Labor Market Balance Act (WAB – Wet arbeidsmarkt in balans) and amendments thereto

The purpose of this law is to make hiring permanent staff more beneficial for employers. It is no secret that many companies are trying to find any reason not to give the employee the permanent contract so desired for the latter. The fact is that it is rather difficult to fire such an employee and employers do their best to avoid risks. All this has led to a certain imbalance in the labor market, which the Dutch government plans to eliminate with the help of WAB. Some changes will be made to the law on dismissal, the payroll system, unemployment insurance premiums and some other provisions governing the relationship between the employee and the employer.

Less than three years after the passage of the Work and Safety Law (WWZ), the Cabinet of Ministers drew up a plan for another law to improve labor market regulation. Or, more precisely, to correct the shortcomings that were in the WWZ, since the studies have shown that it does not work properly.

WWZ's goal was to bridge the gap between employees working under permanent contracts and all those working under other types of contracts. It seems that this has failed: the gap has only widened. That is why the government came up with a new law - the Labor Market Balance Act (WAB).

So what is the labor market balance law?

As the name of the law suggests, the government believes that the labor market is not balanced. Studies show that employers, when choosing the type of contract for employees, are guided not by the professionalism of the candidate and the nature of his work, but by the ratio of their own costs and risks. First of all, this affected employees applying for a permanent contract, but those who work part-time, as a private entrepreneur or through uitzendbureau, also felt it. This means that more and more workers, especially young people, have to settle for temporary contracts.

To improve the current situation, the government has proposed a number of measures, which, in fact, are set out in the WAB. The new rules should create such conditions under which it will be more profitable for the employer to hire employees on a permanent contract.

The government wants to achieve this by making the permanent contract itself (contract voor onbepaalde tijd) easier for employers. On the other hand, working on other types of contracts will become less flexible and therefore less attractive.

What does the Labor Market Balance Act contain?

The WAB contains a number of measures that can be divided into several components: the law on dismissal, the provision on employment under temporary contracts and unemployment benefits.

Briefly about these changes:

1. Dismissal Act

A number of measures are provided here that will allow an employer to more easily part with employees who have a permanent contract.

• Introduction of a new ground for dismissal

The conditions for the layoff of permanent employees will become less stringent. Now, in order to dismiss an employee from a permanent contract, one of the eight grounds for dismissal must be fully met. Under the new labor market balance law, dismissal will also become possible in the presence of a combination of circumstances related to different grounds, the so-called cumulative basis.

To make it clearer what we are talking about, consider an example. Let's say the employer decides to fire his employee for the fact that he fulfills his duties in bad faith, however, he cannot provide a sufficient amount of supporting materials. At the same time, the manager's relationship with the employee is also seriously damaged. Considered separately these two grounds for dismissal, they may not be enough, but if considered together, it may become a reason for termination of the contract.

• New method of calculating severance pay (benefits that are paid upon termination of employment)

Now, upon dismissal of an employee, the employer is not obliged to pay him an allowance if he has worked for less than two years. This will be changed in the new law. Under the WAB, an employee is entitled to severance pay if he is dismissed from the first day of work, even if he was fired during the probationary period.

On the other hand, this severance pay will decrease. For each year worked, an employee will be able to receive 1/3 of the monthly gross salary (also for years after ten years of work in the organization). Whereas according to the rules that are in force now, after ten years of work, the employer must pay another 1/2 of the monthly gross salary for each year worked.

In addition, the period for which the employer has to pay the severance pay will no longer be rounded to half a year, but will be calculated based on the actual duration of the contract.

2. Working on other types of contracts will become less attractive

The government wants to make work on other types of contracts less flexible and therefore less attractive. To this end, the following measures have been included in the WAB:

• Increase in the term in which a fixed-term contract can be offered

The employer now has the right to offer the employee three consecutive fixed-term contracts for a maximum of two years. From the next (2020) year, this period will be increased to three years.

The mandatory break between two consecutive fixed-term contracts remains six months. However, an industry-specific mandatory collective bargaining agreement may stipulate that this period will be reduced to three months. This is only possible if we are talking about seasonal work, which can be performed no more than nine months a year.

• New rules for workers with minimum employment

The new law provides that the employer will have to notify the employee who works on call (that is, has a zero contract or a contract with minimum employment) at least 4 days before the time he needs to go to work, as well as pay wages. if the job was canceled in less than 4 days.

Also, after a 12-month period of work on call, the employer is obliged to offer such an employee a contract for the average number of hours worked by an employee this year. For example, if an on-call employee was hired for 20 hours a week, but worked an average of 28 hours a year, then they should be offered a 28-hour contract. If the employer does not, the employee is still entitled to pay based on this number of hours.

• The new position of employees working through payroll organizations

So far, lighter rules apply to employees working through payroll organizations, the same as for employees working through uitzendbureau. Within the framework of the WAB, such employees will receive almost the same status as ordinary employees of the company. This means that such employees will be more expensive for employers because of the services of the payroll organization and the employment office, which will make this form of contract less interesting.

Equality between employees working through payroll organizations and companies' own employees will affect both primary and secondary working conditions (and this is not only salary and vacation pay, but also bonuses, thirteenth salaries, holidays, and so on). Only the rules regarding the retirement of such an employee will remain the same.

3. New classification of unemployment insurance premiums

For each employee with whom a permanent contract is concluded, the employer will receive a bonus from the government in the future. This means that employers will pay lower unemployment insurance premiums for permanent employees than for employees with temporary or flexible contracts. Moreover, this contribution continues to depend on the sector to which the company belongs.

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