On 1 January 2020 the new Dutch employment act (the WAB) came into effect. There are certain areas that require action by you as an employer, particularly if you engage flexible workers in your organisation.
Please find below an overview of the most important changes and actions you should take.
1. Increased social security premiums for fixed-term employment agreements
From 1 January 2020, employers have to pay a higher Unemployment Act (WW) premium of 7.94% for all employees without a written employment agreement for an indefinite period. The high premium also applies to on-call agreements for an indefinite period that do not include a pre-agreed fixed (monthly or annual) working time stipulation (vaste arbeidsomvang).
Important: the requirement for a written employment agreement will be strictly applied.*
- Do you employ employees for whom you cannot produce a written employment agreement in place (for example, the original has been lost or one was never entered into)? If you cannot prove the existence of a written employment agreement with an indefinite duration, the higher premium will apply.
- Do you document extensions to temporary employment agreements by means of a notification letter to the employee? A notification letter does not qualify as a written employment agreement as two signatures are required. In such a case the higher premium also applies.
*The Minister decided that employers can suffice with a written addendum to the original employment agreement. With effect from 1 April 2020, this written addendum or a written employment agreement for an indefinite term (signed by both parties) must be included in your files and needs to show that the employee was already employed for an indefinite term before 1 January 2020.
- Check whether you have a written employment agreement (signed by both parties) for an indefinite period of time in your files. If not, make sure that you sign an addendum or draw up a written employment agreement, otherwise the higher premium applies.
- Modify your payslips: from 1 January 2020, payslips must state whether the employee has a permanent or temporary employment agreement.
2. Changes for on-call workers
New rules apply for on-call workers (oproepkrachten). An on-call agreement exists if (i) the individual does not receive salary when he/she is not working and (ii) the working hours are not pre-agreed for a period of one month or one year. This would apply to individuals engaged under an on-call agreement with a framework agreement (voorovereenkomst), a zero-hours agreement (nul uren-contract) or a‘min-max’ agreement.
From 1 January 2020, employers must provide on-call employees with a minimum notification period of four days before the employee is required to commence working. This period can be shortened to a minimum of 24 hours by a collective labour agreement. For example: if on-call work is accepted from 9 am to 1 pm and the time is changed to 12 pm to 4 pm less than four days in advance, the worker is entitled to a payment of 4 + 4 = 8 hours.
After 12 months the employer must offer the on-call worker a fixed number of hours. If the on-call worker refuses the offer, the parties can continue their current way of working. After the following 12-month period, the employer must again make an offer for a fixed number of hours. Where there is a fixed term agreement the employer can let the term of the agreement expire before or on expiry of the 12 months period. In that case no offer has to be made to the employee.
Please note that the rules on the maximum number and total period of consecutive fixed-term employment agreements (the so-called “ketenregeling”) apply to on-call agreements. The maximum number of fixed term agreements can therefore be reached with the extension of an on-call agreement. For more information about the maximum number and total period of fixed-term employment agreements, please see item 5.
- Check the duration of your on-call agreements. If the duration of the on-call agreement was more than 12 months on 1 January 2020 an offer for a fixed number of hours must be made no later than 31 January 2020. The number of hours must be based on the average number of worked hours per month in 2019.
3. Payroll employees
Individuals appointed under a payroll agreement now fall under the payroll legislative regime and no longer fall within the scope of the rules of the temporary agency agreement (uitzendovereenkomst). A payroll agreement exists (i) if the agreement was not concluded for the purpose of mediating between supply and demand on the labour market and (ii) the employer (i.e., the ‘payroller’) is only authorized to transfer the employee to another party with the permission of the third party (i.e., the company that hires the employee from the employer/payroller).
From 1 January 2020, employees working on this payroll basis are entitled to at least the same employment conditions as employees employed by the company that hires them. The hirer is obliged to inform the payroll company about the terms of employment that are used in the company prior to the assignment.
