Field Notes_006_The management company: fix the abuse, keep the tool

"The minister is right about the disease. He is wrong about the organ. The management company is not the leak in the welfare state. It is the pressure gauge that shows where the leak is."

Key takeaway - The government wants to crack down on management companies because they cost the welfare state money. Partly true, and the fake ones deserve everything coming to them. But for real businesses trying to hire real talent, the management company solves problems nothing else in Belgian law can. Here is a five-point proposal that kills the abuse and keeps the tool.

Every Belgian budget round needs a villain. This year, one of them is the management company.

Vincent Van Peteghem, hunting for 16.6 billion euro in savings by 2029, wants to stop its rise. The argument: doctors, consultants and managers who work through their own company instead of on a payroll pay less tax and fewer social security contributions, and that erodes the welfare state. Policy circles have a word for the trend: vervennootschappelijking, the incorporation of professional income. The government has already moved. From 2026, the minimum salary a director must take rises from 45,000 to 50,000 euro, perks are capped, and the tax on liquidation reserves goes up.

Before we go further, two things.

First, what a management company actually is, for readers who don't have one: instead of signing an employment contract, the manager sets up a company, and that company invoices a fee for the work under a mandate agreement. No payslip, an invoice. That one change moves the income out of personal income tax and social security contributions and into the corporate tax regime.

Second, a confession: I have one. I run a company through exactly this construction. So read everything that follows knowing the author has skin in the game. I would only add that I have also sat on the other side of the table, deciding whether to hire people through theirs. Both seats taught me something.

Where the minister is right

Let's start with the part the defenders of management companies prefer to skip.

Take a salary of 100 euro, employer cost. By the time it lands in the employee's account, less than half is left. Belgium has the heaviest tax wedge on labour in the OECD: 52.5% on an average salary, with a marginal rate of 50% that kicks in at around 48,000 euro, before municipal surcharges. That is not a rich person's problem. That is a nurse-with-seniority problem.

Now route the same money through a company: 25% corporate tax, or 20% on the first 100,000 euro for qualifying SMEs, plus exit mechanisms such as the liquidation reserve and VVPRbis dividends that release profits later at reduced rates. The gap between the two routes is enormous. And when the gap between two legal routes to the same money is that wide, people will take the cheaper one. Not because they are criminals. Because they can count.

The minister is also right that some of these companies are fake. Be honest about the test: if your company has one client, no staff, no real costs, no risk, and exists purely to turn a 50% tax rate into a 25% one, it is not a company. It is an envelope with a VAT number. Belgium even has a legal doctrine for it, schijnzelfstandigheid, fake self-employment. Anyone defending those constructions is not defending entrepreneurship. They are defending a discount.

So: the abuse is real, the maths is real, and the cleanup is justified. Said out loud, by someone who has one.

What the debate misses

Here is what never makes it into the budget discussion. Four things a management company does that no employment contract in Belgium can.

One: it lets a normal company hire top talent. Picture a family business in Flanders, 40 million euro in revenue, that needs a heavyweight operations director. The kind of profile that gets calls from multinationals and Dutch competitors every month. On a Belgian payroll, the numbers simply do not work: to give that person a competitive net income, the company would have to pay roughly double in gross cost. A multinational can absorb that with global pay scales and stock plans. The family business cannot. Its one realistic move is a management company: the manager invoices a fee, both sides can live with the number, the talent stays in Belgium. Take that option away and the talent does not quietly join the payroll. It joins the multinational, or moves to Amsterdam.

Two: it lets both sides walk away like adults. Belgian employment law protects employees, and rightly so; it was designed for relationships where bargaining power is unequal. A CEO negotiating a mandate does not sit in that position. When a top manager stops performing, a company can be stuck for two years paying severance mathematics instead of fixing the problem. Everyone in the building knows, nothing moves, and it is the ordinary employees who pay for the paralysis. A mandate agreement ends the way commercial contracts end: with the notice period both sides negotiated, in months. And in the other direction, it lets a manager build a career out of several mandates over time: run a company, then sit on boards, advise, invest. Belgium says it wants more experienced independent directors. This is the legal form that career is lived in.

Three: the protection story cuts both ways. Critics say the manager escapes social contributions. True. What they don't say: the manager also escapes the protections. No unemployment benefit if the mandate ends tomorrow. No employer pension quietly building in the background. No severance formula. When my contract ends, my income ends with it, full stop. That is not a complaint; it is the deal, and I signed it with open eyes. But then call the deal what it is: not a scam, a trade. Less contribution, less protection, more risk carried personally. Some of us think that trade is exactly what an entrepreneurial career should look like.

Four: it is how a manager becomes an owner. This is the argument I care most about. A management company is the natural vehicle for equity participation in the business you run: subscribing to shares, rolling proceeds into the next mandate, co-investing alongside the owner. Every study of the mid-market says the same thing: managers who own a piece behave differently. FieldNotes_005_Boardroom_Gap argued that European companies lose their best people because only founders and heirs ever own anything. Kill the management company and you make that worse. You get a country where managers stay renters forever, and only family capital and foreign funds ever own the house.

The proposal

So don't defend the status quo. Clean it up properly, and keep what works. Five points, no expertise required to follow them.

1. A real substance test. A management company must demonstrate substance: genuine costs, genuine entrepreneurial risk, and within a few years more than one source of revenue. Can't show that? Then it's employment, taxed as employment.

2. Enforce the fake self-employment rules we already have. The doctrine exists, the case law exists. Apply it consistently instead of writing new rules on top of unenforced ones.

3. Keep the salary floor, and let it bite. The move from 45,000 to 50,000 euro minimum salary is reasonable. Index it, close the perks loophole, done. A construction that cannot pay its own director a normal salary was never financing anyone's pension anyway.

4. Make the envelope visible without a court case. A few simple declarations, one client or many, staff or none, real activity or not, so the tax authority can sort enterprises from envelopes at a glance instead of after five years of litigation.

5. In exchange: keep the tool, and start cutting the wedge. This is the part every government skips. As long as work in Belgium is taxed at more than half, people will find a route around it; abolish this construction and the next one appears within a year. Van Peteghem himself said it: the high burden on labour is the root. Treat the root. The welfare state is not financed by tax rates. It is financed by people building things worth taxing.

What you can do on Monday

If you own or chair a company that hires managers this way: put a proper mandate agreement under it before the honeymoon ends, with scope, term, notice and leaver provisions in writing. Pay comfortably above the new floor, not just barely over it. And put co-investment on the table early: if you want your manager to act like an owner, let them become one.

If you are the manager: never build your life on a tax rate, because it changes every budget round. Build it on what the construction really gives you, the freedom to combine mandates, the vehicle to own what you help build. Read your own leaver clauses the way a lawyer would. And keep a buffer, because nobody is paying you severance.

The management company will survive this minister as it survived the previous ones, because the problem it solves is real. The debate worth having is not whether managers may have companies. It is whether Belgium wants managers who can be hired, held accountable and become owners, and what tools it is willing to leave standing for that.

The welfare state has no interest in the answer being no.

Ruben Claessens is CEO of an industrial group in Belgium and founder of LIDI Partners BV Field Notes is the public archive of his work on operatorship, governance, and Belgian mid-market reality. Published deliberately, on a monthly cadence.