Complying with the Balance Employment Market Act (WAB)

If you are you an employer, the Balanced Labour Market Act (WAB) applies to you. Read here what to look out for so that your business is compliant.

What is the WAB?

The Balance Employment Market Act (Wet arbeidsmarkt in balans, WAB) aims to improve balance in the labour market. This has made it more attractive for employers to hire permanent employees. At the same time, flex workers and on-call workers will get more job and income security, and payroll workers will enjoy improved legal status and working conditions.

The WAB replaces the Employment and Security Act (WWZ) and has implication for the following:

• Temporary contracts and the 'chain rule'
• Dismissal
• Transition allowance
• On-call workers
• Payrolling
• Unemployment insurance premiums

Temporary contracts and the 'chain rule'

The period within which you can employ an employee through temporary or flexible contracts is three years. You may offer an employee a maximum of three temporary contracts in that period. If you want to retain the employee after three years, the next contract must be for an indefinite period. This is known as the 'chain rule'. If an employee does not have a contract with your company for six consecutive months, the 'chain' is broken. At the point, you can once again offer up to three years of temporary contracts.

How many temporary contracts can there be?

According to figures (in Dutch) from Statistics Netherlands, almost 4 in 10 people in the Netherlands are flex workers. That is 2.8 million flex workers. These people have flexible employment relationships or are self-employed.

Three months under a collective bargaining agreement

In some cases, you can rehire staff after at least three months. This is possible only for recurring temporary work that someone performs for you for up to nine months a year. Examples include seasonal work in the hospitality, agriculture, or cultural sectors. The collective agreement should specify the arrangements on this.

This is how you tackle it

• List the end date and the length of each contract, and how many contracts there are.
• Check how often and for how long you can extend contracts under the WAB.
• For new temporary contracts, take into account the changes from the WAB.

Dismissal

There are nine grounds for dismissing an employee who is not performing. Previously, some circumstances on their own were not enough of a basis for dismissal. The WAB allows you to terminate a contract based on the combination of a number of grounds for dismissal. This is called 'dismissal through cumulation'.

Grounds for dismissal

The nine grounds for dismissal are:

1. Business reasons
2. Long-term incapacity for work
3. Refusal to work based on conscientious objection
4. Frequent absenteeism
5. Dysfunction
6. Culpable acts or omissions on the part of an employee
7. Disrupted employment relationship
8. Other circumstances
9. Cumulative grounds

Under the WAB, an employer can therefore combine several grounds for dismissal based on cumulative grounds. That applies only to grounds four to eight for dismissal. It does not apply to grounds one to three.

This is how you tackle it

• When you are building a personnel file, consider the cumulative grounds and put them in writing.

Transition allowance

What does the WAB offer employees? With effect from 1 January 2020, an employee will be entitled, right from the first day of employment, including the probationary period, to a transition allowance upon dismissal. The amount of the allowance is one-third of a month’s salary for each year of employment. With effect from 1 January 2022, the maximum payout (in Dutch) is €86,000 or the gross annual salary for one year, whichever is higher. In addition, a court may award a higher transition allowance in a case involving 'dismissal through cumulation'. The maximum is 1.5 times the standard transition allowance.

Calculate the transition allowance

The amount of the transition allowance is determined by the monthly salary and the duration of employment. With the transition allowance calculator (in Dutch), you can figure out the amount of the transition allowance for your employee.

Compensation of transition allowance

You can be compensated by UWW for the transition allowance you paid in the case of dismissal for long-term incapacity for work or because the business has stopped.

Dismissal in the case of long-term incapacity for work

You must continue to pay wages to a sick employee. After two years of illness, you can ask the Employee Insurance Agency (UWV) for permission to dismiss the employee. Your employee will then be entitled to a transition allowance. As an employer, you can apply to the UWV for compensation of the transition allowance. This is subject to the following conditions:

• The employee was dismissed because of long-term illness.
• The employee was entitled to a transition allowance.
• You have paid out the transition allowance to your employee.

You must submit the application for compensation (in Dutch) of the transition allowance to the UWV within six months of paying it.