After 1 January 2020, (i) the so-called agency clause (uitzendbeding) facilitating the termination of the employment when the hirer ends the hire and (ii) the (extended) exclusion from the obligation to continue to pay wages (i.e., no work no pay), included in existing payroll agreements can no longer be invoked. These lapse immediately.
The rules on the maximum number and total period of consecutive fixed-term employment agreements (ketenregeling) also now apply to payroll agreements. If the payroll agreement is entered into before 1 January 2020, the old rules will continue to apply. This means that a maximum of three consecutive fixed-term agreements can be agreed within a maximum period of 24 months (i.e., the fourth agreement, or the agreement running over the 24 month-term will automatically convert into an agreement for an indefinite period). The new rules (i.e., maximum of three consecutive agreements during a maximum period of 36 months) will apply to payroll agreements that are entered into after 1 January 2020.
- Check whether your payroll agreements contain an agency clause or an (extended) exclusion from the obligation to continue to pay wages. These cannot be invoked after 1 January 2020
- Inform the payroll agency about your terms and conditions of employment
- Check whether you have concluded multiple payroll agreements regarding the same employee. If the payroll agreement is entered into before 1 January 2020, the old rules will continue to apply. This means that if a fourth payroll agreement is in place that ends in 2020, or if an agreement has been entered into before 2020 for more than 24 months, the agreement is automatically converted into an agreement for an indefinite period
4. Transition payment due from the first working day
From 1 January 2020, employees who are dismissed are entitled to a transition payment (statutory severance) from the first day of their employment agreement (instead of after two years). However, the calculation of the transition payment will be lower: the transition payment will be approximately one third of the monthly salary per year of service.
The higher accrual for employees who have been employed for more than 10 years and who are older than 50 years will lapse from 1 January 2020.
Please be aware that the old rules to calculate the transition payment (including the higher accrual for older employees with more than 10 years of service) still apply if:
- the employment agreement is terminated before 1 January 2020;
- an application for termination has been submitted to the Dutch Labour Authority (UWV) before 1 January 2020; or
- a request for termination has been submitted to the court before 1 January 2020.
5. Amendment of the ketenregeling
Consecutive fixed term employment agreements will from 1 January 2020 automatically convert into an agreement for an indefinite period of time when the aggregate term exceeds 36 months, or if it is the fourth fixed term employment agreement. Previously this conversion already took place after 24 consecutive months.
The new act does not include transitional law provisions, except for payroll agreements (please see item 3 above). The new rules therefore immediately apply per 1 January 2020 to existing and new fixed term employment agreements.
- Check (i) the expiry date of the temporary agreements, (ii) the number of agreements concluded with the employee and (iii) the total duration of the agreements.
- No transitional arrangements apply (except for payroll agreements - see above). Did you reach the maximum total period of 24 consecutive months on 1 January 2020? You can now enter into a new fixed-term agreement for maximum 12 months.
6. “i-ground” as a new ground for dismissal
The WAB introduces an additional ground for dismissal which allows employers to combine different grounds for dismissal: the so called i-ground. This ground is intended to offer a judge the possibility to terminate the employment agreement when there is not one fully substantiated ground for dismissal, but there are multiple partially substantiated grounds. This should lead to more flexibility in respect of dismissal proceedings. Previously termination could only be granted by the court when one reasonable ground for dismissal was fully substantiated. This led to difficulties in cases where various circumstances related to different dismissal grounds led to the employer wanting to terminate the employment agreement.
The i-ground requires a combination of circumstances from two or more dismissal grounds that relate to (i) the regular inability to perform work, (ii) non-performance, (iii) culpable acts of the employee, (iv) damaged work relationship and/or (v) other grounds based on which the employer cannot be expected to continue the employment (the so-called “h-ground”).
If the employment agreement is terminated on the basis of the i-ground, the court can grant, in addition to the transition allowance, a severance up to half of the transition allowance.
- In cases where one ground for dismissal cannot be fully substantiated, termination of the employment contract may nevertheless be possible after 1 January 2020.