Important Changes in Dutch Labour Law 2020

EDIT: Employer obligations for April 1st has been extended to July 1st in response to the coronavirus pandemic.

The Balanced Labour Market Law (Wet Arbeidsmarkt in Balans (WAB)) rolled out in the Netherlands and presents several important changes to Dutch Labour Law of particular interest to employers. 

The objective of this act is to bridge the equality gap between flexible and fixed workers. However, employers of either type of worker will be required to take some action this year in order to comply.

In this article, we will briefly compare the laws of last year with the new laws introduced by the Balanced Labour Market Act. This is an incomplete overview of the most relevant changes for employers. For a complete list, and more details about each change we suggest you check out the official statements (in Dutch). For guidance or more specific help about how this act will impact your business, get in touch with one of our experts.

Overview of Changes in 2020

Unemployment premiums for indefinite contracts

As an employer in the Netherlands, you are required to contribute to the unemployment scheme of your employees via the tax paid on their salaries. Your contribution varies per employee contract.

2019 – You pay the same unemployment premium regardless of the temporary/permanent status of the employee

2020 – You will pay a 5% lower unemployment premium on salaries for permanent employees versus temporary employees. 

Tip!

Employers have until April 1, 2020 to take advantage of this change for this year. For example, if you would like to convert a fixed-term contract for an employee into an indefinite contract in order to pay the lower unemployment premium, you must indicate the change in contract pre-dated January 1, 2020 and then provide this information before April 1st. Otherwise, you will still owe the higher premium retroactively from Jan 1, 2020.

Read more here (in Dutch).

On-call workers

There are two standard forms of flexible contracts in the Netherlands. These contracts (nulurencontract and min-maxcontract) apply to employees who are paid a wage based on the number of hours you request from them. Keep in mind that there may be exceptions to the laws below if your business works with a CAO.

2019 – Employees will come in to work at your request – there is no required period of notice you are obliged to observe.

2020 – Employers are obliged to give employees 4 days of notice to come into work. If you provide less notice than this, your employee will not be required to heed the call. If the employee is called up, but you then cancel their hours within less than 4 days of notice, your employee will be entitled to the wage of that period.

After your on-call employee has worked for you for at least one year, you must start offering a fixed number of hours that are greater than or equal to the average number of hours the employee worked in the previous year. This also applies to employees with a min/max contract.

Read more here (in Dutch).

Expanding Chain System

The Work and Security Act (WWZ) of 2014 enacted the employment contract “chain system” (ketenregeling) which prevents employers from offering an unlimited number of “fixed-term” or temporary contracts to an individual employee. Keep in mind that there may be exceptions to the laws below if your business works with a CAO.

2019 – You may offer no more than 2 fixed-term contracts within a period of 2 years to an individual employee. Subsequent contracts will automatically be converted into an Indefinite contract. 

2020 – You may offer no more than 2 fixed-term contracts within a period of 3 years to an individual employee. Subsequent contracts will automatically be converted into an Indefinite contract. 

Read more here (in Dutch).

Transition Compensation

As an employer, if you choose to conclude the employment relationship with one of your employees (either through firing or choosing not to extend a fixed-term contract), you are obligated to pay your employee transition compensation. Transition compensation is calculated using the employee’s wage, and the amount of time they were employed with you.

2019 – Transition compensation only applies to employees who have been in your employment for at least 2 years. 

2020 – Transition compensation applies to employees from the first day of their employment with you (including trial periods). There have been several essential changes to the formula of calculating the amount owed to outgoing employees. In the event of dismissing an employee due to an incapacity to work, as of April 1 2020, it will be possible for you to apply for compensation from the Employee Insurance Administration Agency (UWV) to pay for transition compensation.

Read more about this change, and the formula to calculate transition compensation here (in Dutch).

New Grounds for Termination

Terminating a contract as an employer in the Netherlands is only possible under specific, established “grounds” or reasons for termination. The Employee Insurance Administration Agency must then grant you explicit permission in order to terminate the employee.

2019 – There are eight grounds for termination of employees. “Mutual termination”; “Business/economic reasons”; “Objectionable working conditions for the employee”; “Long-term incapacity for work”; “Fraudulent or unethical behavior”; “Poor performance”; “Damaged working relationship” and “Acts that qualify for summary termination”.

2020 – An additional ground for termination, “cumulative ground” is now in force. It is now possible to dismiss employees through an accumulation of the grounds listed above.

Read more about this change here (in Dutch).

Adapt your Business Processes

Octagon Professionals’ experts are working with our clients and partners to help them adapt their processes to these new laws, and we can help you too. The Balanced Labour Market Act presents definite benefits for employers, and our experts can help your team make the most out of these laws to benefit your business. 

Get in touch with us today if you would like to discuss how the Balanced Labour Market Act impacts your business.