On 1 January 2020 the Balanced Labour Market Act (Wet Arbeidsmarkt in Balans (WAB)) takes effect.
This Act is meant to improve the balance between fixed and flexible employment agreements. Once again, employment law is changed in important parts. Apart from that, the Dutch Supreme Court has ruled on the issue of ‘dormant employment’.
In this blog the following issues will be discussed.
- Transition payments
- Cumulation ground and extra compensation
- Chain provision
- On-call contracts
- Unemployment benefit
- Payslip and employer’s duty to give information
- Compensation for transition payment
- Dormant employment
1. Transition payment
As a starting point, transition payments are due if an employment contract for a definite period of time is not renewed and if dismissal takes place at the employer’s initiative. As from 1 January 2020 the following changes will take effect:
- the right to a transition payment immediately arises when employment starts – so, not where employment has lasted for two years or more;
- the accrual of the transition payment is reduced. For each year of employment a transition payment amounting to one third of a monthly salary is due;
- the transition payment is no longer raised after the tenth year of employment;
- the transition payment is calculated on the basis of the actual duration of employment – so, employment is no longer rounded to fully worked periods of six months of employment;
- the transition payments for older employees and the transitional arrangements for transition payments by small employers no longer apply.
The old transition payment still applies if a request to have the employment contract set aside is made before 1 January 2020, if notice of termination of the employment contract is filed before 1 January 2020, if the employee agrees, before 1 January 2020 and in writing, to the termination or if the procedure at the UWV is started before that date.
2. Cumulation ground and extra compensation
Since the implementation of the Work and Security Act (Wet werk en zekerheid (WWZ)), there has been a closed system of reasonable grounds for dismissal. The ground for dismissal selected by the employer must be ‘well-considered’ in all respects.
The WAB introduces a new ground for dismissal, the ‘i-ground’, a accumulative ground. This means a combination of circumstances resulting in two or more grounds for dismissal may be applied (except economic circumstances/cancellation of job and long-term incapacity for work) on the basis of which the employer cannot be required – within reason – to continue employment.
If the employment contract is set aside on the basis of the cumulation ground, the judge may award extra compensation. This compensation amounts to a maximum of half the transition payment and depends on the circumstances of the case. Apart from that, the employee can claim fair compensation if the employer has acted in a seriously culpable way.
3. Chain provision
A chain provision determines when an employment contract for a definite period of time is converted into an employment contract for an indefinite period of time.
The implementation of the WAB has resulted in a renewed term: the 24 months have become 36 months. From the day employment contracts for a definite period of time have succeeded each other with intervals of a maximum of six months and the period of 36 months has been exceeded, these employment contracts are converted into an employment contract for an indefinite period of time.
In certain circumstances, the chain provision may be departed from: an exception is made for primary education and special education.
4. On-call contract
An on-call contract is an employment contract under which:
- the scope of the work to be performed has not been specified for a specific number of hours per time unit of at most one month or at most one year, whereby the right to wages has been equally spread over that time unit; or
- the employee is not entitled to the wages that are set per time unit if he has not performed the activities agreed on.
Zero-hour contracts and ‘min-max’ contracts are examples of on-call contracts. Contracts, not being on-call contracts, for on-call services are not considered to be on-call contracts if the employee receives compensation in money or time for the hours he must be available.
The on-call worker must be requested to come to work, in writing or electronically, at least four days prior to the work to be done, otherwise he does not have to respond to the request. If the request is withdrawn within those four days or if the working hours are changed, the on-call worked is entitled to wages over the period he was requested to work.
Once the on-call worker has been employed for twelve months, the employer must make an offer, within a month and either in writing or electronically, for a fixed number of working hours. The offer must be at least equal to the average number of hours of employment in the previous period of twelve months. The term for acceptance is at least one month.
During the period the employer has failed to meet this obligation, the employee is entitled to wages for the average number of hours of employment; this also applies if the employee has not worked during this period because he was not called up. If the employment contract has lasted for more than twelve months on 1 January 2020, the first offer for a fixed number of hours must be made within a month, that is, before 1 February 2020.
For on-call contracts, the notice period for the employee is different.
Payrolling is still possible, as a means to support employers. Payrolling may not result in less favourable employment conditions nor in competition with regard to employment conditions.
Payrolling is defined both in the Dutch Civil Code and the Placement of Personnel by Intermediaries Act (Wet allocatie arbeidskrachten door intermediairs (Waadi)).
