Bill ‘Balanced Labour Market Act’: possible changes by 2020

Mr D. (Dennis) Spek I 27 November 2018 I Reading time: about 3 minutes

On 7 November 2018, the Minister sent the bill ‘Balanced Labour Market Act’ [‘Wet arbeidsmarkt in balans’ (‘Wab’] to the House of Representatives [Tweede Kamer]. This article describes the most important measures in the bill.  

In recent years, the number of employees with a permanent contract has fallen sharply, while flexible employment has actually increased. The Coalition agreement already showed that the Rutte III administration intended to modernise the labour market by making permanent work less permanent and flexible work less flexible. On 7 November 2018, the Minister of Social Affairs and Employment sent the bill ‘Balanced Labour Market Act’ to the House of Representatives. This bill contains measures aimed at reducing the differences between flex and permanent employment.

According to the Cabinet, the current design of the labour market entails a number of bottlenecks for both employers and employees. Employers are often reluctant to hire permanent employees because of the costs and risks associated with the permanent contract. Flexible employees, on the other hand, have a great deal of uncertainty about their work and income. The Wab bill is therefore aimed at reducing the cost and risk differences between the permanent and flexible forms of contract. On the one hand, the proposed measures aim to limit or increase the cost of the negative effects of specific forms of flexible employment. On the other hand, the proposed measures aim to make permanent contracts more attractive to employers.

The Wab bill contains – among other things – the following measures, which are important for both employers and employees:

Provisions on succession of temporary employment contracts [Ketenregeling] 

  • The provisions on succession of temporary contracts will be extended. Currently, three temporary contracts may be concluded in two years. This two-year period is extended to three years.
  • It will be possible to shorten the interval between a chain of temporary contracts from six months (as is currently the case) to three months. This can only be done by collective agreement and if there is recurring temporary work that can be done for a maximum of nine months per year.
  • There will be an exception to the provisions mentioned above for substitute workers in primary and special education who stand in due to sickness. 

Probationary period 

  • The probationary period will be extended. If an employer immediately enters into a permanent contract with an employee, a probationary period of up to five months can be agreed. If an employer immediately enters into a temporary contract of more than two years with an employee, a probationary period of up to three months can be agreed. Under current law, a probationary period of up to two months can be agreed in both cases. 

Transition payment 

  • Under current law, employees are only entitled to a transition payment (severance pay) after two years of employment. It is proposed that employees will be entitled to a transition payment from the first day of their employment (also during the probationary period).
  • The accrual of the transition payment will be reduced. The accrual of the transition payment will be the same for everyone: all employees receive a third (1/3) monthly salary per year worked. As a result, employees with an employment contract of ten years or longer are no longer entitled to a transition payment of half (1/2) a month’s salary per year worked from the tenth year of service.
  • There will be a compensation scheme for small employers. In the event of a business closure due to the employer’s retirement or sickness, the transition payment that the small employer must pay the employees can be compensated. 

Dismissal: ground for cumulation 

  • An employer can only validly dismiss an employee if there are reasonable grounds for dismissal. Under current dismissal law, there are eight legal grounds for dismissal, of which at least one must be fully complied with by the employer. The bill introduces a new ground for dismissal, namely the ground for cumulation. This ninth ground for dismissal allows the court to combine circumstances. This means that an employer can also dismiss an employee because of a combination of circumstances from two or more grounds for dismissal (with the exception of economic circumstances or long-term incapacity for work).
  • If the ground for cumulation is used for the dismissal, the employee can receive an additional half transition payment (on top of the transition payment). 

Premium differentiation under the Unemployment Insurance Act [Werkloosheidswet (WW)] 

  • The WW-premium will be differentiated according to the nature of the contract, so that employers pay a lower WW-premium for permanent contracts than for flexible contracts. The level of the WW‑premium depends on the sector in which a company is active. 

Payrolling 

  • The law will contain a definition of the payroll agreement. Payroll employees receive at least the same terms and conditions of employment as the employees who are employed by the hirer/client. The payroll employee is also entitled to an adequate pension.

The intended date of entry into force of the vast majority of the amendments to the bill is 1 January 2020.

If you have any questions regarding this article, please contact Mr D. (Dennis) Spek.

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