The Balanced Labour Market Act
(Wet arbeidsmarkt in balans: WAB)
– expected to come into force January 1, 2020

Publication May 2019

On May 28, 2019, the Dutch Senate voted in favour of the legislative proposal. The WAB is therefore likely to enter into force on January 1, 2020.

The effect for employers

The proposed changes to the current Dutch Labour and Employment Laws are expected 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. Below the main changes of the WAB are shortly summarised.

Cumulating dismissal grounds

Current law provides eight grounds for termination of an employment contract. These cannot be combined (e.g. non-performance as result thereof a disturbed relationship). This makes it hard for an employer to terminate someone’s employment contract. The proposed 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 transition allowance

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.

Expanding chain of fixed-term employment contracts

Under the current legislation it is possible to enter into a maximum of three temporary contracts with a maximum period of two years. With the proposed amendment of the law, employers can enter into three temporary contracts with an employee within a three-year period. The pause of six months which can ‘break’ the chain of successive employment contracts for a fixed term (which can, by operation of law, result in a permanent employment contract) will remain. As before, through collective labour agreements, there will be a greater flexibility to deviate from this rule and to shorten the pause if the work this requires; for example, in the case of recurrent temporary work which can only be done for a maximum of nine months per year.

A new definition for pay rolling and on-call contracts

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. 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 WAB introduces a new definition for on-call contracts. On-call employees no longer need to be permanently available for work. The amendment to the law proposes that an on-call employee will only be obliged to come to work if an employer requests to do so four days in advance (the calling period can be shortened to 24 hours by collective labour agreement). If the employer cancels the assignment within this period, the employee is entitled to be paid for the hours cancelled. After one year, the employer must make a written or electronic offer for an employment contract to the on-call employee for the average number of hours he worked in the year before. As long as the employer fails to make this offer, the on-call employee is entitled to wages over the average number of hours he worked in the year before.

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. Also, the nature of the employment contract will be visible for employees through their payslip.

Please feel free to contact Maartje Govaert for any advice or further questions in respect of the above.

 


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