Employment Law

In this guidance guide, we provide you with an update on changes to employment law, as well as an overview of the changes the government intends to implement as of 1 January 2020.

Examples of this include:

• redundancy rules;
• strengthening rights under fixed-term employment contracts;
• strengthening the rights of on-call workers;
• chain provision;
• The duration of unemployment benefit was reduced with effect from 1 January 2016.

Redundancy procedure

There is one standard procedure for dismissal: dismissal on commercial grounds and dismissal due to long-term incapacity for work are handled by the UWV; dismissal for other, more personal reasons is dealt with by the subdistrict court.

The proceedings before the UWV and the subdistrict court take time. This duration of the proceedings may be deducted in full from the notice period. However, at least one month’s notice must remain. The employer must state the reason for the termination in the notice of termination.

It remains possible for an employer and an employee to enter into a written termination agreement by mutual consent. The employee then has a 14-day cooling-off period. The employer must explicitly inform the employee of this – in writing. If the employer fails to do so, the cooling-off period is extended to 3 weeks.

The transition payment

All employees are entitled to a transition payment, provided that:

• they have been employed for at least 24 months;
• the employment contract was terminated at the employer’s initiative.

Please note! This means that employees on fixed-term contracts are also entitled to a transition payment. If you terminate a fixed-term contract of at least 24 months, you must pay a transition payment.
The government intends to ensure that the transition payment accrues from day one. The two-year threshold will therefore be abolished.

Termination of the employment contract at the employer’s initiative occurs in the following circumstances:

• termination by the employer following authorisation from the UWV;
• termination of the employment contract by a court;
• termination by the employer with the employee’s consent (not to be confused with a settlement agreement) and
• the non-renewal of a fixed-term employment contract where the employee has been in service for two years or more.

The employee is not entitled to the transition payment if the dismissal is due to serious culpable conduct on their part. Examples include theft, embezzlement, fraud, a breach of trust, repeated failure to comply with monitoring requirements in the event of illness, frequent tardiness and attempting to misrepresent production figures in an improper manner.

If the employer is found to be seriously at fault, the employee is entitled to the transition payment. This is the case, for example, in the event of discrimination, (sexual) harassment by the employer or gross neglect of reintegration obligations.

Calculation of the transition payment

• The allowance is accrued for each full 6-month period. The rule is: 1/6 of a month’s salary per 6 months (1/3 of a month’s salary per year of service) and 1/4 of a month’s salary per 6 months (1/2 of a month’s salary per year of service) if an employee has been in service for more than 10 years. If an employee has been in service for 2 years and 9 months, they are therefore entitled to 5/6 of a month’s salary as a transition payment.
• The remuneration may not exceed €79,000 gross (2018) or an annual salary (whichever is higher). The former amount is indexed annually.
• Where the employer is seriously at fault in connection with the dismissal, the subdistrict court may award the employee further (additional) equitable compensation.

Please note! When calculating the amount of the transition payment, only the periods during which an employee has actually worked are taken into account.

Please note! The government intends to maintain the accrual rate for the transition payment at 1/6 of a month’s salary every six months, even after 10 years’ service. The conditions under which training costs may be deducted from the transition payment are also to be relaxed.

Fair compensation

Fair compensation can only be awarded by the subdistrict court. This may be relevant in cases where the employer is seriously at fault.

In the following cases, the employee may choose to apply to the subdistrict court to have the notice of termination set aside or to be awarded fair compensation:

• in the event of termination by the employer without the employee’s consent;
• in the event of termination by the employer without the consent of the UVW;
• in the event of termination by the employer in breach of a prohibition on termination;
• in the event of termination in breach of the re-employment condition.

There is therefore no requirement for serious culpability on the part of the employer.

Transitional law

The transition payment applies to redundancy procedures initiated on or after 1 July 2015. A transitional arrangement applies until 1 January 2020 to employees aged 50 or over with at least 10 years’ service. From the age of 50, they accrue one month’s salary for each year of service. However, this does not apply to those aged 50 or over who work for a small SME employer (fewer than 25 employees). There is also a transitional arrangement for small SME employers, which applies until 1 January 2020. In the event of dismissal on commercial grounds or due to the employer’s poor financial circumstances, the period prior to 1 May 2013 is not taken into account when calculating the amount of the transition payment. There are three very strict eligibility criteria for this transitional scheme. Both the small SME employer and the employee in their service may request the UWV, using a special form, to give an opinion on whether the aforementioned conditions have been met.

