In the autumn of 2008, the social partners reached agreement with the Dutch cabinet on the country’s dismissal law. Resolving the issue had previously been entrusted to an advisory committee, the Bakker Committee, as the government parties opposed one another directly. However, the committee’s recommendations were again overruled in the autumn agreement. While employees will continue to enjoy protection from dismissal, the benefit level will be reduced and a ceiling introduced.
Agreement reached on dismissal law
The social partners reached agreement on the country’s dismissal law with the Dutch cabinet in the autumn of 2008. Dismissal law in its current form and the protection it offers will remain the same for 90% of all employees. The dismissal test conducted by the courts, which aims to determine if the dismissal is justified, will also remain unchanged. Only a small group of employees who earn a gross income of more than €75,000 a year will lose ground, as their dismissal compensation will be subject to a maximum limit of one year’s salary. The Dutch Trade Union Federation (Federatie Nederlandse Vakbeweging, FNV) is prepared to accept this deterioration in compensation for higher wage earners, provided that employees with lower incomes continue to be protected as before. Thus, it will become cheaper for employers to dismiss employees earning a gross annual income of more than €75,000. The Confederation of Netherlands Industries and Employers (Vereniging van Nederlandse Ondernemingen-Nederlands Christelijk Werkgeversverbond, VNO-NCW) is also satisfied with this adjustment since it will now become cheaper to dismiss older employees with a longer track record.
Resolving the issue of dismissal had previously been entrusted to an advisory committee because the social partners and the two biggest government parties directly opposed one another. Nevertheless, the recommendations issued by the so-called Bakker Committee in the spring of 2008 (NL0807019I) were again overruled by the agreement reached in the autumn. Senior executives representing VNO-NCW and FNV reached this agreement in secret. The other employer associations and organisations were only informed afterwards, as was the Minister of Social Affairs and Employment, Piet Hein Donner. First, the minister adopted the agreement. Then, the Dutch House of Representatives approved the agreement. The other organisations followed this approach, despite raising concerns about the procedural sequence. Criticism arose in employee circles too, especially from the Federation of Managerial and Professional Staff (Vakcentrale voor middengroepen en hoger personeel, MHP), whose members may be subject to the maximum limit of one year’s salary for dismissal compensation.
Subdistrict court changes less costly for employers
The situation concerning dismissal law appears to involve more than political agreement alone. The subdistrict courts have decided to make dismissals ‘cheaper’ for employers, with effect from 2009, because they believe that the existing system is outdated. In the Netherlands, dismissal applications can be brought before a Centre for Work and Income (Centrum voor Werk en Inkomen, CWI). While relatively inexpensive, the procedure is lengthy. Half of the employers choose to approach the subdistrict courts to test if dismissal would be lawful. In approving dismissals, subdistrict courts apply a formula to determine the appropriate level of dismissal compensation. The number of years of service serves as the basis for determining the amount of compensation and count for more if the employee is older or has worked for a greater number of years. While this procedure is short, employers consider it relatively expensive.
The subdistrict courts have now decided to downwardly adjust the dismissal compensation formula: a year worked at the same company now serves as the basis for calculation. However, the extent to which that year counts in calculating dismissal compensation has now been downwardly adjusted for each age category. In practice, this decision means that a 52 year-old employee who has been with the same employer for 30 years will now be awarded 27 instead of 37 months’ dismissal compensation. Younger employees up to the age of 35 years will be particularly disadvantaged by the change in the formula. In amending the system, the subdistrict courts took account of scarcity in the labour market. Nevertheless, whereas the assumption then was that younger employees would be able to find a new job quickly, the picture began to change significantly in November 2008. As a result, the government parties are not particularly pleased with the timing of the decision taken by the subdistrict courts. While the Christian Democratic Appeal (Christen Democratisch Appèl, CDA) points out that the adjustment will mainly affect older employees, the Labour Party (Partij van de Arbeid, PvdA) has threatened legislation if the new method of calculation turns out to be disadvantageous for employees.
Fortis Bank Nederland indifferent to agreements
The Fortis Bank Nederland was the first to breach the above provisions in concluding its collective agreement in December 2008. The new collective agreement for the bank departs from the aforementioned provisions. In addition to a salary increase of 3.5%, the collective agreement disregards the maximum limit stipulated for dismissal compensation in cases where employees earn an annual income in excess of €75,000. The new subdistrict court formula is also rendered redundant. The parties involved in the collective agreement refer to the national agreements as being unjust. Because the state took over ownership of the bank in the autumn of 2008 to avoid bankruptcy, it is questionable whether the bank can take so little notice of agreements reached between the social partners and cabinet at a national level.
Marianne Grünell, Hugo Sinzheimer Institute (HSI)