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    Balanced Labour Market Act submitted to the Dutch House of Representatives

    The so-called Balanced Labour Market Act (Wet Arbeidsmarkt in Balans or "WAB") was submitted to the Dutch House of Representatives on 6 November 2018. The Dutch State Secretary has referred to the WAB as 'a thorough refurbishment of the labour market'. The WAB includes changes to some parts of the Work and Security Act (Wet Werk en Zekerheid or "WWZ") which was enacted in 2015 and included some major changes to Dutch employment law. We shall discuss the most important WAB measures below.

    1. Introducing a new ground for dismissal: the combination ground

    The WWZ introduced an exhaustive number of dismissal grounds in 2015. As a result, the dismissal of an employee is, in principle, only possible if it can be demonstrated that one of the dismissal grounds referred to in the WWZ is fully substantiated. According to the government, this is unreasonable in situations where a number of grounds are only partially substantiated, for instance, in cases of a combination of the following grounds: an imputable act of the employee, unsatisfactory performance and/or a damaged working relationship. After the implementation of the WAB, the court will in such cases be able to terminate the employment contract on the basis of a combination of several dismissal grounds under the newly created 'combination ground'. The court will in these cases be able to award an employee extra compensation of a maximum of half the statutory transition fee, on top of the existing transition fee.

    2. Amendments to the transition fee: entitled from day one and lower accrual

    Under the current rules, employees are only entitled to a transition fee after two years of employment. Under the WAB employees will be entitled to a transition fee from the start of their employment contract, also in case the contract ends during the probationary period. Currently, employees still accrue half a month's salary per year of service after ten years of employment. Under the WAB, for each year of employment, the transition fee will amount to one third of a monthly salary, also for contract periods exceeding ten years. As of 1 January 2020, the temporary measure concerning the transition fee (lower payments for small employers and extended accrual older employees), will expire, as laid down in the WWZ, at the same time as the WAB is scheduled to come into force.

    3. Amendment of provisions on succession of fixed-term employment contracts (chain rules)

    The two-year period after which successive temporary employment contracts convert into a permanent employment contract, will be extended to three years under the WAB. Currently, a chain of successive employment contracts for a fixed-term – which can by operation of law, convert into a permanent employment contract – can be 'broken', if there is a pause of six months between the employment contracts. That will still remain as it is, but there will be more flexibility to deviate from this rule through collective labour agreements, and to shorten this pause to three months instead of six months for jobs which cannot be carried out consecutively by the same employee for up to nine months a year. Fixed-term contracts for substitute teachers in primary and special education, concluded in order to substitute for pregnancy and illness, are entirely excluded from the chain rules.

    4. Amendment of the maximum probationary periods

    If an employer offers a permanent employment contract as a first contract, the maximum probationary period will be extended from two months to five months. The probationary period for long-term contracts (at least two years) will be extended from two to three months. In all other cases, the probationary period will remain unchanged. 

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

    It will still be possible to include a non-competition clause in a permanent employment contract. 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 employee cannot be held to the non-competition clause in such case, unless substantial business interests or substantial interests of the service are at stake. If the employer invokes the non-competition clause when the employment contract is terminated within the probationary period, the employee has to be notified in writing that he or she will be held to the non-competition clause and which substantial business interests exist on the part of the employer. This letter has to be sent simultaneously with the termination of the employment contract if the contract has been terminated by the employer, or without delay if the contract has been terminated by the employee.

    6. Compensation of transition fee for employers in the event of dismissal after two years sickness

    The House of Representatives has recently approved legislation (expected to come into force on 1 April 2020), following which employers will receive compensation for paying the transition fee in case they dismiss an employee after two years of sickness. Under the WAB the transition fee is due from the first day of employment. It has therefore been emphasised that the transition fee will only be compensated if the employment contract has been terminated after the employee has been sick for two years.

    7. Compensation of transition fee for small employers in case of business discontinuation due to retirement or sickness

    The employer may receive compensation for paying the transition fee if the termination of the employment contract is the result of discontinuation of the employer's business, due to retirement or sickness of the sole owner of the company of the employer. The terms and conditions under which this compensation can be paid out, and the maximum number of employees for which the employer can make use of this compensation, will be worked out in a governmental decree.

    8. Payrolling

    Under the WAB, a definition of payroll agreement will be included in the law, stating that if the employer does not fulfil an 'allocation function' (which implies that an agency brings together supply and demand of labour), the relationship will be regarded as payrolling instead of agency work (uitzend). Payrolling as such will remain possible, but the lighter employment regime, including more flexible dismissal rules, will no longer be applicable to payrolling relationships.  Furthermore, payroll employees will have to be treated equally to the employees employed by the hirer, when it comes to (both primary and secondary) terms and conditions of employment, with exception of pensions. With regard to pensions, an adequate pension scheme is to be provided. In any case there is an adequate pension scheme, if the same basic pension scheme applies as to employees employed by the hirer. Rules and conditions concerning the pension scheme will be laid down in a governmental decree. The WAB further states that payroll employees should be offered equal access to company facilities or services, including canteens, child care and transport facilities.

    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, unless notice thereof was given at least four days in advance. This four-day period can be shortened to 24 hours by collective labour agreement. If the employer withdraws the assignment wholly or in part within this period, or changes the hours of the assignment, within this period, the employer will still have to pay for all the hours the employee was called for, including the withdrawn hours. Any assignment, including a withdrawal thereof or changes to the assignment, has to be done on paper, or electronically. Assignments withdrawn or changed otherwise, will be considered as unchanged or not withdrawn.

    Furthermore, once an employee's on-call contract has been valid for a period of 12 months, the employer must, within one month, offer the employee (on paper or electronically) hours of work which are at least equal to the average hours worked in the preceding 12 months. 

    Employment contracts in which the scope of the work is not laid down (zero-hours contracts) and employment contracts under which minimum and maximum working hours have been agreed ('min-max' contracts) are all regarded as on-call contracts. Rules will be laid down in a governmental decree  with respect to whether or not a contract is an on-call contract. In the event that stand-by services are imposed on the employee and a fixed number of working hours is agreed, the employment contract will not qualify as an on-call contract.

    10. Changes to unemployment social security contributions

    The WAB lays down that employers will pay a lower unemployment social security contribution (WW-premie) for an employee with a permanent contract (not being an on-call contract) than for an employee on a fixed-term employment contract. Further, the nature of the employment contract (permanent or fixed term) should in the future be shown on the employee's payslip.

    A lower percentage of unemployment social security contribution always applies for employees who receive certain practical occupational training (the so-called BBL-employees). A governmental decree will stipulate that, in certain situations, a lower contribution will be revised under certain circumstances, for example when the employment contract is terminated within five months of its start (in case of the extended probationary period – see above). The current sectoral contribution differentiation for unemployment insurance will consequently expire. 

    We have discussed the main measures of the Balanced Labour Market Act above. The WAB will be debated in the House of Representatives and possibly amended. We will follow this process closely and keep you informed of any developments.