This afternoon the Dutch Senate approved the bill on the Balanced Labour Market Act. The approved bill introduces several changes to varying employment laws. The act will enter into force on 1 January 2020. Although varying political parties and other stakeholders were opposed to the new legislation, the Dutch government wanted to go ahead with the new legislation anyway. The new legislation is meant as a first step in achieving more balance between employees with an employment contract for an indefinite period of time and employees with a more flexible employment contract, e.g. a contract for a definite period of time or a zero-hour contract. Below we provide a brief overview of the most important measures that are part of the Balanced Labour Market Act.

The Dutch government is also preparing new legislation for self-employed workers. More clarity on the measures is expected before the start of the summer (see “New legislation for self-employed workers postponed”). Also, the government has installed a committee who is asked to give advice on the regulation of new forms of work, e.g. self-employed workers and platform workers. This advice is expected in November 2019.

1. Provisions on succession of fixed-term contracts

The maximum term for successive fixed-term employment contracts will be extended from two to three years.

In addition, the bill will introduce the ability to reduce the allowed interval between two employment agreements from six to three months in collective bargaining agreements in case of recurrent temporary for periods not exceeding nine months. This exception is broader than the existing exception for seasonal labour.

Also, an exception will be introduced for substitute teachers in primary education in the event of replacement due to illness.

2. On-call contracts

For employees with employment contracts with a deferred duty of performance, and without fixed working hours (zero-hours and ‘min-max’ contracts), a new rule will be introduced. The employer must notify the employee of the times at which the work is to be performed at least four days in advance. In the event of shorter notice, the employee will not be under the obligation to comply with the call. A term of less than four days may be agreed in the collective bargaining agreement (“CBA”).

Furthermore, it is proposed that, if the call is withdrawn within four days of commencement of the work, the employee will be entitled to payment of wages for the period for which he was called.

Also, employees with zero-hours contracts will be able to terminate their employment contracts subject to a notice period of four days (or such shorter term as agreed in the CBA), without any liability to pay a compensation to the employer. At the moment, these employees have a one-month notice period.

Finally, employers will be obliged to offer employees a fixed number of working hours after 12 months have passed. The offer must take into account the average working hours over the last 12 months.

3. Payroll employees

The government intends to further regulate the deployment of payroll employees. Payroll constructions should still be possible because it lightens the administrative burden of employers. However, the deployment of payroll employees will be submitted to other rules than it has been so far.

A separate equal treatment requirement will be included in the Dutch Placement of Personnel by Intermediaries Act (Wet allocatie arbeidskrachten door intermediairs - “Waadi), comprising the primary and secondary terms of employment that are also being used by the client, including an adequate pension scheme. It will not be possible to deviate from this requirement in a CBA.

Also, it will no longer be possible to use the exceptions for agency work in case of deployment of employees via a payroll company. This means that for payroll employees it will be not be possible anymore to conclude six successive employment agreements for a maximum period of four years (before being converted into a temporary employment contract for an indefinite period of time).

4. A new cocktail ground for dismissal

A new ground for dismissal will be added to the reasonable grounds for dismissal of Article 7:669, paragraph 3, sub i DCC, also referred to as the ‘i-dismissal ground’.

This ground means that there must be a combination of circumstances consisting of two or more grounds for dismissal (c‑h) to such an extent that the employer cannot reasonably be required to continue the employment contract. This may be offset by a higher maximised compensation in addition to the transitional compensation for the employee.

Such compensation cannot exceed fifty per cent of the transitional compensation to which the employee is entitled in the event of termination of the employment contract.

5. The transition payment

The formula for calculating the transition payment will be changed, with as a consequence that a larger group will be entitled to a transition payment and the differences between employees will be smaller. This will take place by introducing two measures. Firstly, it is proposed to provide for entitlement to transition payment from the start of the employment contract, rather than only after two years. This first measure will be offset by the second measure: abandonment of the increase of the transition payment after the employment contract has continued for ten years. In the current situation, employees receive a higher transition payment for the years of service after ten years (1/4 monthly salary per 6 months rather than 1/6 monthly salary per 6 months).

Furthermore, an entitlement to compensation for employers who have made transition payments will be introduced in the situations where it concerns a small-sized employer who dismisses employees in view of discontinuation of his business to retire, or on account of sickness.

6. Unemployment Benefit

The Government proposes to replace the sectoral differentiation in the Unemployment Benefits (WW) contributions by differentiation according to the nature of the agreement.

This means that the sector classification will no longer be relevant to the WW contributions, and that, for the future, two WW contributions will be introduced that will apply to all employers: the low contribution for permanent contracts and the high contribution for flexible contracts.

An exception will be made for employees with temporary employment agreements who are younger than 21 and who work no more than 12 hours.