A hot topic in Dutch labour law is the gap between employees with permanent employment agreements and employees with a flexible employment agreement (e.g. fixed or zero-hour contract). There is a substantial imbalance here that the Dutch government wants to address. This will have an impact for any employer that has employees in the Netherlands.
The Balanced Labour Market Act (in Dutch: Wet arbeidsmarkt in balans, “WAB”) contains several changes to Dutch employment laws, which should narrow the difference between permanent employment and flexible employment in the Netherlands. The act will enter into force on 1 January 2020.
This publication lists the 6 most important new measures together with insight what these can mean in practice.
1. TRANSITION PAYMENT
Currently, employees under Dutch law are entitled to a transition payment if they have been employed for at least 24 months and their employment agreement is terminated at the employer’s initiative. The transition payment is a form of -fixed- severance pay. Under the WAB, employees in the Netherlands will be entitled to a transition payment from the start of their employment agreement, also during their probationary period.
The transitional payment will amount to 1/3 of the month salary per year of service. The higher payment that applies after ten years’ service will be abolished.
In combination with the new rules under the WAB it is also important that:
• as of 1 January 2020 the current exceptions for a lower transitional payment for small employers (<25 employees) and extended accrual for employees of 50 years old will expire;
• employers will be compensated by the government for paying a transition payment when they dismiss an employee after two years of sickness on the grounds of long-term incapacity for work.
The change means that a larger number of employees will be entitled to a transition payment. There are no grandfathering rules so this applies to a termination on or after 1 January 2020. In order to get an overview of the expenses for employees who will be terminated, employers may start making budgets for termination(s) on the employer’s initiative.
2. NEW COMBINATION GROUND FOR DISMISSAL
Under the Balanced Labour Market Act, employers can combine several grounds for dismissal. However, if an employee is dismissed based on combined grounds, the employee is entitled to an extra payment of a maximum of half of the statutory transition payment.
As of 1 July 2015, a new system of several reasonable grounds for dismissal was introduced. From case law, we know that it is quite difficult to convince a judge that the employment agreement has to be terminated based on one particular reasonable ground. Dismissal law in the Netherlands is relatively restrictive and therefore, there was a need for a combination ground, which could make dismissal easier. However, in return, a dismissal based on the combination ground is a little bit more expensive.
3. SUCCESSION OF FIXED-TERM EMPLOYMENT AGREEMENTS
The maximum term for successive fixed-term employment agreements under Dutch law will be extended from 2 to 3 years.
The chain of successive fixed-term employment agreements can be broken if there is an interval of 6 months between the employment agreements. That will remain. However, exceptions are allowed if this is provided by collective labour agreements (CLA) that the work requires to shorten the interval.
If desired, employers can offer more successive fixed-term employment agreements which is a welcome tool for both national and international employers.
4. ON-CALL CONTRACTS
For employees in the Netherlands with contracts with a deferred duty of performance, and without fixed working hours (i.e. zero-hour contract or min-max contract) will be notified by the employer 4 days in advance of the times at which the work has to be performed. Before, they needed to be permanently available for work. The 4-day period can be shortened to one day by if provided by a collective labour agreement (CLA). If the employer cancel the assignment within this period, the employee is entitled to be paid for the hours cancelled.
In the event the on-call contract lasts for a period of 12 months, the employer must offer within one month the employee the average working hours over the last 12 months.
These measures makes on-call contracts less attractive in the Netherlands. It requires coordination within the new set framework for on-call contracts. This may result in alternative models or new policies for on-call contracts.
5. PAYROLL EMPLOYEES
Under the Balanced Labour Market Act, the deployment of employees on a third party payroll will be regulated:
• an equal treatment requirement will apply, that means that payroll employees are entitled to the same terms and conditions of employment as the employees who are directly employed, including an adequate pension scheme. However, the rules regarding such pension scheme would be in force one year later, in 2021;
• the exceptions for temporary agency workers (‘uitzendkrachten’) will not apply to payroll employees, e.g. it will no longer be possible to conclude six successive employment agreements for a maximum period of 4 years.
These measures make third party payrolling as an instrument to compete on employment conditions in the Netherlands less attractive.
6. UNEMPLOYMENT BENEFIT CONTRIBUTIONS AND FLEXIBLE CONTRACTS
Currently, unemployment benefits contributions are based on sectoral differentiation. Under the WAB, employers should pay for unemployment benefits contributions (WW) by differentiation according to the nature of the agreement and therefore two WW contributions will be introduced that will apply to all employers:
1. Low contribution for permanent contracts
2. High contribution for flexible contracts (NB does not apply to employees <21 years old and work for up to 12 hours a week).
More practical, the nature of the employment contract (permanent or flexible) must be stated on the pay slip.
The changes of the WAB are considered one of the first steps to tackle the hurdles of Dutch labour law. Besides these measures of the WAB, we can also expect new legislation for self-employed workers. This is also a hot topic in Dutch Labour law especially following the practices of platforms like Uber Eats and Deliveroo. A committee will give the government advice on new forms of work (self-employed and platform work) and this advice is expected in November 2019.
These are (only) the most important measures of the WAB. Please contact Lukas Witsenburg of the Dutch law firm Penrose (email@example.com or at +31 20 240 0710) if you have any questions.