Belgium ranks third on the list of European countries with the highest labour costs. Only companies in Denmark and Luxembourg have higher labour costs per hour worked. Securex and Starfish Consultancy examined the competitiveness of companies within our country by analysing the labour cost disparity between them. The total labour cost per company was divided by the total number of hours worked by their employees. The 10% of companies with the highest labour cost per hour worked were then compared with the 10% of companies with the lowest labour cost per hour worked.

The labour cost disparity of 4.4 indicates a large difference in labour costs between companies in our country, with the 10% of companies at the top of the labour cost scale paying an average of 46.80 euros per hour worked, compared to 10.60 euros for the 10% of companies at the bottom of the scale.

Heidi Verlinden, Research Project Manager at Securex: “The substantial labour cost disparity highlights the wide variation in compensation policies across the Belgian business landscape. This not only points to different approaches to compensation management, but also underlines that companies currently paying high labour costs still have room to reduce these costs through targeted measures. It is essential to keep labour costs under control in order to maintain and strengthen competitiveness, both in the domestic market and in relation to companies abroad.”

There are several factors that explain the differences in labour costs per hour worked between companies in Belgium. A quarter (24.9%) of these differences can be explained by factors that employers themselves can influence. Different contract types have a strong impact on labour costs, but the level of absenteeism and employee turnover or contract termination within a company also create major differences in labour costs per hour worked.

More sickness absences result in more hours not worked, while costs continue to be incurred by the employer, causing the labour cost per hour worked to increase. Short-term sickness absences in particular have an impact, since the employer pays guaranteed salary during that period.

Nevertheless, sickness absences of more than one year also increase labour costs per hour worked. On the one hand because of their replacement, which generally costs more per hour (often due to overtime and fixed-term contracts). On the other hand because of costs that the employer continues to bear for the long-term absent employees. These may include group insurance, hospitalisation insurance, benefits in kind for a company car, mobile phone and IT costs, seniority bonuses, purchasing power bonuses and gift vouchers.

In companies where more people leave, the average labour cost is also higher. In the event of a contract termination, the employer must immediately pay the employee several items, such as departure holiday pay, as well as the single and double holiday pay for the holiday entitlements the employee had already accrued for the following calendar year. If the contract is terminated at the employer’s initiative, the employer also pays a severance indemnity calculated on the basis of the notice period and the employee’s base salary.

The factor with the greatest impact on labour cost per hour worked is the level of gross salary, although employers have less influence over this, except through salary optimisation.

Heidi Verlinden of Securex provides companies with guidance on how to reduce their labour cost per hour worked: “The use of learning pathways, student contracts or flexi-jobs helps reduce labour costs per hour. However, it is important to maintain a balance in the mix of contract types. An excessive number of flexible contracts, for example, is detrimental to productivity. In addition, it is important that employers do not underestimate the effects of illness – including long-term absences – and employee turnover on their labour costs. This study once again underlines the importance of a preventive absenteeism policy aimed at keeping employees healthy and motivated.”

1. A company in Belgium with five employees who are each absent due to short-term illness for an average of 15 days per year has 1.79 euros higher labour costs per hour worked than a company where the same number of employees are absent due to illness for an average of only six days per year. On an annual basis, the labour costs of the company with more sickness absence days are 3,134 euros higher.
2. In a company with five employees, one employee leaves during the year. That company will have 20 euro cents more labour costs per hour worked for that year than if everyone had remained on board throughout the year. On an annual basis, this amounts to 349.60 euros in labour costs. Dismissal also involves many costs that are not directly visible in labour costs, such as finding and onboarding a new employee.
3. In a company with ten employees, one employee follows a learning pathway. This company has 2.20 euros lower labour costs per hour worked than a company with ten permanent employees. On an annual basis, the employer with the learning contract will have approximately 3,845.60 euros less in labour costs.

Jeroen Naudts, Managing Partner of Starfish Consultancy: “Companies in Brussels have the highest average labour cost per hour worked, at 27.20 euros. This is due to the presence of larger companies in the capital, which on average pay higher gross salaries, make less use of flexi-jobs and experience more dismissals and contract terminations. Companies in Flanders follow closely with 26.10 euros per hour worked. Companies in Wallonia have the lowest labour cost per hour worked, averaging 22.36 euros. However, the labour cost disparity is highest among companies in Wallonia, with a factor of 5.06.”

The study also shows that the construction sector and sectors related to the metal industry, with labour cost disparities of 7.4 and 6.5 respectively, have the largest differences between companies with the highest and lowest labour costs. This can be explained by the large differences in gross salaries between companies in those sectors, and by the extent to which they make use of different types of contracts such as learning contracts or temporary contracts. In contrast, labour cost disparities are smaller in independent retail (3.3) and hospitality (2.17), where salaries are closer together and companies are more similar.

These results are based on data from Securex’s social secretariat from 2022. The sample for this study consists of 22,389 companies across various private sectors active in Flanders, Brussels or Wallonia. Micro and small companies are particularly well represented, but medium-sized and large companies are included as well. Company directors and companies with more than one thousand employees were excluded. Extreme labour cost values exceeding three times the standard deviation were also excluded.

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