Balanced Labour Market Act (WAB)
New employment legislation as per 1 January 2020
The cabinet published end 2017 a so-called coalition agreement with their plans.
The coalition agreement 2017-2021, named ‘Confidence in the Future’, announced changes by means of which the government aims to create a better balance between permanent and flexible work arrangements. On May 28, 2019, the Dutch Senate adopted new legislation to bring the labor market into balance effective 1 January 2020.
The changes to the current Dutch Labour and Employment Laws are to have an impact on many types of employment contracts. The main principle of the WAB is to make it more attractive for employers to hire employees on a permanent basis by reducing the gap between permanent contracts and flexible employment. The WAB contains a number of important legislative changes in relation to flexible employment, dismissal law, the transition allowance, pay rolling and on-call contracts. All Dutch employers are affected by the above changes and should therefore take action to become compliant.
The WAB aims to make flexible work less attractive, should be achieved by, among other things, increasing the unemployment insurance premium for employers who make extensive use of flexible labor and by reducing the differences between contract types.
Below the main changes of the WAB are shortly summarised.
The payslip must, in addition to the existing legal obligations, also state the name of the employer and of the employee, the period for which the wage has been calculated, the agreed working hours, whether there is an employment contract for an indefinite period of time entered into in writing, and whether there is an on-call employment contract as intended in Article 628a, paragraphs 9 and 10 of the Dutch civil code.
On-Call Employment Contracts
The definition of an on-call employment contract has been made clearer in the WAB. An on-call employment contract exists if the extent of the work is not laid down as one number of hours per period of a maximum of one month, or as one number of hours per period of a maximum of one year, with the right to wage being spread evenly over that period. The definition includes the 0-hour contracts and the min-max contracts.
Employment contracts where (on the basis of Article 7: 628 of the Dutch Civil Code) the wage payment obligation is excluded are also regarded as on-call contracts. This means that temporary employment contracts/ secondment agreements* can also fall under the definition. Consignment services and accessibility services in healthcare do not fall under the definition of a call agreement.
* A secondment agreement (or temporary employment agency agreement) is an employment agreement under which the employer, within the framework of his business or professional practice, places the employee at the disposal of a third party in order to perform work under supervision and direction of that third party by virtue of an agreement for the provision of services between the third party and the employer.
Notification for On-Call Employment Contracts
Current legislation does not regulate the length of time between when an employer calls the employee and when the employee must report to work. Under the Act, employers must provide on-call employees at least four days advance notice, and must pay on-call employees if work is cancelled within those four days. The notice may be reduced to 24 hours by way of a collective labor agreement.
Fixed number of hours On-Call Employment Contracts
The legal position of on-call workers is strengthened because the employer has to offer an on-call worker after twelve months an employment contract for a fixed number of hours based on the average number of hours worked in that year. (based on the average number of hours worked in the past 12 months)
The employee may decline the offer if he or she prefers to continue working on the basis of a n on-call agreement. If the employer does not make this offer, a right to salary arises over the average number of hours from the latest date on which the employer should have made the offer. If an employee has been working for more than twelve months on the date of the introduction of the WAB on the basis of a call agreement, the employer will have to make an offer for a fixed size of work within one month of January 1, 2020.
The legal position of on-call workers is strengthened because the employer has to offer an on-call worker after twelve months an employment contract for a fixed number of hours based on the average number of hours worked in that year. The employer will also have to call on-call workers at least four days in advance and keep on-call workers entitled to wages if the work is canceled less than four days in advance.
Duration of Successive Fixed-term Employment Contracts Extended to 36 months
Under current law, the maximum duration of successive fixed-term employment contracts is three consecutive fixed-term employment contracts within 24 months. The Act extends the period of time to 36 months. Consequently, after 36 months or the fourth fixed-term employment contract, the contract is converted into an indefinite employment contract.
Cumulating dismissal grounds
Current law provides eight grounds for termination of an employment contract. These cannot be combined (i.e. non-performance as result thereof a disturbed relationship). This makes it hard for an employer to terminate someone’s employment contract. The new legislation amendment will allow an employer to combine different grounds for dismissal except for the dismissal on business economics grounds and dismissal because of long-term incapacity for work. In the event an employment contract is terminated on the basis of a cumulated dismissal ground, the judge can grant, in addition to the transition allowance, a severance up to half of the transition allowance.
