Complying with the Balanced Employment Market Act (WAB)

What is the WAB?

The Balance Employment Market Act (Wet arbeidsmarkt in balans, WAB) which took effect in 2020 aims to 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 3 years. You may offer an employee a maximum of 3 temporary contracts in that period.

If you want to retain the employee after 3 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 6 consecutive months, the 'chain' is broken.  You can then again offer temporary contracts for up to 3 years.

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 around 2.7 million flex workers. 

Dismissal

There are 9 grounds for dismissing an employee who is not performing satisfactorily. 

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 end a contract on the basis of combining several grounds for dismissal. This is called ' cumulative grounds'.  You can only combine grounds 4 to 8 for dismissal. It does not apply to grounds one to three.

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

Transition allowance

What does the WAB offer employees? An employee is entitled, right from the first day of employment, including the probationary period, to a transition allowance upon dismissal. This also applies to temporary employees and on-call employees.

The amount of the allowance is one-third of a month’s salary for each year of employment. With effect from 1 January 2024, the maximum payout (in Dutch) is €94,000 or the gross annual salary for 1 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. Costs of, for example, outplacement and training can be deducted from the compensation payment.

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 6 months of paying it.

On-call workers

You can cover peak workloads in your business with flexible on-call workers. There are a number of rules that apply to on-call contracts

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 4 days in advance, either in writing or electronically. The on-call worker must then come in. A collective bargaining agreement can shorten this period to, for example, 24 hours. If you give less notice than that, the on-call worker does not have to come in.

You must set out on which days and in which time periods you can call on workers. 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.

The employee does 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.

Payrolling

As a result of the WAB, payrolling 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.

The changes

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 are also  entitled to proper pensions. 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.

Different unemployment insurance premiums for permanent and temporary

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 in which the employee works is no longer a factor. 

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. These types or contract 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 programme.

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 2024, the low unemployment insurance premium percentage was 2.64%, according to the UWV (in Dutch). The high unemployment insurance premium percentage was 7.64%.