It makes no sense for an employer to split their business into small operating companies, as the question of whether they are a small employer is assessed on the basis of the group as a whole.

Definition of ‘wages’ for the purposes of the transition payment

The definition of ‘wages’ for the purposes of calculating the transition payment refers to an all-inclusive gross monthly salary. The following wage components are also included in the definition of ‘wages’ for the transition payment:

• 1/12th of the holiday allowance and the fixed end-of-year bonus to which the employee would be entitled within 12 months had the contract continued,
• 1/12th of the agreed fixed salary components in the 12 months preceding the end of the contract,
• One-thirty-sixth of the agreed variable pay components in the three calendar years preceding the year in which the contract ends.

Fixed pay components are those that do not depend on the employee’s performance or the company’s results. Fixed components include the shift allowance and overtime pay. It is irrelevant whether these are of a structural nature. Variable pay components, on the other hand, are components that do depend on the company’s results and/or the employee’s performance. Bonuses, profit-sharing payments and end-of-year payments are classified as variable pay components and are only taken into account if they have been agreed. Variable pay components that have not been agreed, such as a gratuity, are therefore not taken into account.

You may deduct the following from the transition payment due:

• any transition payment that may have been paid upon the termination of a previous employment contract,
• transition costs, such as outplacement costs and wages payable during the extended notice period, provided that the employee is exempt from work during this period,
• employability costs, such as the costs of training courses that are not specifically aimed at the employee’s role but which promote their broader employability in the labour market, provided this has been agreed in writing with the employee.

Please note! In the case of successive employership (you can read more about what this is later in this special feature), however, you may not deduct the employability costs incurred by your legal predecessor from the transition payment.

Just like the notice payment (see below for more on the notice payment), the transition payment qualifies as pay from previous employment to which the green table applies. This means that the employed person’s tax credit is not taken into account, as it is intended for those in work.

Special circumstances

You must also pay the transition payment if you wish to terminate the employment contract after two years of sickness and apply to the UWV for redundancy. Employers sometimes keep an employment contract ‘on hold’ to avoid having to pay a transition payment when a sick employee is made redundant. Sub-district courts have ruled that, whilst this may be improper, it does not yet constitute seriously culpable conduct, meaning that the employee would be entitled to a transition payment if they themselves request the termination of their employment contract. However, you do run the risk that the employee will recover to such an extent that they ask you to offer them suitable work. You also run the risk that, if you do decide to part ways with the employee, the transition payment due will have increased even further. The government wishes to provide employers with retroactive relief, subject to certain conditions, regarding the payment of the transition payment to employees on long-term sick leave.

You are not liable to pay a transition payment if the employment contract ends:

• before the employee has turned 18 and the employee has, on average, worked no more than 12 hours a week for you,
• upon the employee reaching retirement age,
• as a result of serious culpable acts or omissions on the part of the employee.

The transition payment is not payable if:

• the employer has been declared bankrupt, or
• the employer has been granted a moratorium on payments, or
• the Debt Restructuring Scheme for Natural Persons Act (WSNP) applies to the employer.

This also prevents the UWV – which, in such situations, assumes the employer’s payment obligation under the wage guarantee scheme – from being required to pay these transition payments. In the event of a business restart following bankruptcy, the successor employer is, however, obliged to take into account the years of service prior to the bankruptcy when determining the transition payment.

If payment of the transition allowance would have unacceptable consequences for the business’s operations, the transition allowance may be paid in instalments. Payment in instalments may be spread over a maximum of 6 months, with the 6-month period commencing 1 month after the employment contract has ended. However, if payment is made in instalments, the employer is liable to pay statutory interest.

Notice requirement for fixed-term contracts

In the case of fixed-term contracts of 6 months or longer, you must inform the employee in writing, no later than one month before the agreed end date, whether or not you wish to renew the contract thereafter and, if so, under what terms.

Please note! A verbal notice is not sufficient, even if it is clear that the employee has received it and is therefore aware of the situation. Written notice is a mandatory requirement.

Tip: As an employer, make sure you can prove that you have given notice. Send the notice to the employee by registered post, and keep the proof of posting and, most importantly, the acknowledgement of receipt. You can also ask the employee to sign to confirm they have received the notice when you hand it to them.

