As described in earlier contributions of ours, the Balanced Labour Market Act (WAB) will take effect from 1 January next. With a little over a month to go, it is now time to look at which steps you need to take to operate WAB-proof and to prevent unwanted situations.
We have put together an overview of the most important action points for you.
- Copy of the written employment contract in your records
From 1 January 2020, under the WAB, you are required to keep a copy of a written employment contract for all your employees in your records. This is sometimes still missing for many older employees. So check whether you have a written employment contract in your records for all your employees. If not, you must still record a written employment contract with your employee. This way, the competent authorities (UWV and Tax and Customs Administration) can check what type of contract is involved. This ensures you continue to pay the “lower” unemployment insurance premium from 2020 for employees with an indefinite-period contract and fixed hours.
- Entries on the payslip and in the wage tax return
Make sure that, from 1 January 2020, every payslip and the wage tax return states whether it concerns employment for a fixed or indefinite period, whether it is also an on-call agreement, and whether there is a written employment contract: so, for a fixed or indefinite period, on-call agreement, etc. This is important for the lower unemployment insurance premium.
- Check which fixed-term contracts fall under the widened chain rule
Under the WAB, from 1 January 2020 the chain rule is widened again from 24 months to 36 months. Within that period, you may still offer 3 temporary contracts. After that, it automatically becomes an indefinite-period contract if you let the employment continue. It is wise to now map out clearly which temporary contracts can still be renewed under the new chain rule from 2020 onward, and which contracts will, by operation of law, become an indefinite-period contract in 2020.
N.B. The widened chain rule does not apply if a deviating chain rule has been agreed in the CAO that continues to apply even after 1 January 2020. That is, for example, the case in the Cleaning CAO. If you fall under this CAO, you must still observe the 24-month chain rule.
- Be alert to the changed dismissal rules and calculation of the transition payment
Under the WAB, it becomes easier to dismiss someone on personal grounds. From 1 January 2020, you can base a request for dissolution before the subdistrict court on multiple grounds (the so-called “i-ground” or “cumulation ground”). Therefore, have an employment lawyer check the state of your dismissal files and whether a dismissal becomes possible in 2020 and what you will have to pay for it.
Dismissal in 2020 means, after all, that you owe a transition payment, even if the employee has been employed for less than 2 years and you do not renew the contract. The law no longer distinguishes between these cases. The transition payment itself does become lower, especially for older employees and employees with long service. If you wish to dismiss such employees, it is better to wait until 2020 to do so.
- End your dormant employment relationships if the employee asks for this
On Friday 8 November 2019, the Supreme Court ruled that keeping dormant employment relationships going (employees who are no longer actually working for the employer due to permanent incapacity for work and whose continued wage payment has stopped) constitutes poor employership. This is because it deprives employees of their entitlement to a transition payment. With this ruling in hand, the hundreds if not thousands of employees expected still to be in a dormant employment relationship will likely request termination of their employment from their employer after all.
If an employee makes a request for termination, they will initially claim damages. Subsequently, through negotiation, this will result in a request to terminate the employment relationship by mutual consent. The employee will initially demand a severance payment calculated based on a future termination date. However, the employer is not legally required to pay more in severance than the transition payment it would have owed on the day after the day on which the employee could have been dismissed due to incapacity for work. As a rule, that is 104 weeks after the first day of incapacity for work. Via the route of mutual consent, employees may also try to obtain compensation for other items, such as damage due to not being able to enjoy the transition payment sooner, the statutory increase normally due on wage claims, or statutory interest, etc., up to the legal end date of the employment. The extent to which the employer goes along with this all depends on the negotiations and the employer’s wish to avoid the UWV route.
From 1 April 2020, you can apply for compensation from the UWV if you have paid a transition payment to a long-term sick employee whose employment you have ended or are going to end after 104 weeks, via the UWV or via a settlement agreement. You do, however, have to advance the transition payment yourself. Fortunately, this compensation scheme also applies to transition payments paid from 1 July 2015 onward. Before 1 July 2015, no transition payment was yet legally due upon the dismissal of long-term sick employees.
