WAB: Dutch Law on Labour Market Balance

by | Oct 8, 2019 | International tax

WAB

Headlines WAB

Wet Arbeidsmarkt in Balans; Law on Labour Market Balance

As of 01-01-2020, both labour law and social security law will be amended. The objective is to bring about a better balance in the labour market, taking into account the interests of both employers and employees. Reason for naming the amendment Law on Labour Market Balance (hereinafter: WAB).

Because the WAB is regulated by law, the WAB can interfere with regulations in Collective Labour Agreements. It is therefore important to examine whether the changes to the WAB no longer make an existing Collective Labour Agreement arrangement possible or whether the arrangement in the WAB may result in a more workable arrangement than a Collective Labour Agreement arrangement. Where relevant, a remark has been made about the effect on collective agreements.

The WAB has the following changes.

Dismissal and transition allowance

  1. Grounds for dismissal:
    The grounds for dismissal in employment law are exhaustive. If the employer chooses a certain ground for dismissal, he will have to prove that that specific ground has been met. The WAB adds a new ground for dismissal, the so-called cumulation ground. As a result, dismissal will also be possible in the event of a combination of several circumstances that individually do not provide a fully-fledged ground for dismissal. The accumulation of reasons will then be such that the employer cannot reasonably be expected to allow the employment contract to continue. Please note: In the event of dissolution on this ground for cumulation, the court may increase the transition allowance applicable to the employee by a maximum of 50 percent.
  2. Transition allowance:
    Upon termination of an employee’s employment contract by means of a dismissal permit issued by the UWV or by means of a dissolution by the court, the employee is entitled to a transition allowance provided that the employment contract has lasted for at least 2 years.
    a. The waiting period of two years will disappear: employees will as of 01-01-2020 be entitled to a transition allowance from the first day of work.
    b. This is therefore regardless of the way in which the employment contract is terminated by the employer, including for example in the event of dismissal during the probationary period or not prolonging a temporary contract.
    c. The current calculation system for full six-month periods will therefore also disappear. See pint 3 hereafter.
    d. Note: if the employee ends the labour agreement himself and this is not due to culpable conduct on the part of the employer, no transition allowance is due. For example when the employee ends the agreement for he has found another job elsewhere.
  3. Calculation transition allowance:
    The calculation of the transition allowance will be as follows:
    a. For all years of service, regardless of the age of the employee, the transition allowance is 1/3 of the monthly salary, pro rata in the event of incomplete years of service.
    b. The monthly salary is the gross monthly salary supplemented with: any other salary, the holiday allowance, shift bonuses, overtime allowances, bonuses, profit distributions, variable end-of-year bonuses. What counts is the average of the fixed wage components over the previous 12 months and the average of the variable wage components over the previous 36 months.
    c. The increased allowance for people over 50 with ten or more years of service will disappear as from 01-01-2020. This was already laid down in the Work and Security Act.
    d. Note: In the case of dismissal applications at the UWV or court that were submitted before 1 January 2020, the current scheme will continue to apply, even if the employment contract ends in 2020.
  4. Compensation transition allowance small employers:
    For small employers (less than 25 employees), the transition allowance may be compensated by the UWV. This only happens in the event of termination of the company’s activities due to retirement or illness. This will be further elaborated in additional regulations and has no retroactive effect.
  5. Compensation at long-term disablement:
    Note: this is not regulated in the WAB, but it is relevant. As of 01-04-2020, a separate law will come into force on the transition allowance compensation for dismissal due to long-term illness. From that date, the employer can be reimbursed by the UWV for the transition allowance provided in this type of situation. This will have a retroactive effect on dismissals as from 01-07-2015. The application form for compensation is available from 01-04-2020 on the employers’ portal of the UWV.
  6. Effect change transition allowance:
    All employees are entitled to the transition allowance as soon as their employment ends.
    a. This includes temporary workers, agency workers, employees who are dismissed during the probationary period, etc
    b. Employers who make use of agency workers will therefore have to take into account the fact that the rates for agency workers may increase considerably from 01-01-2020 onwards.
    c. Older employees must take into account that after 01-01-2020 the transition allowance will be lower (1/3 instead of 1/2 month).

