accelerates back and many European companies need more and more workers.

So is it a fable or a fact?

Fact is:

• Your foreign worker should, in principle, in Belgian salaried employment/ temporary employment/free movement of services, get the same gross pay package as his Belgian equivalent. Net, the employee in "free movement of services" may have more to spare, because he does not contribute to Belgian social security, but to that of his home country, which in most cases is lower than the Belgian one.
• Your invoice for the same foreign candidate via Belgian salaried/agency work will ( probably) be higher, than the one via "free movement of services", because the foreign company has no tax and NSSO obligations in Belgium for its employees and thus can keep its margin, although it can reduce the price per hour, due to the more favorable foreign tax system.
• The distinction between real and sham self-employed workers is often unclear and often a thorn in the side of interest groups in Belgium. Figures also indicate that many employers are still using "free movement of services", (bogus) secondment and (bogus) self-employed workers to work in other EU member states. If you are working with a foreign organization in one of these constellations, it is always important to check carefully with your partner whether they are correctly remunerating your foreign worker according to Belgian labor law. As a Belgian company, you are responsible for this since 2020 and this can have nasty consequences if you are working with a dubious partner.

Link2Europe can help you legally put foreign workers to work at your company through temporary employment or immediate permanent hiring. Through our Link4Projects department, we can help your company vet your subcontractors to see if they are working legally or find solid, legal subcontractors for you abroad.

So still a lot of work to do in terms of worker protection within the EU!
As Link2Europe, we are making an important contribution to ensuring that everyone works legally in Belgium. This also protects you as a company from any unpleasant experiences due to labor inspections.