- Important Changes to Dutch Labour Laws
- November 14, 2017
On 10 October, after a record 208 days of negotiations, the prospective coalition partners for a new government in the Netherlands presented their coalition agreement (regeerakkoord). The agreement will be the basis for a new Dutch coalition led by the liberal VVD party, with Mark Rutte as prime-minister.
The centre-right policy programme proposes a number of changes to Dutch labour law. Below we have set out some of the most important changes that will impact businesses. Of course, the true impact of these changes will not be known until after they come into effect.
Under the new agreement:
• termination of employment will become easier and less expensive;
• there is an extended probationary period;
• the regime for working with independent contractors (zzp-ers) will change dramatically, as the agreement introduces three different categories of contractors;
• smaller businesses will benefit from a reduced period of salary payment during illness.
Termination of Employment Made Easier
A number of rules previously introduced in 2015 by the Act on Work and Security (Wet Werk en Zekerheid, WWZ) will change. For one, termination of employment agreements will be made easier:
• Dutch labour courts will be permitted to terminate an employment agreement based on a combination of statutory dismissal grounds. Currently, each ground for dismissal in and of itself, as set out in the Dutch civil code, must justify a termination of employment. In practice, this results in a large number of requests for termination submitted in court being denied. Under the new agreement, this will change so that courts can now combine multiple grounds to terminate an employment agreement as requested by an employer.
• To compensate employees for this, the court will have the option to award an additional severance payment to the employee, up to a maximum of 50 percent of the statutory transition payment.
Transition Payment Revised
With the introduction of the Act on Work and Security in 2015, a statutory severance payment was introduced, referred to as a transition payment (transitievergoeding). Every employee who is employed by an employer for a period longer than two (2) years is entitled to this statutory payment upon termination of employment. Under the new agreement:
• employees will be entitled to the statutory transition payment as of the start of their employment instead of after two years;
• the transition payment will decrease, making it less expensive for employer to terminate their employees. The transition payment will be one third of the employee’s gross monthly salary for each year of service. Currently, when an employee has been employed for more than ten years, the transition payment increases to half a gross monthly salary per year of service. This will no longer apply, making it less expensive to terminate employees;
• training and education deductions for employers will be expanded;
• employers will be financially compensated for the transition payment they will have to pay where employees were terminated after two years of illness.
In 2015, the use of fixed-term contracts was restricted. The new coalition plans to expand the rules again. Under the new agreement:
• consecutive fixed-term contracts can be offered for a maximum of three years before the contract changes to an indefinite period of time. Currently this period is capped at two years;
• fixed-term contracts are part of a chain of consecutive fixed-term contracts where there is a period of less than six (6) months in between. The possibilities to deviate from this and shorten that period for seasonal work are expanded;
• the probationary period will be extended. Where an employer offers an indefinite period contract at the start of the employment, a probationary period of five (5) months is introduced. Currently this is capped at two (2) months;
• for fixed-term contracts longer than two years a probationary period of three (3) months is introduced;
• in all other cases the rules regarding probationary period remain as is.
Payroll and Zero-Hour Contracts Become Less Attractive
In the last few years, the use of payroll companies and zero-hour or on-call contracts, has increased. The new coalition aims to make this form of employment less attractive.
Payroll companies are generally used by companies to act as the formal employer for their workers. By doing this, the risk of continued salary payment during illness and severance payments is on the payroll company instead of the actual employer.
Under the new agreement:
• for payroll, the more flexible legal regime for temporary workers (uitzendkrachten) will no longer apply;
• employees that work through a payroll company should be offered the same primary and secondary terms of employment as regular employees of the company where they work;
• zero-hour contract employees will no longer be required to respond to a call for work within a specified period and where an employee was called for work, but the call was later cancelled, that employee becomes eligible for financial compensation.
Salary Payment During Illness
Under present rules, employers are legally required to continue to pay at least 70 percent of salary during the first two (2) years of illness of an employee. Under the new agreement, small employers with 25 employees or less will have a reduced period of one year; however, the protection against dismissal for a period of two years for sick employees remains.
Working as an independent contractor (zelfstandige zonder personeel, ZZP-er) has been under discussion for some time now. In 2016 the Deregulating Assessment Working Relationship Act (Wet deregulering beoordeling arbeidsrelaties) was introduced. With this Act, parties were required to work on the basis of model contracts published by the Dutch tax authorities to ensure the tax position of an independent contractor.
This Act will be replaced by a new regime that effectively introduces three categories of independent contractors. Under the new agreement:
• a minimum hourly rate of 125 percent of minimum wage or alternatively the lowest pay scale of an applicable collective labour agreement is introduced. It is expected this will be an amount between EUR 15 and EUR 18 per hour. Contractors who are paid less than this amount, who perform work that is considered part of the regular business activities of the company, and who work for a period longer than three (3) months, will be considered employees;
• contractors who are paid EUR 75 or more per hour and work for a period of less than one year or perform work that is not considered part of the regular business activities of the company, can ‘opt out’ for wage taxes and social security premiums;
• a ‘principal statement’ is introduced for contractors who are paid more than the minimum hourly rate (opdrachtgeversverklaring). Companies that use contractors can obtain certainty on an independent contractor’s tax position by filling out a web-based form. The supervision and authority test (gezagsverhouding) used to determine whether an employment relationship exists or not will be further clarified. In principle, a material test will apply instead of a formal approach. For example, a requirement to attend a meeting, will in itself not be sufficient to rule that the contractor works under the supervision and authority of the company;
• a restrictive monitoring regime will apply for one year following introduction of the new rules;
• the new government will explore the possibility of introducing an entrepreneur agreement (ondernemersovereenkomst) in the Dutch civil code as a new contractual basis for parties to work together.