On-call workers

With flexible on-call staff, you can cover peak workloads in your business. At quieter times, you do not use on-call workers. Since 1 January 2020, on-call contracts, including min-max contracts, have been regulated by law. That means you have certain obligations as an employer.

What is an on-call contract?

According to the law, a contract counts as on-call if...

• the amount of work is not set as a number of hours within a given period of not more than a month or a year, and the entitlement to pay is spread unevenly over that period.
• the employee is not entitled to pay if no work has been done.

This is how you call an on-call worker

You call an on-call worker to come to work at least four days in advance, either in writing or electronically. The on-call worker must then come in. Any collective bargaining agreement could shorten this period to 24 hours. If you give less notice than that, the on-call worker does not have to come in. Once you have called the on-call worker, they are entitled to wages. Even if you withdraw or change the call.

Mandatory offer of permanent employment

If an on-call worker has worked for you for a year, you have to offer them a permanent job within a month. You can do this by letter or email, and for at least the average number of hours they worked for you over the preceding year. Ask the employee to respond by letter or email. They do not have to accept the offer. In that case, the old employment contract is still in place. If you do not make an offer, the employee is still entitled to pay for the average number of hours.

On-call hours

Note that, from 1 August 2022, for employees with unpredictable work patterns such as on-call workers, employers must specify in the employment contract the days and times on and at which the employer can call them up. Employees can turn down requests that come in outside these days and times.

This is how you tackle it

• Map out when on-call agreements started and the average working hours per month.
• Note when the on-call worker has been employed for a year and offer a permanent contract in time.
• Fixed-term on-call contracts end by operation of law. Do indicate in time that you are not renewing the contract. From 2020, you will then have to pay a transition allowance.
• On the payslip, indicate the period of employment and the type of contract (on-call or permanent).

Payrolling

The introduction of the WAB will make payrolling a legal concept. It no longer falls under the rules for temporary work through an agency: temping. The temporary contract rules now also apply to agreements based on payrolling.

What is payrolling?

Payrolling is similar to temping. The big difference is that the hirer, the company where the payroll employee will actually perform work, itself recruits and selects the payroll employee. The payroll employee is then employed by the lender, the payroll company. This company is the formal employer, and takes care of personnel and payroll administration and bears the risks associated with employment.

Amendments

Since 2020, payroll employees have been entitled to the same terms and conditions of employment as regular employees in equivalent positions. If there are no equivalent positions within the company, equivalent positions within the payroll employee's profession are applicable. Payroll employees have also been entitled to proper pensions since 2021. They may participate either in the payrolling company’s pension scheme or in their own. Provided that the average employer's premium is paid in the Netherlands, there is no waiting period, and there is an entitlement to an old-age and survivor's pension.

This is how you tackle it

• Inform the payroll company about your company's terms of employment and collective agreement.
• Working with payroll employees could become considerably more expensive. Consider whether payrolling is still attractive for your business.

Different unemployment insurance premiums for permanent and temporary

Since 2020, the type of contract of the employee determines the amount of the unemployment insurance premium. Only indefinite contracts are subject to the low unemployment insurance premium. For other types of employment contract, the high unemployment insurance premium applies. The sector of work is no longer decisive.

When does the low unemployment insurance premium apply?

The low unemployment insurance premium applies only to open-ended contracts in writing. The agreements must be present with the payroll department. These should not be on-call contracts, zero-hours contracts or min-max contracts and are always subject to the high unemployment insurance premium.

Exceptions

For employees under 21 who work no more than 12 hours a week, you may apply the low unemployment insurance premium even on a temporary contract. This also applies to employment contracts under a work-study program.

From low to high

Does employment end within 2 months of commencement? Or does your employee get paid more than 30% extra hours within a calendar year? Then you still have to pay the high unemployment insurance premiums afterwards.

Unemployment insurance premium percentage rates

In 2022, the low unemployment insurance premium percentage was 2.7%, according to the UWV (in Dutch). The high unemployment insurance premium percentage was 7.7%.

This is how you tackle it

• Check who in your company is subject to the high unemployment insurance premium. Consider converting fixed-term contracts to open-ended contracts.
• Make sure employment contracts for an indefinite period are in writing. Record the employment contract (or supplementary sheet) in the payroll records, signed by both employer and employee.