On January 1st, 2017, a Royal Decree came into effect which changed the way Belgium's students are taxed for the work they do. In principle, the decree delivers flexibility to an existing social security tax relief scheme designed to help students hold jobs during their periods of study.
In the Belgian tax system, students have a more favourable social security contribution rate than other employees:
- Under a student status, employees pay only a 2.71% social security contribution rate
- Non-student employees pay a 13.7% rate
Under the previous tax system (in place until December 31st, 2016) however, the reduced contribution rate came with a disadvantage for many student employees thanks to an imposed annual limit of 50 days. The problem stemmed from the application of 'days' worked: regardless of the hours spent actually working a single shift, student employees would be determined to have spent one day of their allotted 50 day allowance. The system was obviously frustrating for those students working only short periods of time, and losing out on potential tax savings.
As a further disadvantage, student employees who exceeded their limit would not only have to pay the full 13.7% social security rate on additional days worked, but would have to retroactively pay back the savings from their first 50 days.
The Royal Decree
With the publication of January's Royal Decree, the 50 day relief limit has been removed and replaced with a more flexible 475 hour threshold. Under the new system, rather than deducting an entire day for any amount of time worked, student employees will now make reduced social security contributions (at the 2.71% rate) for up to a total 475 hours. In other words, a 3 hour shift, for example, would leave a given student employee with 472 hours - as opposed to 49 days - of reduced rate contributions.
Taking an average work day to be around 7 and a half hours, the new system offers a potential additional 100 hours pay for students at the reduced contribution rate.
Beyond the immediate benefits the new system brings, it also removes retroactive penalties for those students working in excess of their 475 hour limit. While students still lose their reduced contribution benefits for working into their 476th hour, they can now do so without having to repay the savings made up to that point.
Employers benefit from the new system along with their employees. In addition to a reduced contribution rate of their own (5.42%), the extra flexibility the 475 hours brings means employers can get more value from their student employees, who can be assigned work based solely on demand - rather than possible profitability. As a knock on effect, employers should be more incentivized to hire students or offer them further professional opportunities.
To help student employees keep track of their current quota of work hours, the Belgian government has introduced the 'Student@work' portal. The online platform allows student employees to create personal accounts which let them check easily how many hours are left from their annual allowance. Student@work also hosts a job search tool and provides information on child benefits and post-university employment opportunities.