WAB: Approved Bill on Balanced Labour Market Act
Several changes to varying employment laws
June 5, 2019 – The Dutch Senate has approved the bill on the Balanced Labour Market Act [Wet arbeidsmarkt in balans (WAB)]. This bill introduces several changes to varying employment laws per January, 1st 2020. 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.
Fixed Term Employment Contract:
- The maximum term for extending fixed-term employment contracts will be 3 years (instead of 2 employment contracts, currently). The number of fixed term contracts within the 3 years term is 3 employment contracts. The 4th employment contract will be for indefinite period [arbeidsovereenkomst onbepaalde tijd] (permanent employment contract).
- Employee will get an permanent employment contract if: A. Employee has had 3 employment contracts for definite period of time (fixed term) or B. Employee has had 3 fixed term employment contract for the same job at the employer (for example; 1 employment contract via recruitment agency working at the employer and the other 2 employment contracts directly with the employer. or C. The fixed term contract together have a duration of 3 years incl. the allowed interval.
- The allowed interval between 2 employment agreements is a minimum of 6 months. In case of collective labour agreements (CLAs) the allowed interval between employment agreements is 3 months.
- The new ruling will be known as the 3x3x6 rule (3 employment contracts, 3 years, 6 months interruption).
Permanent Term Employment Contract:
- The Employer and the Employee need to sign the employment contract for indefinite period [arbeidsovereenkomst onbepaalde tijd] (permanent employment contract). If the permanent contract is only signed by the Employer, the Employer will pay a high unemployment benefits premium.
- This is one of the requirements of the labour law update on Unemployment benefit. Please review this section below called Unemployment benefit [WW].
Zero Hour and Min-Max Employment Contract
- The employer must notify the employee (without fixed working hours zero-hours and ‘min-max’ contracts) of the times at which the work is to be performed at least 4 days in advance. A term of less than four days may be agreed in the collective labour agreement (CLA). 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.
- Employer will be obliged to offer employee 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.
- Notice period voluntary termination employment zero hours contract: Employees with zero-hours employment contract will be able to terminate their employment contracts subject to a notice period of 4 days (or shorter as agreed in the CLA), without any liability to pay a compensation to the employer. Currently, the employee has a 1 month notice period and this will change after January 1st, 2020.
- Payrolling constructions are still be possible, however payroll companies will no longer be able to use a temporary employment clause and a more extensive chain provision for payroll employees. In addition, this types of employees are entitled to the same employment conditions as employees working in an equal or comparable position employed by the employer.
Termination of employment
- New formula for calculating the severance payment [transitievergoeding]:
- The severance payment will be calculated from the first day of employment, rather than currently after 2 years of employment.
- The increase of the severance payment for employment contract of 10 service years or longer will lapse.
- To make sure the correct severance payment calculation will be used, always consult per employee dismissal case a labour law lawyer.
- Eligibility severance payment:
- The employee is entitled to a transitional remuneration if: The employment is terminated by the Employer, or is dissolved on the request of the Employer or fixed employment contract (ends by law) and on the initiative of the Employer will not be extended.
- This means that all fixed term employment contract ending after 31 December 2019, employer is obliged to pay a severance payment to the employee when employment contract will not be extended by employer.
- No entitlement to transitional compensation arises if the employment contracts ends or is not continued after the employee reaches state pension age or a higher or lower contractual retirement age.
- Introducing the i-dismissal ground:
- It is possible to end the employment contract on multiple grounds than currently on one of the 8 grounds according to art. 7:669 BW. There can be a combination of circumstances consisting of two or more grounds for dismissal to such an extent that the employer cannot reasonably be required to continue the employment contract.
- The combination is not possible for the dismissal on business economics grounds and dismissal because of long-term incapacity for work.
- The i-dismissal ground could lead to a higher maximised severance payment compensation, on top of the severance payment. The compensation cannot exceed fifty per cent of the severance payment to which the employee is entitled in the event of termination of the employment contract.
- Compensation for Employer: Companies could be entitled for compensation by the UWV, in case a severance payment was applicable where it concerns dismissal of employees in view of discontinuation of business or dismissal of employee due to 2 years of sickness. Compensation can be applied for from 1 April 2020, also with retroactive effect, for paid transitional severance payments from 1 July 2015. UWV will assess the compensation request.
Information on payslip and in employment contract
- The employment contract type of the employee has to be visible on the payslip. The employment contract types are: fixed term employment contract [arbeidsovereenkomst bepaalde tijd], permanent employment contract [arbeidsovereenkomst onbepaalde tijd] or on-call employment contract [oproepovereenkomst].
- Employer is currently obliged to provide the employee with the essential employment conditions of the employment contract art.7:655 BW). Per January 1st, the employer is obliged to always inform the employee in writing (or electronically) on the employment contract type.
Unemployment benefit [WW]:
- Under current legislation, employers pay taxes on the wages of their employees. Part of this is the unemployment insurance benefits (WW). Per January 1st, 2020 the level of the unemployment benefits is linked to the employment contract type.
- Employers are going to pay a low unemployment insurance premium for employees with a permanent contract and will pay a high unemployment benefits premium for employees with a fixed term employment contract. In this way, offering a permanent employment contract becomes (financially) more attractive for the employer.
- For the on-call employment contracts the Employer will pay a high unemployment benefits premium.
- To make sure your company will pay a low insurance premium the Employer AND the Employee need to sign the employment contract for indefinite period [arbeidsovereenkomst onbepaalde tijd] (permanent employment contract). If the permanent contract is only signed by the Employer, the Employer will pay a high unemployment benefits premium.
- The Employer is responsible to provide the information in the loan tax administration, in order to make sure the correct unemployment insurance premium (low or high) will be paid.
If you need more information or advice, please contact us.
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Marieke Stoop is the founder of Human In Progress. She is the content owner of the HR Portal NL covering Human Resources best practices with a focus on leadership, trends and labour law.
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