Notice pay: employer fails to fulfil (in good time) the obligation to give notice

If you fail to comply with the notice requirement, the employee is entitled to their full gross monthly salary. If you give notice too late, you will be liable to pay compensation on a pro rata basis. The fixed-term employment contract will, however, end on the agreed expiry date.

Calculation of the notice period allowance

You calculate the gross monthly salary by multiplying the hourly rate by the number of working hours per month. If no fixed number of working hours has been agreed, you multiply the hourly rate by the average number of working hours per month over the last 12 months. If the employee has worked for you for less than 12 months, you should calculate the average number of working hours over that shorter period. For example, you should base your calculation on the average number of working hours for on-call contracts and min-max contracts. For pay in the form of commission or piecework, you should also calculate the average. The notice payment qualifies as pay from a previous employment to which the green table applies. The term ‘working hours’ must be interpreted as working days and not as calendar days. This means that the calculation is not based on 30 or 31 calendar days per month, but on 20, 21 or 22 working days. The last month before the end of the employment contract is decisive for determining the amount of the notice payment.

Suppose this month has 22 working days and the employee works 7.6 hours a day (38 hours a week / 5 working days). To calculate the amount of the notice pay, the number of hours per day must then be multiplied by the gross hourly wage, and this figure must then be multiplied by the number of working days per month. The notice payment is therefore 7.6 hours per working day × hourly wage × 22 working days.

The amount of the notice pay is determined by the last month before the end of the employment contract. If this month has 31 days and the employer, for example, gives notice four days too late, the employer is liable to pay 4/31st of the wages. If the month has 28 days, the compensation amounts to 4/28ths of that wage.

Please note! The notice payment will lapse if the employee does not bring the matter before the court within three months of the date on which your obligation to give notice arose. You are also not required to pay the notice payment in the event of bankruptcy, a suspension of payments or the application of the debt restructuring scheme for private individuals.

The notice payment is therefore based on a narrower definition of pay than the transition payment. It is calculated on the basis of the basic gross hourly rate, i.e. without adding holiday pay or other emoluments.

The employer is extending the contract, but has not been clear about the terms and conditions

If you have informed the employee that you wish to extend the fixed-term contract but have not specified the terms and conditions, the employee will be offered a new fixed-term contract on the same terms and conditions. The new contract will run for the same duration as the extended fixed-term contract, but for no longer than one year.

Probationary period depending on the duration of the fixed-term contract

From 1 January 2015, it is prohibited to include a probationary period in fixed-term employment contracts of six months or less. It is also prohibited to include a probationary period in a subsequent contract.

Please note! A new probationary period with the current employer or when taking on a temporary worker is permitted if an employee is offered a new role that requires substantially different skills and responsibilities.

Table showing probationary periods for fixed-term employment contracts

The government plans to extend the probationary period for permanent contracts from a maximum of 2 months to a maximum of 5 months. For multi-year contracts with a term of more than 2 years, the probationary period will be extended by 1 month to a maximum of 3 months.

Competition clause

Since 1 January 2015, non-competition or non-solicitation clauses have been prohibited in fixed-term contracts. However, a non-competition clause is permitted where there are compelling business interests, provided that you explicitly justify these compelling business interests in the employment contract. This relates to specific knowledge or business information that the employee acquires during their employment. A written justification cannot be added at a later date. Furthermore, the need for a non-competition clause must exist not only at the time the clause is agreed, but also at the time you invoke it. The latter will be the case at the end of the contract.

Please note! You can no longer rely on a non-competition clause if there has been serious culpable conduct or negligence on your part.

The comments made regarding the non-competition clause apply equally to the non-solicitation clause, as this also falls within the scope of the relevant statutory provision.

Please note! In the case of directors appointed under a temporary contract, a non-competition clause cannot simply be agreed upon. Careful consideration must be given to the written justification for such a clause.

In order to remain valid, a non-competition clause must be agreed in writing once again if the employer’s legal entity changes and there is no transfer of undertaking. In the latter situation, after all, there is a transfer of rights and obligations by operation of law. This is often overlooked in practice.

The Government intends to ensure that, as an employer, you cannot derive any rights from a non-competition clause in the event of dismissal during the probationary period, unless it is necessary to hold the employee to the clause on the grounds of compelling business or service interests and you notify the employee of this in writing or electronically, stating your reasons.

