The Balanced Labour Market Act
On 1 January last, the Balanced Labour Market Act (‘Wet Arbeidsmarkt in Balans’ or ‘WAB’) entered into force. The most relevant changes are set out briefly below.
Additional statutory ground for dismissal
Before this date, there were eight limited grounds for dismissal, on which an employer could base a request for dismissal at the authorities. The new act has introduced a new, cumulative ground, allowing employers to come to a dismissal decision based on a combination of grounds, which are not sufficient on their own to justify a dismissal. For example, the combination of a poor performance case and a disturbed employment relationship. This additional ground is called the ‘i-ground’. The expectation is that as a result of the introduction of this ground, it will be easier for employers to terminate employment agreements. There is a flip-side to this coin: if the court terminates employment based on this cumulative ground, it may grant the employee an additional severance payment of maximum 0.5 the applicable transition payment on top of the statutory transition payment (the statutory severance payment on termination of employment in the Netherlands), and possible additional reasonable compensation.
Furthermore, the way the transition payment is calculated has changed. Now, employees are entitled to the transition payment from the start of their employment, instead of after two years. Furthermore, the calculation covers the whole duration of employment rather than rounding up per six months period. The employee is entitled to one third of his or her gross monthly salary (including holiday allowance, 13th month, average bonus and other fixed salary components) per year of service. For partially worked years the calculation is made pro rata.
The maximum transition payment is set at EUR 83,000 gross or a maximum of one years gross salary in case this would be higher than the EUR 83,000 gross.
Extension chain rule
The WAB also has consequences for the Dutch ‘chain’ rule, which determines how many fixed-term employment agreements an employer and employee can agree upon before the employee is entitled to an indefinite contract. The new act allows employers to conclude three fixed-term employment agreements over a 36-month period (instead of 24). The interval period of six months maximum remains unchanged.
The WAB contains several new rules regarding on-call employees, for example that they should be called upon at least four days in advance, and that if the employer changes or cancels the call within this period, the employee will remain entitled to the salary related to this call. In addition, an obligation is introduced for employers to make an offer in the 13th month of on call employment for a fixed number of hours per week, being the average over the preceding 12 months. It is up to the on-call employee to accept this offer or not.
Furthermore, employers should pay attention when working with standby and other similar services. If not properly remunerated, these may also be considered as on-call contracts, even if the employee would be employed on the basis of a normal contract of employment.
A new definition of ‘the payroll agreement’ was added to the Dutch Civil Code (‘payrolling’ is the Dutch term for the practice of outsourcing staffing and associated administrative responsibilities). As a result of this, employees employed on a payroll basis are entitled to the same primary and secondary employment conditions as employees employed at the same company. Furthermore, payroll employees are entitled to an adequate pension scheme at the payroll employer.
Premiums for unemployment benefits
Instead premiums varying according to branch, differentiation will instead be based on the nature of the employment contract: for indefinite-term contracts employers owe the low unemployment insurance premium (2.94%) and for fixed-term contracts or on-call contracts employers owe the high unemployment insurance premium (7.94%).
Indefinite contracts with a fixed number of hours per period will qualify for the low premium, provided that the scope of hours in them is not exceeded by more than 30%.
An additional condition for being able to use the low premium is that the employment contract for an indefinite period is also in writing and a copy of it is available at the payroll administration.
In cases where there is only a written fixed-term employment contract that has tacitly, or in any case without proper written record, been converted to an indefinite period of time, it is not necessary to draw up and enter into a completely new employment contract. The Tax Authorities have already confirmed this. A written addendum signed by both parties with reference to the original, pre-existing fixed-term employment contract, which confirms that the employment relationship is now one for an indefinite period (and that there is no on-call agreement) will be sufficient. A copy of this addendum must then also be kept in the payroll administration.
It is therefore important for employers to have their HR administration and personnel files in order in time. Fortunately, the Minister of Social Affairs and Employment confirmed in a letter to the House of Representatives on 10 December 2019 that employers will have until 1 April 2020 to ensure that the written addendum, signed by both parties, is present in the payroll administration.
If this is not the case, then the employer will still have to pay the high unemployment insurance premium retroactively, i.e. from 1 January 2020.
Normalisation of civil servants’ legal status
From 1 January 2020, the Act on the Normalisation of the Legal Status of Civil Servants entered into force. As a result of this Act, private employment law now applies to most civil servants (instead of public employment law): the unilateral appointments of civil servants are converted into bilateral employment contracts by operation of law and new hires will be employed on the basis of an employment agreement. By means of this Act, the government aims to give civil servants a legal status equal to and comparable with the legal position of employees in industry.
Compensation of transition payment in case of long-term illness
From 1 April 2020, employers may claim to be compensated for the transition payments they have paid out in cases of termination of employment for reasons of long-term illness (minimum two years’ illness). This compensation will also apply for transition payments paid after long-term illness on or after 1 July 2015. This means that employers may still file a request for compensation for dismissals that took place between 1 July 2015 and 1 April 2020. Employers are granted the opportunity to enter requests for compensation by 30 September 2020 at the latest.
Modern forms of work: self-employed workers, platform work
Over the past few years, employers and employees have been exploring modern forms of work that deviate from the classic employment relationship. This will remain a topical issue in 2020. An example of another form of work is self-employment. In the autumn of 2019, a legislative proposal was submitted, containing a statutory minimum wage of EUR 16 for self-employed workers. The aim of the proposal is to protect self-employed workers by avoiding a ‘race to the bottom’. The proposal is currently pending. We expect a follow up on this proposal in 2020. In addition, discussions regarding new forms of work and their legal consequences will continue, for example the question of platform work: under what conditions will a platform be considered to be an employer?
Gender equality: women’s quota, equal payment
In December 2019, the House of Representatives expressed its support for the implementation of a women’s quota of 30% for listed companies. We expect that the legislative proposal for implementing this quota will be presented in 2020. Furthermore, last year, a proposal for the ‘Act on Equal pay of women and men’ was submitted to Parliament. The proposal contains, among other elements, a reversed burden of proof: employers with 50 or more employees will be obliged to demonstrate that they pay their employees equally by means of a certificate. If they do not have such a certificate and an employee states that he or she is not paid equally, the legal assumption is that this is indeed the case. We expect that the debate and decision on this proposal will take place in 2020. These plans related to gender fit in well with the government’s goal of a more inclusive labour market.
From 1 March 2020, employers or self-employed individuals from the EU, another country within the EEA or Switzerland with a temporary posting in the Netherlands will have a duty to notify this. They must indicate to the Dutch online notification portal what work they will be performing, the period during which it will take place and whether they are bringing employees with them. The arrival of all posted workers must also be notified. Please visit the government’s informative website and online notification portal here.
In addition, the legislative proposal for the implementation of the European Posting of Workers Directive is still pending. The envisaged date for implementation is 30 July 2020.
Extended birth leave for partners
From 1 July 2020, partners will be entitled to five weeks’ leave during the first six months after the birth. During this additional period of leave, the partner will be entitled to 70% of their salary. Paid leave for adoptive and foster parents is also extended to six weeks (instead of four).