The Dutch Civil Code defines payrolling as a temporary agency contract whereby:
- the contract for services between the employer (payroller) and the third party has not come into existence in the context of bringing together offer and demand on the labour market – so, there is no allocation function – and
- the employer is only authorized to make the employee available to another party with the permission of the third party (exclusivity).
The Waadi has a broader definition. The provisions concerning the ‘no allocation function’ and the exclusivity also apply; however, an employment contract is not always required and making the worker available does not have to take place in the context of the employer performing his profession or business.
Dutch Civil Code
The special provisions that apply for a temporary agency contract – the so-called lighter employment law regime – no longer apply for payrolling as from 1 January 2020. This means that, for example, the temporary agency clause, the exclusion of the obligation to continue to pay wages and the extended chain provision will no longer apply.
In het context of the Waadi the following changes are of interest:
the worker made available – including the payroll employee – is entitled to at least the same employments conditions that apply for the hirer’s employees that work in an equal or equivalent position. The conditions concerned are individual and collective employment conditions, as well as pay and benefits, such as wages, working times, holidays, leave arrangements, continued pay during illness;
the hirer must ensure that the workers made available have equal access to his enterprise’s facilities or services, for example canteens and childcare facilities. In case of payrolling, this applies equally;
if the hirer has a fund which the party that makes the workers available cannot join, then the relevant monetary contribution must be reserved and paid to the worker on at least an annual basis;
as from 1 January 2021, the worker who is made available in the context of payrolling must also have an adequate pension scheme;
the hirer must ensure that the worker made available is informed, in time and clearly, of the vacancies that arise in his enterprise;
the hirer has the obligation to notify the enterprise that makes the worker available about the employment conditions that are applicable for his own employees. This notification must take place before the worker is made available.
The definition of payrolling also applies for making the worker available to a third party. In that situation the employee works under the direction and supervision of the eventual hirer.
6. Unemployment benefit (WW)
To make permanent contracts more attractive for employers, a premium differentiation based on the nature of the contract is introduced as from 1 January 2020. The sectoral funds will be abolished. Only two WW premiums will apply as from this date. The low premium for employees with a permanent contract , the high premium for employees with a flexible contract. The low premium applies for employees with an employment contract for an indefinite period of time which is not an on-call contract.
The total amount of premiums to be collected will be set, on an annual basis, by the Minister of Social Affairs and Employment and will be divided over the wage bill for permanent and temporary contracts. A premium difference amounting to 5% applies. The premium percentages for 2020 have been provisionally set at 2.94% as the low rate and at 7.94% as the high rate.
To prevent circumvention of the high premium, the low premium may be reviewed, in various situations, with retroactive effect.
7. Payslip and employer’s duty to give information
The payslip must refer to the employment term agreed on; it must also state whether the employment contract is a contract for an indefinite period of time which has been entered into in writing and whether it is an on-call contract.
The employer’s duty to give information is extended. The employer is obliged to provide the employee with a written or electronic statement with respect to the applicable employment conditions pursuant to the Waadi (see below), whether the contract is a payroll contract, whether the contract is entered into for an indefinite period of time and whether it is an on-call contract.
8. Compensation for transition payment
There will be two compensation schemes: one scheme for an employee’s long-term incapacity for work and a second one for termination of the business as a result of the employer’s illness, retirement or demise. The compensation scheme for long-term incapacity for work will be implemented on 1 April 2020 and has retroactive effect until 1 July 2015. The implementation date for the scheme applicable for termination of the business has yet to be determined. This scheme will not have retroactive effect.
9. Dormant employment
On 8 November 2019 the Dutch Supreme Court ruled on dormant employment – the continuation of an employment contract with an employee who has been incapacitated for work for a long period of time and where the 104-week statutory delay has lapsed.
The Supreme Court found that the legislator intended to end this phenomenon by enacting the Compensation for Transition Payment Regulations (Regeling compensatie transitievergoeding) referred to above. A standard for being a good employee, as these Regulations stipulate, is that dormant employment must be terminated, in principle, if the employee should want this and the employer has no reasonable interest in continuing the employment. The realistic possibility of reintegration could be such a reasonable interest.
The starting point for terminating dormant employment is that the employer pays the statutory transition payment to the employee. Considering the method to calculate the transition payment as from 1 January 2020, the best approach seems to be to enter into a settlement agreement with the ‘dormant’ employees before 1 January 2020 and to terminate their employment contracts. To obtain the compensation, the request for old cases must be filed at the UWV at the latest within six months following 1 April 2020.
The information in this blog has been compiled with the greatest possible care, however, no rights can be derived from its content, nor can liability be accepted for any incompleteness or inaccuracies.