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    The Balanced Labour Market Act (Wet arbeidsmarkt in balans): the most important amendments

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  • The Balanced Labour Market Act (hereinafter the WAB), which was presented for internet consultation on 09 April 2018, contains amendments which should narrow the gap between employees with permanent employment contracts and those deemed flexible labour. Below is a list of the most important proposals.

    1. The introduction of a new ground for dismissal: the combination ground

     The Work and Security Act (Wet werk en zekerheid, hereinafter the WWZ) introduced an exhaustive number of dismissal grounds. As a result the (unilateral) dismissal of an employee is, in principle, only possible if it can be demonstrated that one of the dismissal grounds referred to in the Act is entirely applicable. However, this could be viewed as unreasonable if several dismissal grounds are partially applicable. (for example imputable acts, combined with an unsatisfactory performance and a damaged working relationship). Under the WAB, the court will in such cases be able to terminate the employment contract on the basis of a combination of grounds. On the other hand, the court will in these cases also be able to award an employee extra compensation up to a maximum of half the statutory transition fee (that is a payment on top of the existing transition fee).                                                                                                     

    2. Amendments to the transition fee

    Currently, only an employee who has been employed for at least 24 months and whose employment contract is terminated at the employer's initiative is entitled to the statutory transition fee Under the WAB, employees will be entitled to a transition fee from the start of their employment contracts, also during probationary periods. Moreover, for each year of employment, the transition fee will amount to one third of a monthly salary; and this will apply equally to contracts which exceed ten years. Under current legislation, there is a higher accrual of half a month’s salary per year of service for all employees who have an employment contract of ten or more years. As of 1 January 2020, the temporary measure in respect of the transition fee (lower payments for small employers and extended accrual for older employees) will expire, as laid down in the WWZ (at the same time as the WAB is scheduled to come into force).

    3. Compensation of transition fees for employers in the event of dismissal after two years of sickness

    Employers will be compensated for paying transition fees when they dismiss an employee on the grounds of long-term occupational disability (after two years of sickness).

    4. Compensation of transition fee for small employers whose businesses are discontinued due to retirement or sickness

    If an employment contract is terminated because an employer winds up the business due to his/her retirement or sickness, the employer will be compensated for the transition payments he/she makes. The terms and conditions under which this compensation is possible, and the maximum number of employees for which the employer can make use of this compensation, will be worked out in a governmental decree.

    5. Amendments to the chain arrangement (provisions governing a succession of fixed-term employment contracts)

    The period after which successive temporary employment contracts are converted into a permanent employment contract is to be extended from two years to three years.

    Currently, a chain of successive employment contracts for a fixed-term - which can, by operation of law, result in a permanent employment contract - can be ‘broken’, if there is a pause of six months between the employment contracts. That will remain as it is but, through collective labour agreements, there will be greater flexibility to deviate from this rule and to shorten the pause if the work requires (for example, in the case of recurrent temporary work which can only be undertaken during a period of at the most nine months). The condition that this must involve ‘climatological or natural circumstances' is no longer applicable.

    In primary education, the chain arrangement will no longer apply to temporary contracts given to supply teachers brought in to replace sick employees.

    6. Amendments to the probation period

    If an employee is immediately offered (as his/her first employment contract) a permanent employment contract, the probationary period will be extended from a maximum of two months to a maximum of five months. For multi-year employment contracts (longer than two years), the probationary period will be extended from two to three months. In all other cases, the probationary period will remain unchanged.

    7. Non-competition clause when a permanent employment contract is terminated during the probationary period

    The option of including a non-competition clause in a permanent employment contract remains unchanged. However, the ability to invoke the non-competition clause if either the employer or employee terminates the employment contract during the probationary period is to be limited. The starting point is that the employer may not derive any rights from the non-competition clause in such case, unless there is any question of substantial business interests.

    8. Payrolling

    The WAB includes a definition of a payroll agreement, in which it is laid down that, in respect of payroll employees, the employer does not fulfil an allocation function and payroll employees cannot be deemed to be the same as temporary agency workers. Under the WAB, the construction of payrolling remains possible, but the more relaxed employment-law system of the temporary employment contract will not be applicable in this context. In addition, with the exception of pensions, payroll employees must receive the same (both primary and secondary) terms and conditions of employment as the employees employed by the hirer. In respect of pensions, an adequate pension scheme is to be provided. The terms of this pension scheme will be laid down in a governmental decree, such as the waiting (vesting) period and the rights which can be derived from the pension scheme.

    9. On-call contracts

    On-call employees no longer need to be permanently available for work. An employee with an on-call contract no longer needs to comply with a call if the scope of the work is not (unambiguously) laid down, as is the case in zero hours contracts, and the employee is not called on to work at least four days in advance. This four-day period can be shortened to one day by collective labour agreement. If the employer cancels the assignment within this period, the employee is entitled to be paid for the hours cancelled.

    If the scope of the work is not (unambiguously) laid down (as in a zero hours contract), there is another new obligation. Once an employee’s on-call contract has been valid for a period of 12 months, the employer must, within a month, offer the employee (in writing or electronically) hours of work which are at least equal to the average monthly hours worked in the preceding 12 months.

    10. Unemployment insurance (ww) contribution differentiation according to the nature of the contract rather than the sector

    The WAB lays down that employers will pay a lower unemployment insurance contribution (WW-premie) for an employee with a permanent employment contract than for an employee on a fixed-term employment contract. The nature of the employment contract will be shown on the employee’s payslip. Employers will be able to transfer a lower contribution for employees with permanent employment contracts clearly specifying the number of hours to be worked. A governmental decree will stipulate that, in certain situations, this lower contribution will be revised, for example when the employment contract is terminated within five months of its commencement (the extended probationary period). The current sectoral contribution differentiation for unemployment insurance will consequently expire.

    The WAB is scheduled to come into force on 1 January 2020. Currently, the proposal has been submitted for internet consultation. Prior to the legislative bill being submitted to the Lower House, it will be submitted to the Council of State for advice. We will follow this process closely and keep you informed of any developments.