Balanced Labour Market Act | Legal | Deloitte Netherlands


Balanced Labour Market Act

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On 5 February 2019, the House of Representatives adopted the bill on the Balanced Labour Market Act (Wet Arbeidsmarkt in balans, hereinafter: WAB). The Act will become effective on 1 January 2020.

The legislature introduces a package of measures to induce employers to enter into permanent employment contracts, by decreasing the differences in costs and risks relating to permanent and flexible employment. On top of that, Dutch dismissal requirements will be amended to ensure an improved flow on the labour market.

This article outlines the measures presented in the WAB.

1. Dismissal requirements

Cumulation ground
In the present situation, a single ground suffices to dismiss an employee for personal reasons (i.e., inadequate performance, imputable acts, or damaged working relationship), provided this ground is comprehensively substantiated. In practice, it is not always possible to sufficiently substantiate the ground for dismissal. Several grounds for dismissal often coincide so continuation of the employment contract would be undesirable, yet courts must reject such a request for dissolution for insufficient grounds.

The WAB makes it possible to accumulate grounds for dismissal (basing the request on multiple - individually insufficient - grounds). If these grounds result in dismissal,  the court may award a severance pay of 1.5 times the transition payment.

Transition payment
Under current legislation, a transition payment is due – depending on the manner of termination - if an employee has been employed for two years. This will be different after the introduction of the WAB: employees are entitled to a transition payment from day one. The calculation method of the transition payment will be made equal for all employees, irrespective of the number of years of service. The payment due will be based on 1/6th monthly salary for each year of employment. The current scheme for employees aged 50 and over will be cancelled. A pro rata payment will be due for employment during a period of less than 6 months.

2. Flexible employment

Provisions on succession of fixed-term employment contracts
Employers may currently conclude three temporary employment contracts in a period of two years, before they have to offer the respective employee a permanent contract. The WAB expands this to three contracts in three years. Collective labour agreements may provide for exceptions for season-dependent work.

Under the WAB, persons employed by a payrolling company (or an employment agency with payrolling activities) will have the same employment conditions as employees employed by that company’s client. Moreover, the Dutch Civil Code will provide for a definition of payroll agreement, so the amended regime for temporary employment contracts no longer applies to payrolling employees (e.g., the ample flexibility of 5.5 years of temporary contracts).

On-call workers
Under the new Act, on-call workers must be called to work at least four days in advance. They may refuse to work if they are not called in time. Employees are entitled to continued payment of wages for standby hours if calls are cancelled within four days. The number of days may be reduced to one day under a collective labour agreement.

The legislature also requires employers to offer on-call workers an employment contract after each 12-month period. This contract should provide for the average working hours spent in on-call employment over the past twelve months.

3. Unemployment insurance contributions

Employers currently pay an industry-related sectoral contribution. From 2020 onwards, the type of contract will determine the amount of unemployment insurance contributions. Contributions for employees with permanent contracts are 5% lower than those for employees with temporary contracts. Employers will also pay the high contributions for on-call contracts for an indefinite period of time, since such on-call workers are more likely to claim unemployment benefits.

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