Steps taken to modernise the labour market

In November 2013, the government of the Netherlands put forward three legislative proposals to modernise the labour market. They cover flexible labour relations, dismissal law and unemployment benefits. The broad outline of the proposals has already been established in agreement with the social partners. They are intended to streamline procedures, standardise benefits and protect employees with flexible contracts. Zero-hours and on-call contracts are to be banned.

Focus of reform proposals

The Minister of Social Affairs, Lodewijk Asscher, hopes to reform the labour market by addressing three key issues.

First, from 2015, he proposes that temporary employees should be given permanent contracts after two years of service rather than three, as currently stipulated by law (NL1307049I). Secondly, he proposes that, from 1 January 2016, the right to unemployment benefits should be cut from 38 to 24 months. Finally, also with effect from 1 January 2016, he proposes simplifying dismissal law to make the financial outcome of the dismissal procedure clearer for employees.

Dismissal and unemployment benefits

The overall procedure for dismissal will be streamlined to make it much clearer.

Two procedures will remain, one through the Social Security Agency (UWV) – which is responsible for employees’ insurance schemes – in the case of dismissal for economic reasons and, where there are personal reasons for dismissal, one through the subdistrict courts.

There will be an end to the sometimes random disparity between dismissal compensation levels. The ‘golden handshake’ awarded in some cases by the subdistrict court will cease to exist and each employee dismissed at the request of an employer will receive the same level of statutory dismissal compensation. The amount of compensation awarded will be a third of the employee’s monthly salary for each year worked, up to a maximum of either €75,000 or the worker’s annual salary, whichever is higher. The qualifying period is a minimum of two years’ service, and a dismissed employee will still be able to claim unemployment benefit.

The amount of time a person is entitled to claim unemployment benefit has been reduced in recent years and the new proposals further reduce it from 38 to 24 months. This reduction will be introduced in phases from the start of 2016 to 1 July 2019. The level of benefit to which a person is entitled will remain linked to the level of salary they received in their last job. The social partners have negotiated sufficient leeway in the social agreement to reach mutual agreement on how to limit the impact of this cutback.

Temporary contracts

The minister also wants to curb the abuse of flexible employment contracts. At the moment, employers can offer an employee three consecutive temporary contracts. The proposal is to oblige employers to turn temporary appointments into permanent contracts after two years. If this does not happen, there must be a six-month gap in employment before a new temporary contract can be offered to the same worker.

Currently a permanent contract must be offered after three years, but employers simply do not offer the fourth contract which would give the employee the right to a permanent appointment. It remains to be seen whether the new rule will encourage employers, particularly those in sectors where there is a surplus labour supply, to now offer permanent contracts after a two-year period. The six-month break proposed by the minister will diminish the potential for employers to abuse the system.

Temporary contracts certainly pose a problem, but this issue is small compared with the level of abuse in relation to zero-hour and on-call contracts. The minister has decided to simply ban such contracts and this has already taken effect in the healthcare sector. The social partners can call for such a ban in other sectors as well.

Commentary

The changes, streamlining and rationalisation of certain measures proposed by the minister are much less extreme than those agreed in 2013 by the government coalition parties, the People’s Party for Freedom and Democracy (VVD) and the Labour Party (PvdA). These agreements were watered down by the social agreement concluded with the social partners in the autumn.

Critics in parliament and beyond have said that these measures will do little to reduce existing unemployment levels. The counter-argument offered by the cabinet is that these measures are not intended to address unemployment, and the issue was addressed in the job plan drawn up in 2013 in cooperation with the social partners (NL1307039I).

The new proposals mean that outdated procedures will be streamlined, benefits will be standardised and employees with flexible contracts will be protected more, at least in principle. At present, it looks as if there is enough support in parliament to implement these far-reaching proposals.

Marianne Grünell, University of Amsterdam, HSI/AIAS