Changes Dutch labour Law as of 1 January 2020
Memo pertaining short overview of the changes in Dutch labour law as of 1 January 2020
date: 6 January 2020
Herewith I send you a short overview of the changes in Dutch labour law as a result of the introduction of new legislation as of 1 January 2020.
I will mention hereunder the most important changes which might be of relevance to your company in the Netherlands.
Only five years after the introduction of the Dutch Work and Security Act ( in Dutch: WWZ), which overhauled Dutch Labour law significantly, Dutch employment law is undergoing additional reforms. The legislative proposal for the Labor Market in Balance Act (the “Act”,: Wet arbeidsmarkt in balans, in short WAB) will enter into force on 1 January 2020.
The WAB aims to reduce the gap in legal protection and monetary differences between fixed- and indefinite-term employed employees.
What are the most important changes as of 1 January 2020?
1. Change in chain arrangement ( in Dutch: ketenregeling)
Current chain arrangement under WWZ
The chain arrangement determines how much and/or for how long successive fixed-term employment contracts may be entered into before they change into an employment contract for an indefinite period of time.
Under the WWZ, the chain arrangement has been reduced to the formula: 3x2x6. A maximum of three fixed-term employment contracts may be agreed upon, and the maximum combined term of these fixed-term contracts may not exceed 24 months. Only if there is a period of more than 6 months between 2 employment contracts in which no employment contract exists, a new chain is created. With regard to the chain arrangement, the WWZ has a number of exceptions – such as, but not limited to, apprenticeship contracts in the context of the educational training program and a possible extension for statutory directors of legal entities.
Chain arrangement under WAB as of 1 January 2020
Under the WAB, the chain arrangement is extended to the formula 3x3x6. This means that the maximum number of fixed-term employment contracts will remain 3, but the maximum duration of these contracts will be extended from 2 to 3 years. The period of more than 6 months to start a new chain remains unchanged. Also with regard to this formula there are some exceptions – such as but not limited to statutory directors of legal entities, seasonal work and replacement in education due to illness.
Transitional law ( in Dutch: Overgangsrecht)
The new formula 3x3x6 has no transitional law. This means that it will enter into force immediately on 1 January 2020.
This means that an employment contract ending on or after 1 January 2020 will be subject to the new 3 year WAB chain arrangement. Even if the employment contract was entered into before 1 January 2020.
The WWZ chain arrangement will still apply if the fixed-term contracts in 2019 (i.e. before the WAB enters into force) exceed a total term of 24 months. This therefore applies to all fixed-term contracts, the first of which was entered into no later than 31 December 2018.
Additional Termination Ground
The Dutch Civil Code ( DCC) provides for 8 statutory reasonable grounds for dismissal.
Under WWZ, in order for a court to terminate an employment agreement, 1 of the 8 grounds has to be fulfilled. As a result, the threshold for termination is rather high. The WAB introduces one additional ground for dismissal, also known as the cumulation, or i-ground, which enables employers to combine different grounds for dismissal—for example, unsatisfactory performance (d-ground) and a damaged working relationship (g-ground). This new ground may offer a solution to employers who cannot make their case based on only one of the current statutory reasonable grounds. If the court terminates the employment contract based on the i-ground, it may grant employees additional compensation on top of the transition allowance (statutory severance, in Dutch: transitie vergoeding), up to a maximum of half of the transition allowance.
- Transition Allowance Changes
The WAB also changes the transition allowance in two ways.
First, employees will be entitled to a transition allowance from their first day of employment, including the trial period. Currently, employees are only entitled to the transition allowance after two years of employment. Second, the transition allowance is calculated differently. It is calculated as follows:
1/3 of a monthly gross salary for each full year of service and pro rata for each month or day of service, regardless of the age or years of service of the employee will be paid as transitition allowance.
The differentiation between the first 10 years of employment (one third of monthly salary) and the period afterwards (half of monthly salary) disappears.
- Notification for On-Call Employment Contracts
The WWZ does not regulate the length of time between when an employer calls the employee and when the employee must report to work. Under the WAB, employers must provide on-call employees at least 4 days advance notice, and must pay on-call employees if work is cancelled within those 4 days. The notice may be reduced to 24 hours by way of a collective labor agreement (in Dutch : CAO). Also, after one year employers are obligated to offer the on-call employee guaranteed working hours, which must be based on the average number of hours worked in the past 12 months.
- Adequate Pension Plan for Payrollers
Payroll employees will be entitled to the same primary and secondary employment conditions as the employees of the principal, including an “adequate” pension plan. This will be in force as of 1 January 2021.
If you have any questions, do not hesitate to contact me.