Wet arbeidsmarkt in balans (WAB): What will change?

As per the 1st of January 2020, the Balanced Labour Market Act (hereafter called WAB) will become effective in The Netherlands. This new legislation is meant as a first step in achieving more balance between employees with an employment contract for an indefinite period of time and employees with a more flexible employment contract. What will change for employers? Parakar tells you about the most important shifts within our field of expertise.

1. The WAB will give payroll a new definition.

What’s the situation now?  

Currently, all employment outsourcing agencies or companies that offer Employer of Record (EOR) services such as Parakar, fall under legal framework as regular (temp-work) employment agencies. 

Part of that is that the EOR service agencies are obliged to work under the same collective agreement (NBBU) as these employment agencies.  

What will change? 

 The WAB will give payroll a new definition. Payroll employees will be entitled to the same primary and secondary employment conditions as the employees who are directly employed in a company. This is the case for salary, holiday pay, and 13th-month salary.  

Pay attention to this: 

This all has consequences for both existing as new contracts. It all changes in 2 phases.

Phase 1 will be effective per the 1st of January 2020:  

• Payroll and EOR will get their own legal framework focused on the equal treatment of outsourced staff compared to the client’s own employees. The Netherlands is unique in this in Europe.  
• The collective agreement for regular employment agencies (NBBU) is no longer applicable to payroll and EOR contracts.  

Phase 2 will be effective per the 1st of January 2021:  

• A new system of pension agreements will become mandatory for the payroll/EOR branche. 
• The exact content is not known yet but the system must offer an ‘adequate’ pension to the payroll employee, at least equal to that of the client.

2. The chain rule for temporary contracts.

What’s the situation now?  

 Currently, the maximum term for successive fixed-term employment agreements is 4 contracts within two years. Temp agencies can offer 6 temporary contracts in 4 years.  

What will change?  

There will be a broader arrangement for successive fixed-term contracts (chain provision). Three subsequent contracts may be offered to the employee in a maximum period of 3 years. This change applies to all businesses that offer temporary contracts so also payroll companies. (Temp agencies will remain able to offer ‘6 in 4 years’). 

Pay attention to this:  

• The WAB lays down that employers will pay a 5% lower unemployment insurance contribution (WW-premie) for an employee with a permanent employment contract, than for an employee on a fixed-term employment contract.
• The probationary period will be extended: 
  – Temporary contracts > 2 years, or undetermined: maximum of 2 months
  – Temporary contracts > 6 months – 2 years: maximum 1 months
  – Temporary contracts < or = 6 months: no probation possible 

3. New structure of the unemployment benefit contribution (WW).

What’s the situation now?  

At this moment the unemployment benefits contributions (WW-premie) are based on sectoral differentiation.  

What will change?  

From January 2020 employers pay for the unemployment benefits contribution according to the nature of the agreement. For permanent contracts, there will be a low contribution. For flexible contracts, there will be a high contribution. This means it will be more attractive to offer employment contracts for an indefinite period of time.

4. Introduction cumulation ground / New combination ground for dismissal.

What’s the situation now?  

 Since 2015 a system of eight reasonable grounds for dismissal is introduced. To terminate an employment agreement, you have to meet one of the grounds in full. In this system, it’s quite difficult to terminate an agreement. These are the eight reasonable grounds:  

A. Economic reasons, including restructuring for organizational reason 
B. Long-term illness or disabilities
C. Frequent sickness absence
D. Dysfunctioning
E. Culpably acts or misconduct
F. Conscientious objection
G. Disturbed working relationship
H. Other grounds (specific to the employer’s business, not one of the above)

What will change?  

 Effective per January 2020 the conditions to terminate a permanent employment agreement are less strict. Under the WAB it’s possible to dismiss someone if there is a sum of circumstances within these eight reasonable grounds of dismissal, the so-called cumulation ground. You don’t have to meet the grounds in full, but it’s possible to make a combination of grounds.   

Pay attention to this:  

The court will – in case of the cumulation ground – be able to award an employee extra compensation up to a maximum of half the statutory transition compensation (that is a payment on top of the existing transition compensation).

5. Transition payment.

What’s the situation now?

Currently, you don’t have to pay statutory compensation on dismissal to an employee who had been employed for less than two years.   

What will change?  

 Under the WAB an employee will be entitled to a transition compensation in the event of dismissal from his first working day, also during his probationary period. The transition allowance, however, will be lower. For every year of employment, you pay 1/3 gross monthly salary, so also for the years after 10 years of employment.   

Pay attention to this:   

• The period for the transition payment is no longer rounded off to half years, but it’s calculated over the actual contract duration. 
• The calculation of the transition compensation is based on a normal gross salary with consideration of the last 12 months’ structural payments (for example bonus, overtime, year-end bonus, however, sick leave payments are not considered). 
• Employers will be compensated for paying transition fees when they dismiss an employee on the grounds of long-term occupational disability (after two years of sickness). 
• The maximum transition compensation is in general €81,000. If the employee has an annual salary of more than €81,000, the maximum transition allowance is an annual salary.  
• Transition compensation is not required when the employee reaches his retirement age (AOW-gerechtigde leeftijd).

How can we help you?

Want to know more about the Wet Arbeidsmarkt in Balans? We are happy to provide you with advice. Don’t hesitate to contact us by filling out the contact form. One of our HR specialists will be in touch with you as soon as possible! Do you need help with payroll in the Netherlands? Learn more about Parakar’s services for companies and employers.