Changes in the Dutch Labour Law per 2020 (WAB)

Below we provide some further information on the Wet Arbeidsmarkt in Balans (WAB) that comes into effect on January 1, 2020.

The WAB has been designed to reduce the disparity between flexible and permanent labor contracts. In sum it aims to make flexible contracts more permanent and fixed contracts more flexible. The WAB will have an impact on many types of employment contracts in the Netherlands. It contains several important legislative changes regarding fixed term contracts, on-call contracts, payrolling, transition allowance, contract dismissal grounds, contribution to the unemployment insurance.

The main aspects and consequences of this new legislation are listed below

Fixed term contracts

In the Netherlands, there is a limitation to renewal of fixed term contracts i.e. after a certain number and certain period the employment is seen as an indefinite employment contract rather than a new fixed term agreement. This rule is referred to as the ‘chain regulation’ (ketenregeling). A 6+ months pause is required to ‘break’ the chain of successive employment contracts, whereby under certain circumstances this pause is reduced to 3 months (e.g. via certain Collective Labor Agreements (CLA).With the new legislation, the first limitation, being the period within which fixed-term employment contracts can be extended without being considered a contract for indefinite term, is increased from 2 to 3 years. The second limitation, being the number of fixed-term contracts within these 3 years, remains at a maximum of 3 contracts. No grandfathering rules apply to the new law, hence, for a contract ending on or after January 1, 2020 the new period of three years (rather than 2 years maximum) and three consecutive contracts apply.

On-call contracts

An on-call contract is currently defined as a labor agreement where the regular number of working hours are not defined in the contract; this can be both a so-called ‘zero-hours contract’ or a ‘min-max contract’. From January 1^st, 2020, an employee that has worked under a so-called ‘on-call contract’ in the previous 12 months will have to be offered a contract with a fixed number of hours, i.e. the average of the hours per month worked in the last 12 months.

With respect to on-call contracts, the legislation will also change to protect employees having to be permanently available for employers and also demands certain assurances from the employee. The new law prescribes an advance notice of 4 days (electronically) for on-call work. In more detail:

• The employer will have to inform the employee of changes at least 4 days in advance (cancelling or changing the starting time or day of labor). If the employer fails to do so the employee will have to be paid according to the earlier agreement (when cancelling) or the employee can refuse the labor (when changing the starting time or day of labor).
• The employee will have to inform the employer of changes at least 4 days in advance.

Under certain circumstances it possible to reduce this 4 days period via a Collective Labor Agreement (CLA).

Payrolling newly defined

At the moment there is no legislative (civil law) difference between a payrolling and a temporary employment agreement.

The WAB introduces a new specific definition for the ‘payrolling agreement’. In a payrolling agreement (i) the payrolling employer does not have an “allocation function” in the labor market and (ii) the worker is made available exclusively to one client. As a consequence the statutory regime that applies to temporary employment agencies will no longer be applicable to employees assigned on the basis of a payrolling agreement. .

As from 1 January 2020, an employee under a qualifying payrolling contract is in essence entitled to the same employment conditions and benefits as the employees of the company where he is staffed or if that company does not have any similar own employees, as ‘comparable’ employees. A grandfather rule applies on temporary payrolling agreements (defined term contracts) in force per 1/1/2020.

Following the new rules employees working the basis of a payrolling agreement will in principle no longer be covered by the collective labor agreements for employment agencies (NBBU and ABU) but instead the collective labor agreement and other employment conditions including pension arrangements of the client where the employee is stationed must be applied.

The client has the obligation to confirm applicable employment benefits and allowances before the assignment starts. 

As said, payroll employees from January 1, 2020 will be entitled to the same employment conditions as employees of the company. This includes eligibility to the same pension scheme. However, the implementation of having a ‘correct’ pension scheme has been delayed until January 1st, 2021, taking into account the complexity of setting up new pension schemes. The NBBU site also specifically states that the StiPP can continue to apply until 2021.

It is important that before the year it is determined per employee whether he/ she is a “payroll employee” or a “temporary worker”. Depending on this qualification either code 82 applies (payroll employee) or code 11 (temporary worker).

Transition allowance

The transition allowance is an allowance that employees are entitled to when they are dismissed after having been in service for a minimum of two years - even under a temporary contract. In the new law the employees will be entitled to this allowance from the first day of their employment. Instead of one-sixth monthly salary per half year, an employee will receive a third of the monthly salary per calendar year. The higher accrual for employment contracts longer than ten years will be abolished

Contract dismissal grounds

In the current law an employee can be dismissed when one official legislative dismissal ground is proven. The new legislation allows the dismissal of an employee using a combination of 2 or more official dismissal grounds (in case none can be ‘fully’ proven). The judge will decide per case whether the situation requires 2 or more dismissal grounds

Contribution to the unemployment insurance, “Werkloosheid Wet” (WW-premium)

Employers will pay a lower unemployment insurance contribution for an employee with a permanent employment contract than for one with a fixed-term employment contract.

Nature of contract visible on payslip

The nature of the employment contract (indefinite, fixed, etc.) will have to be visible on the employee payslip insofar as this isn’t currently. Payroll software will be amended for this.