News - Netherlands

Netherlands - September 2013

Delay to unemployment benefit reforms and changes to dismissal laws

On 11 April 2013 the Dutch government and the social partners came to an agreement on the social agenda for the employment market in response to the current economic crisis.

No change until 2016

It was decided that reforms to the WW (the Dutch 'Unemployment Insurance Act') and the law governing dismissal will not be implemented before 2016.

Currently, the maximum length unemployment benefit (WW) is 38 months. From 2016 this will gradually decrease by 1 month each quarter to a maximum period of 24 months.

Change to unemployment benefit

In addition, unemployed workers will have to accept jobs they consider to be beneath their level of education and work experience. This is currently only required after receipt of 6 months’ unemployment insurance.

Changes to dismissal laws and fixed term contracts

Most importantly, the law governing dismissal will be regulated in one law. The two dismissal options (via the UWV - Employee Insurance Agency - and the subdistrict court) will remain availabl eto the employer only. The employee can terminate the employment agreement simply by giving notice to the employer.

A procedure can be initiated with the UWV for dismissal for commercial reasons and dismissal due to lengthy incapacity. The subdistrict court should be used by the employer for dismissals relating to the individual employee’s conduct or capability or in the case of the breakdown of a working relationship. In cases of employment lasting two years or longer, the employer will pay a transitional remuneration consisting of 1/3 of the monthly wage for each year of service and, as at the 10th year of service, half a month’s wage, up to a maximum of €75,000 or a year’s salary if that is higher. A transitional arrangement will be created for employees over the age of 50.

From 1 January 2015 measures will come into effect to strengthen the position of flexible workers. With regard to temporary contracts, the current requirement of 3x3x3 will be changed to 3x2x6 (meaning 3 contracts in 2 years with an interval of 6 months) so that flexible workers can become eligible for a permanent contract more quickly.

It will no longer be possible to include a non-competition clause in a temporary contract except in cases of (currently undefined) special circumstances. In addition, probationary period for contracts lasting 6 months or less will not be permitted.

Commentary

The proposed reforms reflect the so-called "flexsecurity" approach of the Dutch government with regards to employment law.

On the one hand, the amount of severance payments will be seriously limited, on the other hand, flexworkers will be better protected since they will have a permanent contract more quickly.

We consider that the main impact of the new rules will be the limitations on the amount of the severance payment. Currently, the employee can apply for a severance payment which isapproximately 1 month’s salary per year of service, with no maximum. That will change drastically, which will make it much cheaper for employers to dismiss employees.

Resources

Dutch Government News Release of 11 April 2013-09-13

Dutch Government News Release of 1 September 2013

For further information or to discuss any of the issues raised, please contact Edith Franssen on +31(0)2057854525 or +31(0)623004342 at Loyens & Loeff, Amsterdam.

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