Netherlands: Latest developments in working life Q2 2019
Agreement reached on a new national pension system after nine years of debate and a new package of laws to make the labour market more dynamic are the main topics of interest in this article. This country update reports on the latest developments in working life in the Netherlands in the second quarter of 2019.
National private pension plan agreed
The issue of a new national private pension system has been under debate in the Netherlands for about nine years. Therefore, when a preliminary agreement was reached on a new national system in June 2019, this was a cause for celebration and relief amongst the government and social partners.
The Netherlands currently has a dual system of public pensions and private pensions. The public pension, known as AOW, is built up by the government and paid out at the age of 66 years and 4 months. The private pension is built up by an employee and their employer, or by the worker themselves (in the case of solo entrepreneurs, for instance).
The current system has been under increasing pressure due to trends such as an ageing population, which has led to a shrinking labour pool and a greater number of retired people. As such, the current system of building private pensions (whereby the same proportion for all workers is paid into a private pension fund) needs to be adjusted. The pension funds and the rules regarding how much capital and how much financial buffer people must have has been another point of concern and consequently, has become an area in need of reform. Another key issue is that individuals working in physically demanding jobs cannot keep working longer in a sustainable manner, and in some cases, prefer to retire earlier than the national AOW age of 66 years and 4 months.
Under the new pension plan, pension funds now can maintain less of a financial buffer, as long as the people currently eligible for pension payments receive them. This leaves more space for indexing pension payments and prices. In addition, provisions have been included to allow people in physically demanding professions to start working less several years before they hit the AOW age. Per sector and even based on the situation in specific enterprises, employers and employees can now agree upon a trajectory for an individual to follow in order to leave work before the national pension age. The government will also invest up to €800 million between 2021 and 2025 to create sustainable working habits for people, and lifelong learning for all sectors, so that older workers can keep working.
The new pension plan was agreed upon after much discussion between the Ministry of Social Affairs and Employment, the two main national-level trade unions (the National Federation of Christian Trade Unions (CNV) and the Netherlands Trade Union Confederation (FNV)), and the main employer organisation the Confederation of Netherlands’ Industry and Employers (VNO-NCW). The process was facilitated by the Social and Economic Council of the Netherlands, the national tripartite social partner.
The system contains a variety of new rules and approaches, and formal laws and regulations will be developed in the next two years in order to allow it to be implemented. It was welcomed by social partners, though the members of the FNV were more hesitant at first as the situation for individuals in physically demanding occupations was a crucial issue. The union held a referendum on 12–15 June and the members accepted the new pension agreements with a large majority.
New act aims to make labour market more dynamic
The Balanced Labour Market Act, which contains a series of laws and regulations designed to make the Dutch labour market more dynamic, was accepted by the Senate as well as the House of Representatives. This package of laws seeks to remedy the current situation where workers with permanent contracts have so much legal protection from firing or unemployment that employers have become hesitant about hiring anyone new. This means that the Netherlands has very high rates of flexible, fixed-term contracts, which offer much less employment protection and security. The new package of laws seeks to balance the risks and benefits of permanent and fixed-term contracts in a way that helps both employers and employees. With the acceptance of this legislation package, new laws can start to be implemented from 1 January 2020.
One of the most dominant themes in Dutch working life has been the agreement to a new pension system. As this took almost a decade to reach, this has been celebrated by the government and social partners alike. The exact regulations still require further fine-tuning, but the first steps have been made towards a more practical, realistic, and sustainable approach to the labour market and pensions. This issue has almost overshadowed other developments, such as the progress of the Law for a Balanced Labour Market. Only time will tell what sorts of measures are implemented in practice under the new pension approach. Other smaller developments have taken place on issues such as the agreement for more jobs for disabled individuals, and policies are being discussed around the protection of solo-entrepreneurs.