Note, however, that years of service before 1 July 2015 do of course still count towards the calculation of the transition payment you pay when ending the employment of long-term sick employees! Fortunately, due to the changed formula in 2020 (1/3 of a month’s salary per year of service), the transition payment does become more advantageous for employers.
- Convert flexible contracts to permanent indefinite-period contracts to avoid a higher unemployment insurance premium
With the introduction of the WAB, from 1 January all employers will pay a 5 percentage-point unemployment insurance premium on top of a nationally set base percentage, for temporary contracts and on-call contracts (such as zero-hours and min-max). The base percentage is expected to be 2.94%. The high percentage therefore comes to 7.94%. Exactly how much more you will pay depends on how much premium you were already paying. So it does not necessarily have to come to a full 5% but could also be less.
In the sectors of agriculture, construction, cultural institutions, general hospitality, and painting, a low and high sector premium is already used because of seasonal work, depending on the duration of the employment contract. Here, the effect of this measure will therefore be less drastic. Furthermore, an exception is made for employees under 21 who work less than 48 hours per 4 weeks.
In any case, it is wise to take a critical look at whether the higher unemployment insurance costs outweigh the flexibility such contracts offer. Do you actually need that flexibility? Or is the employee already, in practice, working fixed hours at fixed times but still has a zero-hours contract? Then it is better to adjust the contracts accordingly to avoid having to pay the higher unemployment insurance premium.
- Take stock of who your genuine on-call workers are, so you can comply with the new rules on time
Do you work with on-call contracts, such as zero-hours contracts and min-max contracts? Then check here too whether the contracts still match the actual situation. This is because, with the introduction of the WAB, on-call workers are much better protected from 1 January 2020 by new statutory rules. The on-call agreement is then a statutorily regulated variant of the employment contract.
Deadline 1 February 2020
One of these rules requires the employer, after every 12 months, to make the on-call worker an offer of a fixed number of hours based on the average number of hours per week over the past 12 months. This rule has immediate effect on 1 January 2020. This means that you must make an offer, no later than 1 February 2020, to on-call workers who, on 1 January 2020, have already been employed for 12 months or longer.
The employee can accept or decline the offer if they prefer to keep working as a flexible worker. Of course, you can also agree, in consultation, on a different number of fixed hours than offered. Note that you must always make the offer in writing. Make sure the employee signs for receipt of the offer and keep a copy of this in your records. This way, you can always prove that you made a correct offer. If you do not make an offer, the employee can bring a wage claim for the fixed hours that were not offered. That is quite a risk, since a wage claim only becomes time-barred after 5 years, and a statutory increase and statutory interest may also be added on top.
- On-call workers: check your system for calling up or scheduling
Furthermore, you must implement the new rule in your scheduling system that an on-call worker must be called up or scheduled at least 4 days before the shift. If you do not observe this period, the employee is not obliged to come to work. Moreover, the call-up or scheduling must be done in writing. This can also be done digitally via email or a scheduling system.
If you change or cancel the shift less than 4 days in advance, your employee is also entitled to payment for the hours for which they had been scheduled. Calling up or making changes by phone call is inadvisable. An employee must also actually be able to view the schedule 4 days in advance. The call-up period can, incidentally, be shortened in an applicable CAO.
N.B. If you have set the number of working hours per time unit at 40 hours per week or 174 hours per month, but the working times are scheduled each time, then the employee does not fall under the definition of an on-call worker! In that case, you are still bound by the Working Hours Act, under which you must inform the employee of the schedule at least 28 days in advance and communicate any changes at least 24 hours in advance.
- Payroll employees: same terms of employment as your own employees
Do you work with payroll employees? With the introduction of the WAB, these employees also get a stronger legal position. From 2020, they will have the same primary and secondary terms of employment as employees officially employed by your company. Payroll employees also gain entitlement to an ‘adequate’ pension scheme. There is a chance you will be charged more by the payroll company for this type of employee. So check what your payroll service provider’s plans are and take timely action to avoid surprises.
Questions or advice?
Should you have any further questions about the above, or would like advice, please contact us. We are happy to guide you through the new WAB rules.
