Drastic changes in sector classification
Minister Koolmees announced drastic sector classification changes applying with retroactive force to 29 June 2018, 17:00h. The new rules prohibit retrospective sector switches, partial classification and group classification for new cases.
11 July 2018
On 29 June 2018, the Council of Ministers approved the bill introducing the Balanced Labour Market Act (Wet arbeidsmarkt in balans). With this Act the government aims to modernise various rules on flexible labour, employment termination law and the Unemployment Insurance Act, in an effort to encourage employers to hire staff under permanent employment contracts. Employment termination law will be amended and contributions under the Unemployment Insurance Act will change. The system of sector classification will be abandoned and contributions under the Unemployment Insurance Act will henceforth depend on the type of contract. Unemployment Insurance Act contributions for permanent contracts will be lower than for flexible contracts. These measures are scheduled to take effect in 2020.
In anticipation of the bill’s passage through Parliament, the Minister announced several measures addressing urgent bottlenecks in implementation of the sector classification. These changes took immediate effect, i.e., on 29 June 2018, 17:00h.
1. Retroactive reclassification requests no longer possible
Until recently, employers that were incorrectly classified into a certain sector could request for retroactive reclassification for a maximum period of five years. However, requests filed on or after 29 June 2018, 17:00h are only honoured with respect to future periods. Yet the Tax Administration can still impose corrections with retroactive force if employers have been favoured due to late notification of changes relevant to their sector classification.
2. Partial classification no longer possible for new cases
If employers perform various types of activities that correspond to different sectors, the main rule is that they are classified into the sector in which they pay the highest income assessable for social insurance. However, in deviation of the main rule, employers could request for partial classification of different types of activities into various sectors. However, requests to that effect filed on or after 29 June 2018, 17.00h will no longer be processed.
3. Group classification and classification of ancillary businesses and institutions no longer possible
Employers could request to be classified into the sector of the employer(s) they constitute an economic or organisational entity with, or into the sector of the branch of profession or trade in respect of which their business can be considered to be an ancillary enterprise or institution through mutual affiliation, rather than into the sector that would correspond with the nature of the activities they perform themselves. However, requests to that effect filed on or after 29 June 2018, 17.00h will no longer be processed.
No consequences for current sector classification
The measures described above do not affect the way employers are currently classified. They do mean, however, that reclassifications with retroactive force are no longer permitted. Requests for future classification will still be processed, except for partial classifications, group classifications and classifications of ancillary business and institutions.
Source: Letter by the Minister of Social Affairs and Employment of 29 June 2018, ref. no. 2018-0000103078