The Netherlands: Fundamental changes in employment law with effect from 1 January 2020

Several changes in employment law took effect in the Netherlands on 1 January 2020. The new year witnessed the entry into force of the Balanced Labour Market Act, with changes regarding the following topics:

1. Introduction of new ground for dismissal
2. New calculation of transition payment and maximum payment
3. Relaxation of provisions on succession of fixed-term employment contracts
4. On-call workers
5. Payrolling
6. Change in unemployment insurance contributions.

I. Introduction of new ground for dismissal

A new ground for dismissal, the “i ground” or “cumulation ground” was added to the closed system of reasonable grounds for dismissal with effect from 1 January 2020. A court can invoke the new ground to set aside an employment contract if there is not a full or complete ground for dismissal, but rather a combination of circumstances arising from multiple grounds for dismissal. If an employment contract is terminated on the “i ground” the employer may be liable for a higher transition payment.

II. New calculation of transition payment and maximum payment

Employees who are dismissed after 1 January 2020 are entitled to a transition payment from their first day of employment. The transition payment is equal to ⅓ monthly salary for each year of employment. This applies to all types of employment, regardless of length. The calculation will also no longer be rounded off (downwards) to half years of service, with the calculation instead taking place on a pro rata basis. The maximum gross transition payment from 1 January 2020 is €83,000 or a maximum of one gross annual salary, whichever is higher.

III. Relaxation of provisions on succession of fixed-term employment contracts

From 1 January 2020, employers can agree upon three temporary contracts with an employee, with a total length of three years before a permanent contract is formed.

IV. On-call workers

From 1 January 2020, employers must give on-call workers at least four days advance notice for work. If they fail to do so, the worker is not obliged to take the work. If the employer cancels on-call work or changes the hours within four days of the job, the worker is entitled to continued pay for the hours reserved for the call-up. In addition, if the worker has had an on-call contract for 12 months, the employer is obliged to offer him a fixed number of working hours in the 13th month. The offer must be based on the average number of hours worked in the previous 12 months.

V. Payrolling

The entry into force of the Balanced Labour Market Act means that payrolling no longer qualifies as temporary agency work and is therefore no longer covered by the ‘lighter’ employment law regime. In addition, payroll employees are now entitled to the same pay and employee benefits as employees directly employed by the payroll client.

VI. Change in unemployment insurance contributions

Sectoral unemployment insurance contributions have been abolished and replaced by a new system. From 1 January 2020, employers pay a higher unemployment insurance contribution for fixed-term employment contracts and a lower contribution for permanent contracts. Employers must state on the payslip whether the employee has a permanent or fixed-term contract and whether there is an on-call contract. Where a contract has been tacitly converted to a permanent contract, this must be laid down in writing.