2020 was supposed to be the year of the Balanced Labour Market Act (Wet arbeidsmarkt in balans), or WAB, with once again a good number of sweeping changes in employment law. The WAB came into force on 1 January 2020. The moment when the Netherlands’ economy was booming and there was shortage in the labour market. But pretty soon after the WAB came into force, we were overwhelmed by the corona virus that completely flattened entire sectors. As a result, attention shifted from the WAB to the many other new regulations that came into being at breakneck speed to preserve employment and income support.
While it is difficult to draw a definitive conclusion on whether or not the WAB was successful, given the extraordinary year we have had, we think it would be good to briefly revisit the changes brought about by the WAB. We also look ahead to what may still await us in terms of our labour market.
OBJECTIVE AND CONTENT WAB
The WAB was an important step in the implementation of one of the agreements in the coalition agreement 2017-2021 of our now outgoing cabinet: reducing the differences between permanent and flex(ible) staff.
In an attempt to reduce the differences between permanent and flex, first of all, the dismissal law and legislation on flexible labour were revised by the WAB. Regarding the revision of dismissal law, more specifically the introduction of the new i-ground, we would like to refer to our recent article devoted entirely to this i-ground. In this article, we concluded – in brief – that the introduction of the i-ground has resulted in only a minimal relaxation of dismissal law for the time being. This minimal relaxation will therefore not exactly invite employers, especially considering the current crisis, to offer permanent contracts to flexible staff sooner.
In the area of flexible labour, the WAB did change a lot, albeit here too it is unclear whether it has achieved the desired effect. First of all, the regulations on succession of fixed-term contracts were extended, making it possible to agree on fixed-term employment contracts again for a period of three years. To make offering permanent contracts more attractive for employers, a higher WW rate was introduced for fixed-term contracts.
Both measures presumably did not directly lead to more permanent contracts last year, again as a result of the crisis year. We suspect the opposite happened and many more temporary contracts were terminated. Moreover, the change in the unemployment contribution rate brought with it a nasty side-effect for employers, namely the obligation to include a confirmation in the payroll for all employees who did already have, or came to have, permanent contracts. Incidentally, as a result of the corona crisis, the deadline for employers to have this administrative obligation in place was extended by a few months. We assume that all employers now have the administration in order. Should this not yet be the case, we do recommend that they still pay attention. Although we do not (yet) know of any cases where this is already being strictly enforced by the Tax Authorities, the difference in premium for 2021 remains too high (5%) to run a risk.
Alternatives to permanent contracts, including on-call contracts, were not only made more expensive by the WAB due to the introduction of the higher unemployment rate, but also bound by new rules, such as a call period and the obligation to offer a fixed scope of hours after one year. Again, these measures do not seem to have led to a visible reduction in the number of temporary and on-call contracts used. However, we do note a number of proceedings instituted by employees in situations where an employer did not offer a fixed number of hours, which can really add up. So, as an employer, pay close attention to this. As of 1 July 2021, a provision will be added to the regulations on this point requiring employees to respond to an offer for a fixed scope of hours within one month. For a more detailed explanation of the mandatory offer of a fixed scope of employment after a period of one year, please refer to our recent article fully dedicated to this.
Finally, the way of calculating the transitional compensation changed and new rules were introduced for the use of payroll employees. A number of payroll organisations proved creative by finding an option that allowed them to still stick to their old business model and remain under the more favourable temporary employment regime. Again, not much seems to have changed at first glance, but it is possible that the new government will put a stop to this in the future.
For a more detailed explanation of all the WAB changes, please refer to our previous articles on the changes brought about by the WAB.
HAS THE WAB SUCCEEDED?
The key question: has the WAB succeeded and has the WAB resulted in employers offering employees permanent contracts more often over the past year? As we indicated in the introduction, it is actually far too early to answer that. Because not only in the corner of flex contracts but also in the corner of permanent contracts, despite all the support measures, certain sectors were hit hard last year.
In the field of payroll, at least, not much seems to have changed, and the changes in dismissal law have not yet led to a degree of relaxation that would make employers more likely to offer permanent contracts. The same goes for the changes in the area of flexible work, where the uncertain economic times ahead will certainly not help the more than two million workers on temporary or on-call contracts either. We may see a different picture once the dust from the corona crisis has settled a bit and the longer-term effects of the crisis become more apparent.
It is worth mentioning that shortly after the WAB came into force, a report on our labour market by the Borstlap committee was published, which, using five building blocks, recommends a comprehensive redesign of the rules around work in the areas of labour law, social security, taxation and personal development during the career. Perhaps this report will soon be pulled out of its drawer by our new cabinet to come up with an overhaul of our labour market after all and the much-desired narrowing of the differences between permanent and flexitime will still be achieved. We will of course keep you informed!