By Hylda Wiarda, Firm: Bronsgeest Deur Advocaten

The Dutch Senate has accepted the Balanced Labour Market Act (‘WAB’), which will introduce important legal changes for Dutch employers in areas including dismissal, fixed-term contracts and the treatment of on-call employees.

Dutch employment law will undergo some further changes from 1 January 2020. The changes are a result of criticism of the current employment law legislation, which came into force in 2015. The Balanced Labour Market Act (‘WAB’) will in all likelihood take effect from 1 January 2020. On 28 May 2019, the bill was officially accepted by the Senate and now only needs to be signed and published.

In this newsflash you will find an overview of the most important changes employers should take into account that will take effect from 1 January 2020.

1. Increased flexibility in dismissal cases

The current Dutch employment legislation (‘WWZ’) made it more difficult for employers to terminate employment through a court procedure or procedure at the ‘UWV’ (Dutch Employee Insurance Institution). Under the WWZ employers must provide a complete, legally acceptable dismissal ground. These are limited to eight specified grounds (a to h).

In addition to the eight existing grounds for dismissal, WAB introduces a ninth ground, allowing employers to come to a dismissal based on a combination of grounds (c to h), which are not sufficient on their own to justify a dismissal. For example, a poor performance case and a disturbed employment relationship case can be combined. This additional ground is called the ‘i-ground’.

Please note that when using this cumulative ground, the employee can claim an additional payment of, at most, half the ‘transition payment’ (the statutory severance payment) in addition to the legal transition payment and any reasonable compensation.

Furthermore, combinations of the a-ground (redundancy) and another ground, or the b-ground (long-term illness) and another ground, cannot be used to create an i-ground. This means, for example, that the i-ground can never be based on redundancy in combination with poor performance.

2. Modification of the transition payment

The law will also mean changes to the transition payment. Firstly, the thresholds for entitlement to a transition payment will change. Under the WAB, employees will be entitled to a transition payment in the event of dismissal from day one of their employment.

This means in general that if the employment relationship ends at the employer’s initiative, regardless of the length of employment (also when the employment relationship is terminated by the employer during the probation period or when a fixed-term employment contract is not extended) the employee is entitled to a transition payment.

Please note that employers should already take into account the fact that employment contracts starting currently and that will terminate by operation of law on or after 1 January 2020, may be subject to the obligation to make a transition payment. However, the legislator provided transitional arrangements on some cases, which means that the current legislation will still apply if:

  • The employer gave notice of termination prior to 1 January 2020 (even if the a termination date is later).
  • The employer gave notice of termination on or after 1 January 2020, after permission from the UWV to do so, and the request to the UWV for permission was submitted before 1 January 2020.
  • The court terminates the employment contract after 1 January 2020, but the request for dismissal was submitted by the employer before 1 January 2020.

Please note however that where parties enter into a fixed-term contract in 2019 that terminates on 1 February 2020 and is not extended by the employer, the employer will owe the employee a transition payment. The amount of the transition payment will always be calculated based on one third of a monthly salary per year in service (or a pro-rated part thereof). The increase in the transition payment, currently payable for years of service exceeding ten, will be cancelled. This also goes for the six-month rounding off.

Finally, the option to deduct training costs from the transition payment will be broadened under the WAB. Training within the employer’s own organisation focussed on a job role other than the employee’s job role can be deducted from the transition payment. This must of course be arranged with the employee. The law does not change regarding costs for training focussed on the employee’s own job role: those costs remain non-deductible.

3. Extension of the fixed-term contract chain rule

The WAB (once again) allows the possibility for three fixed-term employment contracts over a 36-month period. The interval of six months remains in place. This six-month interval period can only be shortened to three months for specific sectors.

Please note that the legislator has not provided transitional provisions regarding the chain rule. This means that if the second fixed-term contract for one year terminates on 1 February 2020, the contract can subsequently be extended with another contract of one year’s duration.

4. On-call employees

One of the purposes of the WAB is to prevent on-call employees being required to be permanently available for their employer, when their specific work activities do not require such a commitment. The WAB helps allow employees to be able to accept a second (part-time) job

Please note the following measures regarding on-call employees:

On-call employees must be called upon at least four days in advance. If the employer does not adhere to this rule, the employee is not required to show up for work. Please note that the four-day period can be shortened in a collective bargaining agreement.

Should the employer cancel or change the call within this four-day period (e.g. the working hours) the employee will retain his or her original salary entitlement.

The statutory notice period that on-call employees need to observe will be four days. In addition, the employer will have to make an offer for a fixed scope of work each year based on the average scope of work over the previous twelve months.

5. 'Payrolling'

A new definition of ‘the payroll agreement’ will be added to the Dutch Civil Code (‘payrolling’ is the Dutch term for the practice of outsourcing staffing and associated administrative responsibilities). As a result of this, employees employed on a payroll basis will be entitled to the same primary and secondary employment conditions as employees employed at the same company. Moreover, payroll employees will be entitled to an adequate pension scheme at the payroll employer.

6. Unemployment benefit premium

Finally, a system for unemployment benefit premiums will be applied, differentiating based on the nature of the employment contract. Offering employees an indefinite employment contract will be beneficial for employers as the employers’ share of the unemployment benefits premiums will be lowered for those employees (and the opposite will be true for fixed-term employment contracts). This could have major financial consequences for employers, as the difference between the monthly premium will be 5% per employee. The purpose of this new rule is to make it more attractive for employers to offer employees indefinite employment contracts.