We are approaching the end of the year. From 1 January 2020 onwards, new employment legislation will enter into force in the Netherlands. Please find below an overview of the main changes in the Dutch Balanced Labour Market Act (“WAB”). The main purpose of the WAB is making it more attractive for employers to hire employees on a permanent basis.
Fixed term employment agreements will become more expensive
- Before 1 January 2020 only employees who had an employment relationship with the employer for at least 24 months were eligible to receive a minimum severance (the transition compensation), if the conditions are met. From 1 January 2020, employees will be entitled to such transition compensation as of the start of the employment agreement.
- The premiums for unemployment benefits to be paid by the employer in respect of fixed-term employees will be increased.
Permanent employment agreements will become less expensive
- The current higher transition compensation for employees who have been employed for more than ten years and employees who are older than 50 years will in principle no longer apply.
- The transition compensation will be amended to one third of a monthly fixed salary per pro rata year of service.
- The premiums for unemployment benefits in respect of employees working on a permanent contract will be reduced.
Chain scheme for successive fixed- term employment
The chain scheme for successive fixed-term employment agreements will be broadened. The total duration of successive fixed-term contracts, after which the employment agreement will be converted to an employment agreement for an indefinite time, will be increased from 2 years to 3 years. The maximum number of 3 successive fixed- term employment agreements will remain the same, as well as the minimum interval between two employment agreements of 6 months for a new chain to start.
An additional reasonable ground for termination by court's decision
The WAB envisages to make it easier to fulfill a reasonable ground for dismissal by court's decision by introducing the 'accumulation ground'. There are currently 8 reasonable grounds and at least one ground has to be fully substantiated. The WAB will make it possible to terminate the employment agreement on the basis of two or more incomplete reasonable personal termination grounds (for instance a combination of a lack of performance and a disturbed employment relationship). Please note that the court can award the employee an additional amount of not more than 50% of the transition compensation in case of a termination on the basis of this accumulation ground. In addition to this compensation, the court can still award a reasonable compensation to the employee if the termination of the employment agreement is due to a serious imputable act of the employer.
The concept of payrolling (employment through an external payroll company instead of directly hiring) will now be laid down in the Dutch statute. The new provision stipulates that the payroll company acts as employer and has to offer the employee, who is hired through a payroll agency, exactly the same terms and conditions of employment as the hiring company's own employees with similar positions. Consequently payrolling becomes less attractive, also because the current flexible regime for temporary workers will not apply to payroll employees anymore.
Compensation of the severance payment after 2 years of sickness
Apart from the above changes in the WAB we also want to make you aware of recent developments regarding the legal position of employees who have been ill for longer than 2 years (long term illness). It is mandatory to continue to pay at least a part of the salary during the first 2 years of illness. Thereafter the obligation to pay salary no longer applies. Some employers have regularly maintained such 'sleeping' employment relationship, just to prevent that they had to pay the employee a transition compensation after a dismissal based on more than 2 years of illness.
As of 1 April 2020 employers can claim a compensation for the transition compensation they have paid to an ill employee from the Employee Insurance Agency (UWV), which is equal to the transition compensation to be paid in case of a dismissal as soon as possible after those 2 years.
Against this background the Dutch Supreme Court recently ruled that the employer is in principle obliged to respond positively to a proposal of the employee for a termination on the basis of long term illness. Furthermore, the employer should award a transition compensation in that case, especially because such payment will in principle be reimbursed by the UWV.
Please note that the above is only a summary of the most important changes. For instance also the position of on-call employees will be strengthened.