Netherlands: What the New Coalition Agreement “Get to work, building a better Netherlands” Means for the Labour Market

Author: Ron van Eldik

The new coalition agreement between the political parties D66, VVD and CDA sets out a clear direction for the Dutch labour market. The proposed policy measures will affect employers, employees and self-employed workers. Over the coming four years, significant changes are expected in the regulatory framework governing social security, leave entitlements, sickness and incapacity for work, flexible forms of employment, labour migration and tackling of false self-employment.

It is important to note that the agreement concerns proposals made by the coalition parties. Each measure still requires parliamentary approval and the final legislation may therefore differ in form or substance. In this article, we will outline the key developments. Read more below.

The proposals outlined in the coalition agreement

Self-Employed Persons Act

• An increasing number of self-employed individuals are part of the modern labour market, where the desire for autonomy is growing. The new coalition aims to give this group the space and clarity they deserve and introduces the Self-Employed Persons Act. The aim of this Act is to introduce a legal presumption of an employment relationship to provide legal clarity on when someone is, or is not, considered as a self-employed person.

Continued wage payment in the event of illness

• The long and high continued wage payment in the event of illness is perceived as a burden, particularly by small and medium-sized employers. At the same time continued wage payment in the second year is an effective incentive for reintegration with the current employer. The government is working on proposals to make wage payment in the event of illness more workable for employers, particularly for small and medium-sized employers. Whether this means if the period of continued payment of wages during illness will be reduced has not been clarified.
• The government also wants to abolish compensation for transition payments in the event of dismissal after two years of illness for all employers. Currently, employers receive compensation for this from the Employee Insurance Agency (UWV).

From work to work in a changing labour market

• In a rapidly changing labour market, transitions between jobs should be made easier, so that employees are not left behind in a changing economy and employers are more agile in a dynamic environment. To this end, the coalition agreement provides greater scope for the human dimension in case of dismissal and plans to amend the reflection principle in reorganisations, allowing for more room to take personal circumstances into account in case of dismissal.
• Plans to modernise non-competition clauses remain on the agenda to allow for more flexibility for employees to change jobs without restrictions.
• In addition, the government intends to reform the existing transition allowance so that it fulfils its original purpose: facilitating the transition from one job to another. Employers who have timely and sufficiently invested in training and education of their employees and offer maximum support to reintegrate sick employees, will pay a reduced or no transition payment in case of dismissal.
• Furthermore, unemployment benefits increase in the first two months to 80% of the last earned salary, but the term will be reduced from maximum two years to one year. This gives workers more financial security and time to find suitable new employment.

Employment conditions

• The coalition intends to increase growth of start- and scaleups in the Netherlands and for this it will become easier to pay employees partly with share (options).
• The work cost arrangement is amended allowing employers to support employees to repay their study loan.
• Collective Labour Agreements remain important, and should continue to be widely accepted, at the same time should modernize. More support is necessary, less rules and more room for innovative industries.
• Combining work with family and caregiving responsibilities should become easier. The government intends to simplify the leave system, taking the SER advisory report “Balance in Social Leave” as a guiding framework.

Pensions

• The coalition plans to link the pensionable age for eligibility for State Old Age benefits directly to the life expectancy as of 1 January 2033. As this is expected to increase, this means that the State Old Age Benefits age will increase as well in the coming years.

Overview of how the proposals from the coalition agreement are being implemented in the Netherlands

Following the parliamentary elections of last year October, political parties D66, VVD and CDA will form a minority government. Although a coalition agreement has been concluded between these three parties setting out the main policy intentions, it remains uncertain to what extent these plans can be realised. The coalition agreement serves as a guiding framework for government policy, but in the absence of a stable majority in the House of Representatives, the government depends on shifting support from opposition parties to pass legislation and implement policy. This means that proposals must be negotiated and will likely be amended on a subject-by-subject basis in order to obtain sufficient parliamentary support.

Key Points for HR

Without a structural majority, the government must negotiate each proposal with other parties, which means that the political feasibility and pace of implementation remain uncertain.