Impact of the Coalition Agreement on labour law practice
18 October 2017
On 10 October 2017, the Coalition Agreement 2017-2021: Confidence in the future was presented to the House of Representatives. A summary of the main topics and changes in this Coalition Agreement for employment law practice follows below.
Introduction of a cumulation ground in dismissal law
The Work and Security Act has made it more difficult to terminate an employment contract because of the requirement of a ‘well-substantiated' ground for dismissal. This has caused problems for employers because there may be several reasons to terminate the employment contract, while non of them can be considered a ’well- substantiated’ ground for dismissal as required by law. This may be the case, for example, when there are imputable acts in combination with inadequate performance and an impaired working relationship. For this reason, a so-called cumulation ground will be introduced, which allows the court to still make a decision as to whether the employer can be required to continue the employment contract. On the other hand, the court may in that case grant additional compensation of up to half of the transitional payment on top of the already existing transitional payment.
More balance in the transitional payment
Employees will be entitled to a transitional payment from the start of the employment contract (instead of after two years).
The transitional payment will amount to one-third of the monthly salary for each year of employment, also for contract periods longer than 10 years (a cutback for employees compared to the current system). The transitional scheme for those aged 50 and over will be maintained.
The possibility of deducting training costs from the transitional payment will be extended. Training within the own organisation aimed at another job can also be deducted from the transitional payment. There will be no changes for training aimed at employability within one's own position, it will still not be possible to deduct this from the transitional payment.
Controversial transitional payment proposals to go through
The proposals to (1) compensate employers for the transitional payment due in the event of dismissal of an employee due to long-term incapacity for work and (2) not allow a transitional payment for commercial reasons if a collectively agreed scheme is applicable (with a financial paragraph that provides for an allowance upon termination of employment) will go through.
Provisions on succession of fixed-term employment contracts
The principle that in successive contracts the “counter will be reset to zero” after a six-months’ interval will be maintained. On a sectoral level, it should be possible to vary and shorten the intervals if required by the work. The period after which successive temporary contracts will be converted into open-ended contracts will go back from two to three years.
If an employer offers an open-ended contract immediately (i.e. as the first contract), a probationary period of five months will be possible. For long-term contracts (more than two years), this will be a maximum of three months. In other cases, the rules on probationary periods will remain as they are at present.
Payrolling and zero-hours contracts
Payrolling and zero-hours contracts are designed in such a way that they are instruments for ‘taking responsibility for the needs’ of employers and not for competition on employment conditions. With regard to payrolling, the Cabinet has come up with a legislative proposal to declare the eased labour law regime of the temporary employment contract inapplicable and to treat employees at least equally with employees of the hirer in terms of employment conditions. This relates to further agreements in the areas of continued payment of wages during illness, dismissal law, and the Assessment of Employment Relationships (Deregulation) Act. Furthermore, the Cabinet wishes to prevent permanent availability in the case of zero-hours contracts where this is not required by the nature of the work so that employees will also be able to accept other (part-time) jobs.
Obligations for employers in the areas of illness and incapacity for work will be reduced
For small employers (up to 25 employees), the period of continued payment of wages will be reduced from two years to one year. The responsibility for continued payment of wages and reintegration will be transferred to the Employee Insurance Agency (UWV) in that year. The collective costs of this second year of illness will be covered by uniform contributions, payable by the small employers. The protection against dismissal during incapacity for work will continue to be 2 years.
More incentives in invalidity benefit schemes towards employment
In the future, suitable work will be assessed more closely when determining the degree of incapacity for work when someone starts claiming benefits under the Work and Income (Capacity for Work) Act. This will result in fewer people being declared fully incapacitated for work.
The Assessment of Employment Relationships (Deregulation) Act will be replaced
- It has been determined that for self-employed workers without employees there will always be a contract of employment in the case of a low rate in combination with a longer duration of the contract or a low rate in combination with the performance of regular business activities. A low rate will be defined as corresponding to wage costs up to 125% of the statutory minimum wage or to the lowest wage scales in collective agreements. A single rate will be chosen to delineate the lower end for the entire labour market. On the basis of the arguments used, this rate is likely to be in the range of 15 to 18 euros per hour. A longer duration has been defined as more than three months.
- At the higher end of the labour market, an ‘opt-out’ for payroll tax and employee insurance will be introduced for self-employed entrepreneurs in the case of a high rate in combination with a shorter contract duration or a high rate in combination with the non-performance of regular business activities. In the case of a ‘high rate,’ the Cabinet proposes a rate above 75 euros per hour. A shorter duration is defined as shorter than one year.
- For self-employed persons above the ‘low’ rate, a ‘client statement’ will be introduced. This will give clients clarity and certainty in advance when hiring independent entrepreneurs. Clients will be provided with this statement by completing a web module, as is the case in the United Kingdom, for example. This client statement will give clients certainty in advance about indemnification of wage tax and employee insurance premiums (unless the web module has not been completed truthfully).
The Cabinet will investigate whether and how independent entrepreneurship can be given its own place in the Civil Code through the introduction of an entrepreneurial agreement.
Extension of paternity leave for partners
As of 1 January 2019, the paternity leave for partners will be extended from two to five days, with employers paying the full salary. In addition, as from 1 July 2020, partners will receive five weeks of supplementary paternity leave, to be taken within six months after the birth at 70% of the daily wage (maximum 70% of the maximum daily wage).
The rules on adoption leave will be extended from two to six weeks.