As of the 1 January 2020, new legislation has come into force in the Netherlands to respond to modern working practices: the Balanced Labour Market Act (‘WAB’). The Act brings in changes to Dutch employment law which are relevant for both employers and employees. The aim of this new legislation is to improve the balance between fixed and flexible employment contracts.
Succession of fixed term contracts
The period after which a succession of fixed-term employment contracts is automatically converted into a permanent employment contract has been extended from two to three years. The maximum number of fixed-term employment contracts will remain three: if there is a fourth employment contract, it will be a permanent employment contract even if the three-year period has not yet elapsed.
The transition payment
The formula of calculating the transition payment will change, including:
- The abolition of the two-year period before an employee qualifies for the transition payment. An employee will be entitled to this from the start of their employment;
- The employer will have to calculate the transition allowance over the actual period of the employment contract. The payment will no longer be rounded to the nearest half-years’ service;
- The transition payment will amount to one third of the monthly salary per year of service; and
- The higher payment which currently applies after ten years’ service will be abolished.
The new legislation means that Payroll workers are entitled to the same terms of employment as employees of the client, as well as to an “adequate” pension scheme.
To discourage temporary contracts, employers will be required to pay a lower unemployment insurance contribution for employees with a permanent contract (with specified working hours) than they will for employees with a temporary contract.
Please note that to be able to qualify for a lower unemployment insurance contribution, the Minister has stated that the employer needs to have a written addendum which:
- is signed by employee and employer;
- is included in the payroll administration; and
- shows that the employee is employed on an indefinite term contract and is not on an on-call agreement.
On-call contracts are employment contracts with a deferred duty of performance, so without fixed working hours. In practice these are known as zero hour contracts or ‘min-max’ contracts.
The new legislation includes the following requirements:
- Once an on-call contract has been in force for one year, the employer must offer the employee an employment contract. The offer must be based on the average hours worked during the previous twelve months;
- The employer must notify the on-call worker of the dates and times that the work is to be performed, at least four days in advance of the work (it is possible to deviate from this where there is a collective agreement). If the employer does not call upon the on-call worker in time, the worker is not obliged to accept the call; and
- If the work is cancelled or changed less than four days before it is due to be performed, the employee is still entitled to the wages he/she would have earned for the work he/she was called up for.
Introduction of a new ground for dismissal: the combination ground
The WAB introduces the possibility of combining two or more grounds for dismissal. Where a dismissal is based on combined grounds, the employer cannot reasonably be expected to continue the employment contract. Where an employee who has been dismissed on combined grounds brings a claim, the judge may grant the employee an additional payment on top of the transition fee of up to half the transition payment.
Where an employer pays an employee a transition payment at the termination of their employment contract due to long term illness, the employer will be compensated by the UWV (Uitvoeringsinstituut Werknemersverzekeringen or "Social Security Agency").