The Dutch Lower House of Parliament recently adopted the Balanced Labour Market Act (“WAB”). Objective: to achieve a better balance between permanent and flexible work; to make it more attractive for employers to hire staff on a permanent basis and to be more protective of flexible workers. Wietje de Muinck Keizer, Partner in Doorn en Keizer, Amsterdam, explains the new rules. Key changes to the law, under the WAB, include the following:

  • Transitional compensation (statutory severance payable by employers on termination of employment); employees will now be entitled to transitional compensation from the start of employment instead of only after 24 months;
  • No longer a higher accrual of transitional compensation after 10 or more years of service: for each year of service the accrual will amount to 1/3 (instead of 1/2) monthly salary;
  • Reimbursement by the UWV (Dutch Employee Insurance Agency) for transitional compensations paid by the employer: compensation by the UWV will not only be possible in cases where a transitional allowance has been paid after 2 years of incapacity for work of an employee (with retro-active effect to 1 July 2015), but also in cases where a small employer terminates his/her business due to his/her own retirement or illness;
  • Additional ground for dismissal: the eight grounds of dismissal [‘a’ to ‘h’] in the Netherlands each require the fulfilment of certain specific conditions. Meeting these specific conditions is often difficult. The eight grounds will be extended with the introduction of a new ground (the 'i-ground'). This new ground makes it possible for the employer to ask a court to terminate the employment of an employee where a combination of grounds is applicable. This should make it easier to obtain a court authorised termination of employment. Note that a court may award a 50% severance uplift in “i-ground” terminations;
  • Succession of fixed-term employment contracts: the so-called “chain” provision will be extended. It is currently possible to enter into three consecutive, temporary contracts in two years. This period will be extended to three years. It will also be possible to reduce the interval between a chain of temporary contracts by a collective bargaining agreement from six to three months if there is recurring temporary work that can be performed for a maximum period of nine months per year. In the past, this applied only to sectors which are climate-dependent [eg agriculture]; in future this will apply to any sector where, for any reason, there is work available for a maximum of 9 months per year.
  • Payrolling: employees who are employed by a payroll company will receive at least the same primary and secondary employment terms and conditions as employees employed by the company to which they have been seconded. They will also be entitled to an adequate pension. The more flexible labour law regime applicable to temporary employees employed by a temporary employment (manpower supply) agency will not apply to payrolling companies.

Other WAB proposals contained in the original Bill were not adopted or were amended during passage through parliament:

  • Probationary period: the planned extension of the probationary period has been cancelled. This applies to both the plan to extend the probationary period to 5 months for an indefinite term employment contract and the extension of the probationary period to three months if a temporary employment contract with a duration of more than two years is agreed.
  • On-call contracts: the rules with regard to on-call contracts will be stricter. A notice period for a call to work and a notice period for cancellation of that call will apply for at least 4 days. These periods may be shortened by a collective bargaining agreement, provided that the periods are not shorter than 24 hours. If the employer does not observe the applicable notice period, the on-call worker is not obliged to respond to the call. If the employer does not observe the applicable notice period or if s/he changes the working times, the on-call worker is (also) entitled to the wages to which he would have been entitled if he had complied with the original call. After a period of 12 months, within one month, employers must make the on-call worker an offer in writing or electronically for a fixed number of hours, based on the average number of hours worked during the previous 12 months.

The on-call worker must be given at least one month to accept the offer. For sectors that are heavily dependent on conditions related to climate and therefore have to deal with seasonal work (such as agriculture and horticulture), a collective bargaining agreement may stipulate that the aforementioned new statutory provisions do not apply to those positions which are only available for at most 9 months per year. This will allow continued flexibility for employers who depend upon seasonal work.

  • WW (unemployment insurance) premium differentiation: under the WAB, employers pay lower social security premiums for unemployment insurance for employees with a permanent contract than for employees with a fixed-term or on-call contract. During the debate in the Lower House of Parliament, this was amended to include younger employees up to the age of 21 with a fixed-term contract. The lower “unemployment benefit” premium will apply if the young person works a maximum of 48 hours per 4 weeks or 52 hours per month.