Netherlands: Social and Economic Council proposes changes to unemployment financing

The tripartite Social and Economic Council has unanimously agreed guidelines aimed at securing a sustainable labour market in the Netherlands. The guidelines propose changes to the financing of the unemployment benefit system.

SER guidelines on unemployment

Guidelines were issued on 20 February 2015 by the Netherlands' Social and Economic Council (SER) that take into account the provisions of the 2013 Social Pact. The Social and Economic Council is the country’s main tripartite advisory body on social and economic issues. Their guidelines were drawn up in response to a number of factors: the increasingly dynamic labour market and its increasing proportion of flexible jobs; the gradual decentralisation of labour market policy (and of the authorities involved in regulating it) from national to regional and local level; and changes in legislation on the role of unemployment benefits, moving from insurance against unemployment towards a more hybrid instrument in which taxation strongly features.

The SER focuses on three issues:

  • reintegration services for the unemployed;
  • strengthening cooperation between the government, the unemployment benefit board (UWV) and social partners, both at national and regional levels;
  • the financing of the unemployment benefit system, mainly at the level of collective agreements.

Services to reintegrate the unemployed

The main actors in the working lives of employed people are other employed people, employers and social partners (either directly or indirectly through training and education funds). However, when a person becomes unemployed, the public authorities are the main point of contact and they mainly operate at regional level. This transition creates problems with co-ordinating response and involvement.

According to the SER, the 2013 social pact between the social partners offers starting points for tackling these transition problems. In the pact, social partners said they wanted to be responsible for policies on unemployment prevention, support, placement services and reintegration. The SER has therefore proposed establishing independent regional advice centres that are open to employees at risk of unemployment and to those who have recently become unemployed. Every applicant for help and advice will be treated equally, regardless of union membership, coverage by collective agreements or type of employment contract. Final responsibility for policy will rest with the Cabinet and the Parliament, with a strong advisory role for the social partners.

Financing the unemployment benefit system

The SER also proposes changes to the way the unemployment benefit system is financed. Part of the 2013 social pact was an agreement that employers and employees would take joint and equal financial responsibility for the system. Currently employees do not pay contributions to it while employers, on average, contribute 2.07% of their wage bill.

Another element of the social pact was that the social partners want to increase the insurance dimension of the unemployment benefit system (and reduce the tax burden).  The main instrument would be to set the contributions at cost-covering levels in a longer term perspective (taking the average costs over 10 years as the starting point).

Impact of recent changes in legislation

Following the new Act on Work and Security (WWZ), from 1 January 2016 the maximum period of entitlement for unemployment benefits will be reduced from 38 months to 24.  Moreover, the statutory build-up of entitlement to unemployment benefit will be reduced. The new legislation still allows social partners, through the provisions of collective agreements, to agree private insurance arrangements that entitle unemployed workers to supplementary benefits.

However, the SER would like it to be made possible to shift the responsibility for managing these agreements to the public authorities or, alternatively, to pension funds  where administrators are already familiar with managing supplementary arrangements.

Time frame for implementation

Implementation of the SER proposals is set for 1 January 2020. However, the SER would like some transitional measures to be implemented. These include the re-introduction of employee contributions to the unemployment benefit system, and also the contributions to the private supplementary arrangements.

Commentary

At first sight, many aspects of the SER's advice is rather technical, but it addresses some politically sensitive issues. The most important of these is the role of social partners in benefit schemes. In the early 1990s, responsibility for the employee disability scheme was taken away from the social partners because the Cabinet and Parliament of the Netherlands felt the system had been abused, particularly by businesses that had used it as an easy way to get rid of part of their workforce. The number of employees covered by the scheme almost reached one million.

Since then, initiatives to give social partners any responsibility for employee insurance schemes have faced strong opposition, especially from liberal parties. It is therefore remarkable that the SER was able to draft unanimously agreed guidlines. One major reason for this is that although the role of the social partners would increase, ultimate responsibility still remains firmly in the hands of the government.

However, it remains to be seen whether all SER’s advice will be implemented, especially for the financing of the system. This will be heavily dependent on the political set-up of Parliament at decisive moments in the legislative process.  

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