Shift and night work exemption: ⅓ standard for suspensions

Exemption from advance payment of withholding tax for shift work, shift work in the event of construction works (work in immovable property) or night work is granted only if the ⅓ standard is met. How is this standard assessed in case of a suspension of performance of the employment contract? 

Exemption from advance payment of withholding tax

Companies in which shift work (including round-the-clock employment), shift work in construction works, or night work is carried out benefit from an exemption from advance payment of withholding tax under certain conditions.

This exemption is equal to 22.8% of taxable pay in the case of shift work and night work and is increased to 25% in the case of round-the-clock employment. It is 18% for shift work in construction works.

To benefit from the exemption, the relevant fiscal definitions must be met, among other things:

• A company in which shift work (classic shift work) is performed is one where the work is performed in at least two shifts of at least two workers, with each shift doing the same work both in terms of content and scope and which succeed each other during the day without a break between the different shifts and without the overlap exceeding one fourth of their daily work;
• A company in which night work is performed is one where, in accordance with the working arrangements applicable in the company, workers perform their work between 8 p.m. and 6 a.m., excluding:
  • workers who only work between 6 a.m. and midnight; and
  • workers who usually start working as from 5 a.m.;
• A company operating in a round-the-clock employment system is one where the work is performed in at least four shifts of at least two workers, with each shift doing the same work both in terms of content and scope guaranteeing continuous occupancy throughout the week and weekends, and which succeed each other during the day without a break between the successive shifts and without the overlap exceeding one fourth of their daily work. The operating time in such a company, i.e. the time during which the company operates, is at least 160 hours on a weekly basis.

The definition of a company operating in a round-the-clock employment system meets the tax conditions of a company in which shift work is performed;

• A company in which shift work is carried out during shift work in construction works is one where the work is performed in one or more shifts of at least two people, without taking into account students and apprentices in alternance training, who carry out the same or complementary work both in terms of content and scope and in so far as it concerns works referred to in Article 20, § 2, of Royal Decree no. 1 of 29 December 1992 which, if they fall within the scope of Article 30bis of the Law of 27 June 1969 revising the Decree Law of 28 December 1944 on social security for manual workers, were declared to the National Social Security Office in accordance with that article.

⅓ standard

The exemptions are granted only on the wages of workers who, in accordance with the employment scheme in which they are employed, were employed for at least one third of their working time in shifts (classic or for construction works) or night work during the month in question for which the benefit is claimed. Periods of suspension of performance of the employment contract without pay will not be taken into account.

For the purposes of this standard, the following are included:

• the numerator: the number of hours of actual performance in shift work (classic or for construction works) or night work and the number of hours for which performance of the employment contract was suspended and wages continued to be paid by the employer, if it can be proved that, in accordance with their working arrangements, the worker concerned would have been employed in shift work (classic or for construction works) or night work;
• the denominator: the total number of working hours actually worked as well as the total number of hours for which performance of the employment contract was suspended but for which wages continued to be paid.

In the case of classic shift work and night work, it is also required that a shift premium or night premium be granted for the hours of actual shift work or night work performed. Suspensions where wages are continued require that these premiums would have been granted had the worker worked.

As a reminder, since 1 April 2022, performance in shift and night work will not be aggregated to assess compliance with the ⅓ standard. In contrast, one may continue to aggregate shift work performance and round-the-clock employment.

What in case of suspensions of the performance of the employment contract?

According to the FPS Finance, suspensions of the performance of the employment contract, for which payment is continued, may only be included in the numerator of the fraction if it effectively involves shift work (classic or for construction work) or night work.

What suspensions of the performance of the employment contract are meant?

For the term ‘suspensions of the performance of the employment contract’, the FPS Finance refers to the website of the FPS Employment, Labour and Social Dialogue. On this website one can find an overview of the suspensions.

Please note that only suspensions for which the payment of wages is continued by the employer can, in principle, be included in the numerator and/or denominator (see below).

