Looking Ahead 2024: Netherlands
As of 1 January 2024, the following employment law matters have been changed:
- Introduction of a uniform minimum hourly wage
- 30% reduction in tax facility
- Pension accrual
- Whistleblower protection law for medium-sized employers
- Indexations
- Registration of carbon emissions (1 July 2024)
1. Introduction of a uniform minimum hourly wage
Effective 1 January 2024, the Minimum Wage and Minimum Holiday Allowance Act has been revised. A uniform minimum hourly wage now applies to employees aged 21 and older, while a youth minimum hourly wage is set for those aged 15 to 20. The minimum wage will be indexed on 1 January and 1 July each year. For full-time employees earning the minimum wage with contracts exceeding 36 hours per week, the change results in a wage increase, as it is derived from the current minimum monthly wage of 36 hours. This shift may necessitate adjustments to collective bargaining agreements and employment contracts.
2. 30% reduction in tax facility
On October 27, the House of Representatives passed two amendments that will further restrict the so-called 30% facility, now referred to as the 30% facility, for foreign expats. Under the previous 30% facility, a tax-free allowance could be applied up to a maximum of 30% of the salary. The new bill will phase out this allowance. Read this blog to find out exactly what the plans are and what the implications will be.
30% facility
The 30% facility is intended for employees who come from outside the Netherlands and work here temporarily. If they qualify for the 30% facility, no tax is due on up to 30% of their salary. In this way, the government compensates the employee for the additional costs of working in the Netherlands. Currently, the maximum duration of this facility is set at five years.
What will change?
The first amendment will gradually reduce the 30% facility for new applications during a five-year period to a 10% rule. This reduction applies to new applications beginning January 1, 2024. This reduction will not affect employees who are already using the 30% facility prior to January 1, 2024. If that use is interrupted, the transitional rule will no longer apply, and the lower percentage will apply upon return.
In addition, the second amendment eliminates the ability of employees who are subject to the 30% facility to elect partial foreign tax liability. Currently, an employee using the 30% facility can use the partial foreign tax liability when filing income tax returns, resulting in that employee being considered a foreign taxpayer for Box 2 and Box 3. As of January 1, 2025, this will no longer be possible. A transitional rule applies: any employee who uses this arrangement before December 31, 2023, may continue to do so until December 31, 2026.
Practical tips
Since January 1, 2023, employers have had the choice between applying for the 30% facility or reimbursing the actual extraterritorial costs (“ET costs”). Now that the 30% facility is being further reduced, employers would do well to consider which of the two is most beneficial to their employees.
In addition, as a matter of good employment practice, employers can be expected to inform their employees of the potential consequences of the change in the law. This is particularly true in situations where an employee is already using the program prior to January 1, 2024, and that use is interrupted, for example, by a sabbatical. In such a case, the employer should inform the employee that if the employee wishes to use the scheme again, the new, more restricted conditions will apply.
3. Pension accrual
Effective 1 January 2024, the entry age for pension accrual has been reduced from 21 to 18 years. Pension schemes that still adhere to an entry age of 21 years must undergo adjustments.
4. Whistleblower protection law for medium-sized employers
The Whistleblower Protection Act, enacted on 18 February, based on an EU Directive, aims to safeguard whistleblowers. The Act’s provisions have been applicable to large employers (250+ employees) since its enactment. Since 17 December smaller employers with 50 or more employees must also comply. Read below to learn about the scope of these obligations.
To Whom Does the Whistleblower Protection Act Apply?
The Act already covers large employers and government entities. As of December 17, it also includes employers with over 50 employees, including regular employees, temporary workers, interns receiving remuneration, and compensated volunteers. Employers with fewer than 50 employees in sectors such as financial services, products and markets, prevention of money laundering and terrorist financing, civil aviation, maritime labor, port state control, and offshore oil and gas activities are also subject to the Act.
What Does the Whistleblower Protection Act Cover?
While the existing House for Whistleblowers Act already mandates an internal reporting procedure, the Whistleblower Protection Act expands on these rules:
- The order of reporting internally first is no longer mandatory, allowing immediate external reporting. However, internal reporting may still be encouraged by the employer.
- The internal procedure must be easily accessible for anyone who suspects any form of abuse within the scope of work-related activities. This includes employees, temporary workers, applicants, former employees, interns receiving compensation, and volunteers who are remunerated.
- Any violation of European Union law qualifies as potential abuse, for which it should be possible to report within the internal procedure.
- Acknowledgment of receipt of the report must be provided within seven days.
- Within a reasonable time (up to three months post-acknowledgment), the whistleblower must receive information on the assessment and follow-up of the report.
- The whistleblower’s identity must remain confidential unless consent for disclosure is granted.
Extension of Duty to Inform
The duty to inform is also expanded. The employer to whom this Act applies must provide to its employees, in a written or electronic manner, information about:
- Methods for reporting (written, verbal via phone or voice messaging, or in-person through a conversation by request within a reasonable time).