Strengthening the rights of on-call workers

Do you employ on-call staff, for example under a zero-hours contract or a min-max contract? If so, you are, in principle, obliged to continue paying their wages if the employee has not worked. Every time you call in an employee with a working arrangement of fewer than 15 hours per week, they are entitled to at least 3 hours‘ pay. This applies even if the employee only works for 1 hour. In the employment contract, you can exclude your obligation to continue paying wages in writing during the first 6 months. After the first 6 months, you can only exclude the obligation to continue paying wages if the applicable collective agreement makes provision for this, and this is only permitted for roles involving work of an ’occasional nature‘ and without a ’fixed scope’. Examples include peak-period work or cover for staff on sick leave.

Would you like to find out more about the new rules for on-call workers? Read the factsheet ‘Employers and on-call workers’ (Ministry of Social Affairs and Employment).

The government wishes to explicitly stipulate in law that an employer must give an on-call worker at least four days’ notice before calling them in. This period may be reduced to one day’s notice under a collective agreement. If, as an employer, you withdraw the call within this period, the on-call worker is still entitled to pay for the shift. After employing an on-call worker for 12 months, you must make them an offer based on the average number of hours worked over the past 12 months.

Chain provision

The chain provision sets out when successive fixed-term employment contracts are converted into a permanent contract. Since 1 July 2015, you may enter into a maximum of three fixed-term contracts with an employee within a two-year period. If there is an intervening period of more than six months, the contracts are no longer considered consecutive. This means that if a fixed-term contract expires and you enter into a new contract with the same employee within six months, this intervening period counts towards the two-year period.

Under a collective agreement, it is possible to deviate from the number of contracts and the total duration, subject to very strict conditions. The chain provision may also be relaxed in a collective agreement for temporary agency workers. However, a maximum of six contracts is permitted within a four-year period. As a general rule, a collective agreement cannot deviate from the six-month interval. The standard minimum break of six months may be reduced by collective agreement to a maximum of three months for the following roles:

1. where the work is seasonal in nature due to climatic or natural conditions; and
2. provided that this work can be carried out for a maximum of 9 months per year (it must therefore genuinely be seasonal work).

Do you employ seasonal workers? If so, as a result of the above legislative change, which came into force on 1 July 2016, you now have more options (or, in other words, greater flexibility) to use fixed-term employment contracts without this automatically leading to a permanent contract.

Please note! The reduction in the notice period must be provided for in a relevant collective agreement. Once the maximum number of permitted fixed-term contracts has been reached, you are obliged to offer the employee a permanent contract if you wish to continue employing them.

Please note! The new chain provision does not apply to employees aged 18 or under who are on a part-time contract (12 hours or fewer).

Please note! The chain system also applies to successive employment contracts between an employee and different employers who, in respect of the work to be performed, can reasonably be regarded as successors to one another. We refer to this as ‘successive employership’. If a temporary worker is taken on by the hirer to continue performing the same work there, the hirer is the successive employer.

Tip: It can sometimes be useful to take out two one-year contracts rather than three contracts for a maximum of two years. This is because, in five sectors, a higher sectoral contribution applies to contracts with a term of less than one year: agricultural businesses, construction firms, the hospitality sector, general cultural institutions and painting firms.
The government intends to move away from the sector-based classification system for unemployment benefit contributions. Employees on permanent contracts with a fixed agreed number of hours will pay a low unemployment benefit contribution, whilst other employees will pay a high unemployment benefit contribution.

In summary, a permanent contract comes into effect from 1 July 2015:

• after more than three consecutive fixed-term contracts and;
• if you have been working under successive fixed-term contracts for more than two years. If the interval between contracts is six months or less, these are considered successive fixed-term contracts and the interval is included in the two-year period.

Read Factsheet: Extending fixed-term employment contracts (factsheet for employers) (Ministry of Social Affairs and Employment).

The Government intends to extend the maximum period for which fixed-term contracts may be entered into without this constituting a permanent contract from 2 years to 3 years. This is similar to the situation prior to 1 July 2015.

Duration of unemployment benefit reduced as of 1 January

Since 1 January 2016, the maximum duration of the statutory unemployment benefit has been gradually reduced. This is taking place at a rate of one month per quarter, with effect from 1 January 2016. From April 2019, the maximum duration of unemployment benefit will therefore be 24 months instead of 38 months. The amount of the unemployment benefit remains linked to the last salary earned. From 2016, one month’s unemployment benefit will be accrued for each year of service during the first 10 years, and 0.5 months thereafter, so that after 38 years the maximum duration of unemployment benefit will be 24 months. Employment history accrued before 2016 will be recognised.