We note that holidays and days of working time reduction are not considered suspensions of the performance of the employment contract. Consequently, they can not be included in either the numerator or the denominator.

What are suspensions of the employment contract for which wages continued to be paid?

The suspensions of the performance of the employment contract for which the employer continues to pay wages in whole or in part shall be considered as suspensions of the performance of the employment contract for which the wages continue to be paid.

For example, the following suspensions of the performance of the employment contract are considered to be suspensions of the performance of the employment contract for which wages continue to be paid - in whole or in part:

• periods of incapacity for work resulting from illness or accident for which the employer continued to pay all or part of the wages;
• annual holidays. Regarding the annual holidays of manual workers, the periods during which the manual worker takes his holidays and for which he receives holiday pay from a holiday fund are considered as a suspension of the performance of the employment contract for which wages continue to be paid;
• leave of absence or circumstantial leave (the right to be absent from work, with full pay, on the occasion of family events, for the fulfilment of civic obligations or civil assignments and in case of appearance in court);
• the first three days of birth leave;
• …

Examples

According to the FPS Finance, suspensions from the performance of the employment contract, such as illness or holidays, may only be included in the numerator of the fraction if it effectively involves shift work (classic or for construction works) or night work.

Example 1

An employer employs two workers. These workers form a team and perform construction work on site. The employer fulfils all the conditions to claim the exemption from advance payment of withholding tax on shift work in construction works.

During a specific week, the shift consists of only one worker because the other worker is sick.

In that week, the definition of shift work in construction works was not in fact met. After all, the shift does not consist of at least two people.

For the calculation of the ⅓ standard, this has the following implications:

• for the worker who worked: the actual work performed in that week is not included in the numerator. However, this work is included in the denominator;
• for the worker who was sick: the hours of sick leave for which the worker received a guaranteed wage are not included in the numerator. However, this period of illness is included in the denominator.

Example 2

An employer employs twelve manual workers. These manual workers are employed in two shifts, performing construction work on a construction site. The employer fulfils all the conditions to claim the exemption from advance payment of withholding tax for shift work in construction works.

The employer closes its business for a week due to the annual holiday period. During this week, the definition of shift work in construction works was not met.

Consequently, the hours of the annual holiday period may not be included in the numerator. However, this suspension during which wages are continued is included in the denominator.

Example 3

An employer employs thirty workers doing classic shift work. The employer fulfils all the conditions to claim the exemption from advance payment of withholding tax for classic shift work.

In a specific week, the morning shift consisting of 15 workers is succeeded by an afternoon shift of 14 workers (1 worker is on holiday). If we assume that the scope of work performed by both shifts is the same (and provided that all other conditions are met), the fiscal definition of a company where classic shift work is performed is met.

For the calculation of the ⅓ standard, this has the following implications:

• for workers who worked: the actual work performed is included in both the numerator and denominator during that week;
• for the worker who was on holiday and whose wage was paid: the hours of suspension are included in the numerator in that week if, in accordance with their working arrangements, the worker would have been employed in shift work and would have received a shift premium for this.

Importance of correct application

The above examples show the importance of correctly assessing the factual circumstances.

In case of a suspension of performance of the employment contract:

• it must first be determined whether the fiscal definition of shift work (classic or for shift work in construction works) or night work has been met;
• before determining whether hours actually worked or suspensions for which wages continue to be paid by the employer can be included in the numerator and/or denominator of the ⅓ standard.

Are you a customer of Partena Professional ?

If you have questions about the fiscal definitions of a company where shift and/or night work is performed, the conditions for granting the exemption(s) from advance payment of withholding tax, or want advice on a specific situation, please contact our Legal Partners via legalpartners@partena.be.

If you have any questions on how to declare work hours worked or suspension periods for workers who work in shifts or perform night work, contact your Payroll Consultant.

Sources: Law on reducing charges on labour, Belgian Official Gazette of 31 March 2022, Circular 2021/C/99 on the calculation of the ‘one-third standard’.