On the 1st January 2020, the Dutch government passed The Balanced Labour Market Act or ‘Wet Arbeidsmarkt in Balans’, also known as WAB. This policy issued changes to employment law for both labour and social security. The overall objective was to bring a balance in the labour market, with the interests of both employers and employees.
One of the aims of WAB is to make it more appealing for employers to hire employees on a permanent basis by closing the gap between long term permanent contracts and flexible employment contracts. If you are planning on hiring permanent employees through an agency, seconding them from an employment company or looking to outsource your recruitment process, it is important you know what option is best for you and all relevant companies are compliant with the local labour law.
The WAB includes many important legislative changes in association to flexible employment, the transition allowance, on-call contracts, payroll and dismissal law. The changes to the current Dutch Labour and Employment Laws are expected to have an impact on numerous types of employment contracts. All Dutch employers will be affected by the changes and should therefore take action to become compliant. This article will give a brief overview of the changes that have and will be coming into effect.
(WW) Unemployment Benefit Contribution
From 1 January 2020, you as an employer will pay a low unemployment benefit contribution for employees with fixed-term contracts and pay a higher contribution for employees with a flexible contract. It is important you pay the correct amount of unemployment benefit contribution for each employee.
To make employment contracts for a longer period of time more attractive for employers, the new law means employers will pay a lower unemployment insurance contribution (WW-premium) for permanent employment contract than with a fixed-term employment contract. The change in the unemployment premium is to contribute to making the permanent contracts more attractive compared to the flexible contract.
The difference between the low rate and high rate will be fixed at five percentage points. The lower contribution is based on that the employment contract has been agreed in writing and that it is kept within payroll administration.
It is important to take this into consideration when working out your salary costs for employees with a fixed-term employment contact. All contract types fixed-term, permanent or on-call now need to be stated on payslips.
On-call Employee’s Contracts
The on-call employment contract details have been made clearer in the WAB. An on-call employment contract is in place if the employee doesn’t have a set amount of working hours per month, or as one number of hours for the year, with the right to the wage being spread evenly over that period. Employers now under the Act must provide on-call employees at least four days advance notice, and must pay on-call employees as they are entitled to payment if work is cancelled within those four days or the time is changed within those four days before the work is due to commence. On-call employees are given the right to refuse a call if they are not notified at least four days in advance. The period of 4 days can be reduced to 24 hours by way of a collective Labour agreement. The legal position of on-call workers is now more secure because the employer now has to offer an on-call employee after twelve months an employment contract for a fixed number of hours based around the average number of hours worked within that year. Additionally, once an employee has been called up, he is entitled to a minimum of 3 paid hours.
As of 1st January, if you are a payroll employer, you must make sure that your payroll employees work under the same working conditions as the other employees in the company, which previously they have been seconded to. These are working conditions such as working hours, breaks and holiday days.
It will no longer be possible for employees on a payroll solution to be covered by the collective labour agreements for employment agencies (ABU collective labor agreement or NBBU collective labor agreement). Other employment conditions such as pension still apply.
If you hire employees through a temp agency or payroll company, then you must inform that party of the working conditions you uphold for your own employees. Furthermore, the statutory regime that applies to temporary employment agencies will no longer be applicable to payroll companies.
From the 1st January 2021, a payroll worker is entitled to an 'adequate pension scheme'. As an employer you can take care of this in 2 ways: Payroll workers will participate in a pension scheme where they work, or the payroll company will have its own pension scheme.
As of 1st January 2020, part of the amendments for WAB introduces a new definition for the payroll agreement, as a result, payroll employees are entitled to at least the same primary and secondary working terms and employment conditions as the permanent staff.
Additionally, payroll employees will also be entitled to an 'adequate' pension scheme. The payroll employee will be entitled to the same pension as the permanent staff soon. This makes the payroll employee more expensive than the permanent staff. Consequently, this will likely increase the cost of payroll employees. The amended legislation on payroll employees will become applicable on January 1, 2021 and will not be applicable to temporary workers or seconded employees.
Transition Payment from First Day of Employment
The new law means that employers will have to pay a transition payment (like a redundancy) to their temporary workers, as employees are now entitled to this from the start of the contract, where previously this would have been paid after two years or because of dismissal. All employees are also entitled to the transition allowance as soon as their employment ends. This also includes temporary workers, agency workers and employees who are dismissed during the probationary period.
“The transition payment depends on the monthly salary and number of years of employment. You pay 1/3 of the gross monthly wage per year from the first day of employment.” (business.gov.nl)
Fixed Term Employment Contract
Under the current law, the maximum duration of fixed-term employment contracts is three consecutive contracts within 24 months. The WAB act has extended that period to 36 months. Therefore, after 36 months or the fourth fixed-term employment contract, the contract is changed into an indefinite employment contract. With the amendment of the law, employers can go into three temporary contracts with an employee within a three-year period.
Within the current law it provides eight grounds for termination of an employment contract which previously could not be combined. The new legislation will allow an employer to combine several circumstances for dismissal, excluding dismissal due to business economics or sickness. The ‘I- ground’ as a new ground for dismissal. “The following dismissal grounds can be combined: (i) the regular inability to perform work, (ii) non-performance, (iii) culpable acts of the employee, (iv) damaged working relationship and/or (v) other grounds (the so-called “h-ground”). The court can grant, in addition to the transition allowance, a severance up to half of the transition allowance in case of an i-ground dismissal.” (GlobalWorkplaceInsider)
For any further advice on the WAB or payroll please contact the number below and our team would be happy to help.
Simon Duff, firstname.lastname@example.org, +31 20 890 8045 ext 119
For more information about Payroll and Tax in the Netherlands, check out our free guide:
Graphic Credit: Freepik.com