Chain arrangement

In the field of employment law, it is possible to conclude a number of temporary employment contracts during a certain period of time, without creating a permanent employment contract. This is called the chain arrangement. At the moment, the chain arrangement is a maximum of three temporary contracts and a maximum of two years. If the number of temporary contracts exceeds the three contacts or the two years, the employment contract is considered to be for an indefinite period. The WAB is going to change this:

  1. Duration:
    The maximum duration of the chain arrangement will be extended from two years to three years. A maximum of three contracts can then be entered into in a maximum of three years without creating a contract for an indefinite period of time. Note: This is different if the current term of two years is stated in the employment conditions scheme or a Collective Labour Agreement, then that shorter term will prevail!
  2. Breaking the chain:
    The maximum interval at which the chain is not broken remains at six months. The interim period can be shortened to three months by a Collective Labour Agreement. In that case, however, there must be recurrent temporary work that can be done for a maximum of nine months per year (this is already possible in the case of seasonal work).
  3. Temporary workers primary education:
    There will be an exception to the chain arrangement for temporary workers in primary education who substitute a sick teacher.
  4. Transitional rights:
    There is no transitional law; the law will therefore enter into force immediately on 01-01-2020. This means that if the third contract or the three-year contract only expires after 01-01-2020, there will still be a temporary employment contract!

Payrolling

  1. Equal terms and conditions of employment:
    As from 01-01-2020, employees who work on a payroll basis will be entitled to the same terms and conditions of employment as the employees who are employed by the client. The only exception now concerns the pension, which is subject to a separate scheme. The client must provide the payroll employer with the necessary information regarding the employment conditions.
  2. Agency work employment regulations no longer apply:
    The more flexible employment law regime of the agency work employment contract is declared completely inapplicable to the payroll contract. This therefore also applies to the more flexible dismissal law. In addition, it is no longer possible to exclude pay for no work.
  3. Effect on payrolling:
    The amendments to the WAB ensure that the payroll employee is given the same rights as the permanent staff. The payroll employee will also be entitled to the same pension as the permanent staff in due course (when exactly is not yet known). This makes the payroll employee more expensive than the permanent staff. It will then only be interesting to use payrolling in order to have administrative burdens carried out externally.

On-call contracts

  1. On-call term:
    On-call are given the right to refuse a call if they are not notified at least four days in advance. Similarly, on-call employees are entitled to remuneration if work is cancelled or the time is changed within four days before the work is due to commence. The period of four days can be shortened to 24 hours by a Collective Labour Agreement. Note: what does not change is that once an employee has been called up, he is entitled to a minimum of 3 paid hours.
  2. Claim wages:
    If the employment contract is continued after twelve months (this is not compulsory!), the employer must make an offer to the on-call employee for the average number of hours in the previous twelve months. If he does not do so, the employee can still claim wages for that average number of hours. The employee does not have to accept the offer, however; in that case he will simply continue to work as previously agreed.
  3. Practical effect:
    The question is what happens if the employee either claims salary or does not respond to a call. In practice, the employee will no longer be called / summoned. The question is therefore whether this arrangement is effectively applicable in practice.

Premium payment Act on unemployment benefits (WW)

  1. Lower WW premium permanent contracts:
    Permanent contracts are encouraged, by levying a lower WW premium for permanent contracts. The main rule is that the low premium applies to employees with a written employment contract for an indefinite period, provided that there is no on-call contract. The Awf (General Unemployment Fund) contribution rate for this is 2.78%.
  2. Higher WW premium temporary contracts:
    A higher premium is charged for all other contracts than the indefinite contracts (in short: the temporary contracts). The Awf contribution percentage for these contracts is 7.78%. Note: 5% higher! The effect of this is that all temporary and agency staff will become more expensive.
  3. Disappearing of sector premiums:
    Apart from the Awf premium at present employers also pay a sector premium. The height of this premium depends on the sector the employer is active in. The more unemployed people in that sector, the higher the premium. The sectors and the sector premium will disappear as of 01-01-2020.
  4. Lower premium youths:
    Contracts for youths under 21 that work at maximum 52 hours per month (therefore an average of 12 hours per week) and mixed study-work contracts also may use the lower premium percentage of 2,78%.

Self Employed Persons (SEP’s)

  1. Not in the WAB.
    SEP’s are not dealt with in the WAB. It is to be expected that a separate law will come into effect as of 01-01-2021. Until that date, the tax authority will not enforce law, except in the case of malicious intent or as of 01-01-2020 in the event of failure to comply with the instructions of the tax authority.
  2. Rate.
    The minimum rate for which one can hire a SEP is determined at € 16 per hour. The responsibility for checking and payment thereof is at the client.
  3. Safeguarding of payroll taxes.
    The client can obtain an indemnification from the tax authorities via the self-employed person’s declaration.

Probation period

  1. Duration.
    For a moment there was talk of the probationary period becoming a probationary period XL, i.e. a maximum of 5 months. However, this proposal did not make it to law. The maximum probationary period therefore remains 2 months.

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