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Tuesday, 24 March 2020
On Thursday 18 March 2020, the Belgian FA’s COVID-19 crisis department decided that no football matches can be organised up to and including 30 April 2020. It is likely that the term of 30 April 2020 will be extended. A full completion of the football competitions, including regular play-offs, seems utopic, unless the regular football season is extended into the summer.
The Belgian FA has communicated that collective training sessions for Belgian football clubs are suspended up to and including 5 April 2020, which is in accordance with the instructions from the national security council. For the subsequent period, the Belgian FA has announced it will follow the national security council’s advice.
So far, the Belgian FA has not excluded the option of holding individual training sessions. However, Ministerial Decrees of 18 and 23 March 2020 clearly stipulate that infrastructure belonging to the sports sector should be closed. Therefore, and contrary to previously-circulated guidelines, it seems impossible for clubs to continue organising training sessions at their club premises. Nevertheless, it is perfectly possible for clubs to provide their players with an individual training schedule that they must implement at home or elsewhere in line with the rules around physical distancing.
The Belgian Pro League recommends its member clubs not to rely on temporary unemployment, because clubs pay very limited social security contributions for players. The Pro League seems to fear that invoking a social security coverage in the current circumstances may jeopardize their favorable social security regime in the long run.
This being said, football clubs can decide to file an application to enter into a system of temporary unemployment. These applications are assessed on an ad hoc basis, but are likely to be accepted by the competent authorities in the current circumstances.
Entering a system of temporary unemployment does not necessarily mean that the club has to put all its employees on temporary unemployment. It is possible for the club to have some (categories of) employees on temporary employment whilst continuing to employ other (categories of) employees. It is also possible to have employees enter a partial temporary unemployed status (e.g. one day per week).
If a football club decides to have its players enter the temporary unemployment system, then the club has no employer supervision whatsoever over the player during the term of the temporary unemployment. This automatically implies that the club can no longer impose an individual training schedule on the players.
The social security payments for paid football players (i.e. players earning at least 10,612 € per year) are calculated on a capped salary of 2,352.21 € per month, unless the player’s monthly salary is less than the capped salary. In the latter scenario, the social security payments are calculated as 70% of the player’s effective salary. For players with a salary exceeding the capped salary, the social security payments will amount to 1,646.55 € per month (i.e. 70% of 2,352.21 €). In addition to the amounts above, a COVID-19 supplement of 5.63 € per day will be paid out.
No social security contributions are due on the amounts above, but a professional withholding tax of 26.5% is withheld on the amounts above.
Please note that following a tax assessment, the unemployment benefits will also be made subject to progressive tax rates, as the benefits are also to be included in the taxable base totaling all professional income. Generally, for players, the effective tax rate upon the unemployment benefits will thus amount to 50%, increased with communal surcharges.
For coaches and other club personnel with a salary exceeding 2,754.76 € per month, the social security payments will amount to 1,928.33 € per month (i.e. 70% of the capped salary). For coaches and other club personnel with a lower salary, the social security payments will amount to 70% of their effective salary. In addition to the amounts above, a COVID-19 supplement of 5.63 € per day will be paid out.
No social security contributions are due on the amounts above, but a company withholding tax of 26.5% will apply. Again, the final personal income tax burden upon the unemployment benefits will be determined upon tax assessment. The effective tax rate will generally amount to 50% increased with communal surcharges.
A club is allowed to make payments to its players and staff on top of the social security payments to compensate for the loss of net salary. No social security contributions are due on these additional payments on the strict condition that the combination of net social security payments and net additional payments does not exceed the net salary that the employee would have earned if he or she had continued to work.
However, clubs should seek advice on the potential tax consequences when considering paying these additional payments. Although Belgian tax law clearly provides the applicability of the 80% partial withholding tax exemption on salary as well as additional unemployment benefits paid to players, we expect intensified enquiries by the Belgian tax authorities on the matter.
According to Belgian law, during periods of full or partial suspension of an employment contract for economic reasons, a player may terminate his employment contract without having to respect a notice period. However, this option is not provided for in the case of temporary unemployment and suspension of employment contract due to COVID-19 force majeure. Therefore, the contractual situation of a regular football player and a player that has been put under temporary unemployment due to “COVID-19 force majeure” is identical.
This being said, if the temporary unemployment would take too long, it is recommended to reevaluate since a termination of the employment contract for force majeure could then become possible.
Finally, a player can always terminate his employment contract by applying the Law of 24 February 1978 on employment contracts for paid athletes. This action would however be difficult to accomplish in practice. Clubs and federations endeavour to prevent the application of this law to protect the football transfer system. Indeed, the regulations of both the Belgian FA and FIFA impose additional restrictions on players that go beyond what Belgian law imposes. As such, players who unilaterally terminate their employment contract and clubs who hire a player who has unilaterally terminated his employment contract risk serious sporting and financial penalties.
Whereas a unilateral salary reduction cannot be imposed by a club, the parties can agree on a partial reduction of the salary, provided certain conditions are met. Such salary reduction can be achieved through an addendum to the existing employment contract. The wording of the addendum will be crucial to avoid legal liabilities.
Clubs that currently continue to organise training sessions (on an individual basis) are best advised to verify with their respective insurance companies whether their players are and continue to be insured. Equally, players are advised to verify the policy conditions of their (possible) additional insurance.
Players with a contract expiring on 30 June 2020 will, in principle, obtain ‘free agent’ status as from 1 July 2020 and will no longer be employed by their former club. A player's contract can of course be extended by mutual consent. However, the current Belgian collective bargaining agreement for paid football players stipulates that new or extended contracts should always have a fixed duration until the end of a season, i.e. 30 June 2020. Technically, this requirement would prevent clubs and players from entering into an agreement that extends their contracts for only a short period of time. Given that a new collective bargaining agreement will apply as from 1 July 2020, it is to be expected that an exception to this provision in the previous collective bargaining agreement will be included if matches for the 2019-20 competition still have to be played after 30 June 2020.
FIFA-President Gianni Infantino has already announced that FIFA is considering allowing temporary exceptions in which the expiry dates of employment contracts would be postponed to allow for competitions to continue past 30 June 2020. Whereas FIFA’s idea is understandable, particularly taking into account the need to protect the integrity of all competitions, it must be remembered that such employment contract extensions are, under Belgian law, only possible with the consent of both clubs and players.
A short-term extension of an employment contract is furthermore not without risk for players. If a player seriously injures himself during such a short extension, then he risks damaging his search for a contract at a new club. Therefore, some players could use such a request as leverage to negotiate a longer contract extension (e.g. an extra season) with their current club. Also, the new club of a player that is the subject of a transfer that will enter into effect as from 1 July 2020 will be reluctant to negotiate a postponement of this transfer if the competition were to continue after 30 June 2020.
For more information on this subject, please contact:
Daan Buylaert (This email address is being protected from spambots. You need JavaScript enabled to view it.)
Sven Demeulemeester (This email address is being protected from spambots. You need JavaScript enabled to view it.)
Pieter Debaene (This email address is being protected from spambots. You need JavaScript enabled to view it.)
Alexander Vantyghem (This email address is being protected from spambots. You need JavaScript enabled to view it.)
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