Watch out, the WAB is coming. Are you prepared?!

In less than two weeks, on 1 January 2020, the Balanced Labour Market Act (In Dutch: Wet Arbeidsmarkt in Balans, ‘WAB’) will enter into force, introducing important legislative changes to Dutch employment law. The WAB is meant as a first step in achieving more balance between employees with an open-ended employment contract and employees with a more flexible employment contract. In this Alert, we will provide an overview of the most important legislative changes.

• The transition payment: from 1 January 2020, employees will be entitled to a transition payment from the first day of employment. Furthermore, the transition payment will no longer increase after ten years of employment. As a result thereof, the transition payment will be an amount equal to one third of a monthly salary for each year of employment.

• The combination dismissal ground: under current law, unilateral dismissal of an employee is in principle only possible if the employer can demonstrate that one of the dismissal grounds referred to in the Dutch Civil Code is entirely applicable. Under the WAB, it becomes possible for employers to combine several dismissal grounds, for example, poor performance can be combined with a disturbed relationship. This could make the dismissal of employees easier. However, in the event an employment contract is terminated on the basis of a cumulated dismissal ground, the judge is entitled to award the employee extra compensation. This extra compensation comes on top of the statutory transition payment and is maximized on half of the statutory transition payment.

• The chain rule: the maximum period for successive fixed term employment contracts will be extended from two years to three years, which means that employers can enter into three fixed term employment with an employee within a three-year period. Under the WAB, the pause of six months which can break the chain of successive fixed term employment contracts will remain. The new chain rule shall apply to employment contracts that will be terminated on or after 1 January 2020.

• Payrolling: under the WAB the rights of employees employed by a payroll company will change. The exceptions for temporary agency workers (In Dutch: uitzendkrachten) will no longer apply to payroll employees. As a result, payrolling companies will no longer be able to apply an agency clause and the chain provision for temporary agency workers will no longer apply to payroll employees. Furthermore, an equal treatment requirement will apply with respect to payroll employees; payroll employees will be entitled to the same employment conditions as employees who are directly employed, including an adequate pension scheme (from 1 January 2021).

• On-call contracts: for employees with employment contracts with a deferred duty of performance, and without fixed working hours (zero-hour contracts and min-max contracts),  new measures will enter into force, among which the following:
  • On-call employees need to be called on by the employer at least four days in advance in writing or electronically. In the event of shorter notice, the employee will not be under the obligation to comply with the call;
  • On-call employees retain their entitlement to salary if a call is (partly) withdrawn within four days before the work commences;
  • Effective 1 January 2020, if an on-call employee has been employed for a period of 12 months or longer, the employer must offer the employee a fixed hour contract within one month, with at least the average working hours over the last 12 months.

• Changes to unemployment insurance contribution: currently, the unemployment insurance contributions are based on sectoral differentiation. Under the WAB employers will pay a lower contribution for employees with an open-ended employment contract (with specified working hours) and a higher contribution for employees with a flexible contract, such as a fixed term employment contract and an on-call contract. The purpose of this new rule is to make it more attractive for employers to offer employees open-ended employment contracts. The premiums are set by the Minister of Social Affairs and Employment annually. For 2020, employers will have to pay 2.94% (the lower unemployment insurance contribution) or 7.94% (the higher unemployment insurance contribution).

If you have any questions or would like to be provided with more information about a specific topic, please do not hesitate to contact us.