Big changes to Dutch employment laws from 2020
The new Balanced Labour Market Act (WAB) comes into force on 1 January 2020. The Act covers various aspects of employment law in the Netherlands. But, some of the most far-reaching consequences will be for companies and individuals who use Employer of Record (EOR) services.
EOR is sometimes referred to as ‘payrolling’. It involves the EOR provider effectively acting as the employer of contract or temporary workers. This means they handle the administration of contracts, payroll and deductions.
The most important changes for EOR services under the new WAB rules are:
• Payroll employees, who were not recruited directly by the payroll company and work exclusively for the client, will no longer fall under the temporary employment/agency workers rules
• Payroll employees will be entitled to the same employment conditions as permanent employees.
The intention of the new laws is to achieve more balance between permanent employees and those with more flexible employment arrangements. With this in mind, the maximum term for extending temporary employment contracts will be three years (instead of the current two years). The number of fixed term contracts within the three-year term will still be three employment contracts.
Many companies have enjoyed the flexibility and convenience of EOR services. These services have allowed businesses to scale up and down cost effectively and with less risk. Under the new rules, these EOR services will be more complex and expensive to provide.
What are the likely effects of the new rules?
These new WAB laws will have a dramatic effect on the Dutch labour market. In practice, contractors or freelancers looking for maximum flexibility are likely to register as sole traders. In the Netherlands, such one-person businesses with no employees are known as ZZPs.
Freelancing has been a growing trend in the Netherlands for several years. Many people enjoy the flexibility to create their own opportunities and there can be significant tax benefits to being self-employed. However, the new WAB laws look set to accelerate this trend significantly, perhaps doubling the number of sole traders in the coming year.
To continue to be covered by the flexible ABU temporary employment/agency workers rules it must be agreed that the contractor is allowed to work (simultaneously) for more clients (instead of working exclusively for one client).
What do I need to do now?
WAB laws will affect almost every industry sector, from construction workers to IT contractors, as well as highly skilled migrants working in the Netherlands. All these groups are familiar with short-term contracts or projects and their clients’ business models depend on this flexibility. A transition to permanent employment for all these workers is highly unlikely.
If possible, the contracts will need to be changed to non-exclusive contracts to keep the flexibility!
If, as an employer or employee, you currently enjoy the benefits of using an EOR provider, there will be a transition phase. Current payroll contracts can run to their expiry date, even if that is after 1 January 2020. If you have any questions about complying with the new regulations, please get in touch. We are always happy to advise on the best options for Dutch employment contracts.