Key points Dutch Balanced Labor Market Act

In April, online consultation started on the proposed Balanced Labor Market Act (Wet arbeidsmarkt in balans (“WAB”)). The purpose of the WAB is to improve the balance between permanent and flexible employment contracts. It is the government’s aim for the WAB to enter into force on January 1, 2020.

Below we set out the most important changes of the WAB.

Successive fixed-term contracts regulations

The successive fixed-term contracts regulations (ketenregeling) provide when successive fixed-term employment contracts change into an open-ended employment contract. This is currently the case if there are more than three successive employment contracts or (in the event of a smaller number) if the total duration of the successive employment contracts exceeds a two-year period. The WAB will amend the successive fixed-term contracts regulations as follows:

  • The maximum duration of the chain of contracts will be extended from two years to three years, as was also the case before the introduction of the Work and Security Act (Wet werk en zekerheid).
  • The minimum interval between two chains, after which a new three-year chain can start, may be reduced under a collective agreement from six months to three months if the work requires this.
  • Temporary supply workers in primary education who replace a teacher due to illness will be exempt from the successive fixed-term contract regulations.

New ground for dismissal

The WAB introduces a new reasonable ground for dismissal, known as the ‘i-ground’. In order for this ground to apply, there must be a combination of circumstances pertaining to two or more other grounds for dismissal which is such that the employer cannot reasonably be expected to continue the employment contract.

On-call workers

The WAB provides that if the amount of work on offer is not certain, the employer must call up the employee at least four days in advance. If this does not happen, the employee will not be required to respond to the call. If the employer withdraws the call within four days before the start of the activities, the employee will be entitled to payment of salary over the period for which he was called up. A period shorter than four days may be agreed under a collective agreement.

Payroll

In order to prevent payrolling from being used as an instrument to compete on employment conditions, the WAB obliges companies engaged in payrolling to offer employees they have made available the same employment conditions as those applicable to the client’s employees, with the exception of pension conditions.

Probationary period

Under the WAB, it is possible to agree a five-month probationary period when concluding an open-ended employment contract. A three-month probationary period may be agreed with regard to a fixed-term employment contract for two years or more.

Transition payment

The entitlement to a transition payment will arise immediately upon commencement of the employment contract, rather than when the employment contract has been in force for 24 months. The increase in the transition payment for the period by which the employment contract exceeds ten years will be abolished. The combination of these measures will reduce the cost difference upon the termination of open-ended employment contracts and fixed-term employment contracts. The WAB provides for a right to compensation in the event that a small-scale employer dismisses employees because he is terminating his business operations due to retirement or illness.

Different unemployment insurance contributions depending on the nature of the employment contract

Furthermore, the WAB provides that employers will pay lower unemployment insurance contributions for employees with open-ended employment contracts than for employees with fixed-term employment contracts. Finally, the nature of the employment contract (fixed-term or open-ended) must be stated on the pay slip.

Conclusion

In short, the WAB will entail significant changes for the relationship between permanent and flexible employment contracts. We will keep you informed of the developments.

Coco de Munk & Eric van Dam