Employees whose employer has gone into liquidation or for whom a suspension of payments has been applied for, and who have not received their wages, can apply to the UWV to have their wages paid. This is known as the wage guarantee scheme. From 1 January 2016, the amount of payment obligations taken over is capped at a maximum of 1.5 times the maximum daily wage.

Please note! Employees who became unemployed before 1 January 2016 retain their entitlement to the original duration of unemployment benefit.

The accrual of unemployment benefit entitlements has also been restricted since 1 January 2016. During the first 10 years of their career, employees accrue one month’s entitlement to unemployment benefit for each year worked. Thereafter, they will accrue 0.5 months’ entitlement for each year worked. Unemployment benefit entitlements that employees had already accrued before 1 January 2016 will continue to count as 1 month. This measure applies to people who receive unemployment benefit on or after 1 January 2016.

Unemployment benefit entitlement only applies after the notice period has expired

The notional notice period was abolished with effect from 1 January 2016. It is now stipulated by law that an employee is not entitled to unemployment benefit until the statutory notice period has expired and the employment contract has been terminated by notice or by written agreement. The date on which the employment relationship is deemed to have been terminated is the date on which: a. the termination was agreed in writing; or b. the employer terminated the employment contract. During the period in which the notice period has not been observed, a ground for exclusion applies. Only after this period has elapsed will unemployment benefit be granted and the duration of the benefit commence. This is more favourable to the employee. Until 1 January 2016, however, if the notice period had not been observed, the duration of unemployment benefit was reduced by the length of the notice period that had not been observed.

In the event of the early termination by mutual consent of a fixed-term employment contract that does not contain a clause allowing for early termination, the employee is not entitled to unemployment benefit until the fixed-term employment contract would have expired. Entitlement to unemployment benefit therefore commences at a later date.

Changes to the Unemployment Benefit Scheme with effect from 1 July 2015

After just six months on unemployment benefit, any job is considered suitable. This means that the pay level of a job may no longer be a reason for refusing to accept it or apply for it.
Furthermore, the system of hourly-based settlement has been replaced by income-based settlement.

Income offsetting

Under the hours-based deduction scheme, the unemployment benefit is reduced based on the number of hours worked. Under the income-based deduction scheme, the unemployment benefit is reduced based on the income earned. Employees do not have to have 30% of their own earnings deducted. It is therefore often more advantageous to accept a lower-paid job.

Changes to the Unemployment Benefit Scheme (WW) and their implications for the Return to Work Scheme for People with Partial Work Capacity (WGA)

The changes to the duration of unemployment benefit (WW) are directly reflected in the change to the duration of the WGA wage-related benefit under the WIA. This means that, for employees who joined the scheme on or after 1 January 2016, you will be liable for the relatively expensive WGA wage-related benefit for a shorter period whilst they are in the WGA scheme. After all, these benefits – if you are a medium-sized or large employer – are attributed to you, either in the form of an increased fixed WGA contribution in the Return to Work Fund contribution notice, or in the form of a benefit payable if you are self-insured.

Collective redress for the third year of the WW in collective agreements

The social partners have agreed that they will introduce amendments to collective labour agreements to rectify the situation regarding the third year of WW/WGA benefits. It has become apparent that, in order to implement the adjustment for the third year of WW/WGA benefits, it is necessary to work with a limited number of ‘umbrella collective agreements’ which together provide nationwide coverage. Parties to collective agreements may voluntarily join one of these umbrella collective agreements. The implementation of these agreements has been entrusted to a national fund, the Stichting Private Aanvulling WW en WGA (PAWW). (For further information, see: www.spaww.nl.) This fund operates on a pay-as-you-go basis. This means that, in principle, benefits paid out in any given year are financed from the contributions received in that year. The administrative management is handled by Raet. Employees who join via their sector pay a standard contribution based on their gross salary. The sector or company in which they work does not affect the amount of the contribution.

The gross salary from which the contribution will be deducted comprises the regular gross salary plus any fixed allowances. The maximum amount for the contribution base is equal to the maximum daily wage applicable in a given year for statutory employee insurance schemes.