- How to report a suspicion of abuse outside the organization to the competent authorities and, if applicable, to the institutions, bodies, offices and agencies of the European Union.
- Legal protections available to employees (e.g., protection against retaliation for reporting suspected wrongdoing or violations of European law).
What If You Don’t Have a Whistleblower Policy (yet)?
There are currently no legal sanctions (yet) for employers who do not comply with the Act. However, it is highly likely that such sanctions will be introduced in the near future. Since the Minister of Social Affairs and Employment is currently conducting research on the possibility of empowering the House for Whistleblowers to impose sanctions. We will provide an update when these sanctions are introduced.
Despite the absence of sanctions at this stage, if an employer lacks an internal reporting procedure or if the existing procedure doesn’t meet legal requirements, any interested party can request the district court to determine a deadline for establishing a compliant internal reporting procedure.
Moreover, when establishing the whistleblower policy, the works council plays a crucial role. Under the new Act, the works council has the right of consent regarding such a policy. In the absence of a works council, the policy must receive approval from a majority of employees unless it is stipulated in a collective labor agreement. In such case, the works council doesn’t need to be involved, but the collective labor agreement must be followed in establishing the procedure.
5. Indexations
A number of allowances/amounts are indexed annually. The main indexations from 1 January 2024 are briefly described below:
– The tax-free travel allowance will be increased from EUR 0.21 to EUR 0.23 per kilometer;
– The maximum transition payment will be increased from EUR 89,000 gross to EUR 94,000 gross, or to one month’s salary if this salary exceeds the maximum transition allowance;
– The home working allowance will be increased from EUR 2.15 to EUR 2.35 net.
6. Registration of carbon emissions
Starting 1 July 2024, companies employing 100 or more individuals are mandated to maintain records detailing their employees’ carbon emissions. This information must be submitted to the government annually, no later than June 30. The reporting encompasses all carbon emissions associated with business-related travel and commuting activities. Notably, air travel and journeys undertaken by vessels, such as ferries, are exempt from this reporting requirement.
In this particular context, ’employees’ refers to individuals holding an employment agreement for a minimum of 20 hours per month. This definition extends to employees residing abroad but engaged in work at a Dutch branch of the company. Excluded from the reporting obligation are agency workers, seconded employees, and self-employed individuals.
Further expectations in 2024
The following bills are currently under consideration and may potentially be enacted in 2024. We will keep you updated on whether they will indeed take effect.
a. Confidential advisor: Bill to make it compulsory to appoint a confidential advisor for undesirable behaviour in the workplace.
This bill seeks to give employees at smaller employers a legal right to access a confidential counsellor as well. The bill has passed the House of Representatives and is now before the Senate for consideration. Small companies with less than ten employees will be exempt.
b. Equal opportunities recruitment
Employers and intermediaries will be required to take steps to prevent discrimination in recruitment and selection. The bill has passed the House of Representatives and is now before the Senate for consideration.
c. Non-compete clause
The government is seeking to tighten and reform non-compete legislation to facilitate employee mobility. The changes will include statutory geographical and time limits on non-compete clauses. In addition, the obligation for employers to explain what substantial business interests are served by the non-compete clause will be extended to employment contracts of indefinite duration. In addition, employers will have to pay compensation to employees who leave the company if the employer invokes the non-compete clause against them. These plans are currently being developed into a bill, which will be submitted for consultation before being sent to the Dutch House of Representatives.
d. False self-employment: The Assessment of Employment Relationships and Legal Presumption (Clarification) Act
This bill aims to define more clearly when a worker is considered to be self-employed and when he or she is considered to be an employee. (The criterium of ‘”relationship of authority” from article 7:610 of the Dutch Civil Code will be clarified, and the key elements indicating the existence of an employment contract (work content and organizational embeddedness) will have to be continuously weighed against contraindications suggesting the opposite (entrepreneurship). A rate below EUR 32.24 (reference date: 1 July 2023) will give rise to a legal presumption of an employment contract). The bill is expected to be submitted to the Dutch House of Representatives in the second quarter of 2024. The proposed effective date of the measures in this bill is 1 July 2025.
In recent years, the Tax Authorities have not performed any checks to determine whether an assignment contract is in fact an employment relationship because of the lack of clarity in the law. The Ministry has indicated that the Tax Authorities will resume enforcement of the law by 1 January 2025 at the latest. It is, therefore, important to critically assess the contracts of self-employed workers timely, and also, the practical implementation and embedding in the organisation and make adjustments when necessary.
e. Draft bill amending the rehabilitation obligations in the second year of sickness for small and medium-sized employers
Small and medium-sized employers will get the option to jointly decide from the start of the second year of sickness to end the first-track rehabilitation process. The consultation period for this bill has now ended, and the final bill is expected in 2024.