The Transitional allowance /compensation
At this moment, a transition payment only needs to be paid in case of dismissal if an employment contract has lasted two years or longer. The new law provides employees a transition payment from the first day of their employment. The calculation of the transition allowance will also be adjusted. Instead of one-sixth monthly salary per half year, an employee will receive a third of the monthly salary per calendar year. The higher accrual for employment contracts longer than ten years will be abolished.
Regardless of the dismissal route chosen, all employees will be entitled to a transi¬tional remuneration upon the termination of an employment contract. This remuneration may be applied for educa¬tion and training, amongst other things.
The employee is entitled to a transitional remuneration if :
• The Contract of Employment is terminated by the Employer;
• is dissolved on the request of the Employer;
• is ended by law and on the initiative of the Employer, and has not been extended ;
The Contract of Employment as a result of serious imputability / blame of the Employer is terminated by the Employee;
• is dissolved on the request of the Employee;
• is ended by law and on the initiative of the Employee and has not been extended ;
The transitional remuneration may be lowered with:
• cost of measures in connection with the termination / non continuation of the contract of employment aimed at preventing unemployment or the shortening of the period of unemployment for the employee
• costs related to promoting the wider employability of the employee during the period of the employment contract.
No entitlement to transitional compensation arises if the employment contracts ends or is not continued after the employee reaches state pension age or a higher or lower contractual retirement age. The same applies if the employment contract is not con¬tinued because the employee has reached that age.
A ‘serious culpable act or omission’ (for example theft) on the employee’s part eliminates the entitlement to transitional compensation. A ‘serious culpable act or omission’ (for example harassment) on the employer’s part may constitute grounds for the sub district court to award additional compensation.
For each calendar year that the employment contract has lasted, the transitional allowance is equal to one third of the wage per month and a proportional part thereof for a period that the employment contract has lasted less than a calendar year. Further rules may be laid down by order in council concerning the method of calculating the transition payment. The transition allowance amounts to a maximum of € 81,000 or an amount equal to at most the wage over twelve months if that wage is higher than that amount.
A new definition for pay rolling
The WAB introduces a new definition for the payroll agreement. As a consequence, the statutory regime that applies to temporary employment agencies will no longer be applicable to payroll companies. The collective labor agreement NBBU and ABU can no longer be used by payroll companies. Payroll employees will be entitled to the same primary and secondary employment conditions as employees of the contracting authority. Furthermore, payroll employees will also be entitled to an ‘adequate’ pension scheme if this is also arranged for comparable employees of the contracting authority.
The payroll agreement is the “temporary employment contract”, whereby the assignment agreement between the employer and the third party has not been concluded within the context of bringing together supply and demand on the labor market and where the employer is only authorized with the consent of the third party to place the employee at the disposal of a third party.
Exclude wage payment obligation payrollers
For the first six months of the employment contract the wage payment obligation can only be excluded if this permanent use is at the company where the employee is made available or if the wage payment obligation can be excluded on the basis of the collective labor agreement applicable to the hirer (and the company makes permanent use of that possibility).
Adequate Pension Plan for Payrollers
Payroll employees will be entitled to the same primary and secondary employment conditions as the employees of the principal, including an “adequate” pension plan. Consequently, this likely will increase the cost of payroll employees. The new legislation on payroll employees will become applicable on January 1, 2021 and is not applicable to temporary workers and seconded employees.
Unemployment insurance (WW) contribution differentiation
In order to make employment contracts for an indefinite period of time more attractive for employers, the law provides that employers will pay a lower unemployment insurance contribution (WW-premium) for an employee with a permanent employment contract than for an employee with a fixed-term employment contract.
The change in the unemployment premium differentiation must contribute to making the permanent contract more attractive compared to the flexible contract.
The high premium is 5 percentage points higher than the low premium. The premiums have not yet been definitively determined, but the minister has mentioned 2.78% for the low premium and 7.78% for the high premium.
ABOLITION SECTOR PAYMENT ZW / WGA
As of January 1, 2020, it is no longer possible to pay as a private employment agency in a sector other than sector 52. This means that all temporary employment agencies that now pay in another sector must “return” to sector 52. This does not apply to payroll companies, which will be classified in sector 45.