Netherlands: Latest working life developments – Q1 2018

New proposals for workers with disabilities, possible changes to rules on dismissals, and reform of the supplementary pension system 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 first quarter of 2018.

Discussions continue over employment of workers with disabilities

Since last year, the employment of disabled workers has remained high on the political agenda, with much debate around measures to get disabled workers into regular jobs that suit their skills and capacities. As of 2018, the government reports that more than half of individuals with a disability are not in employment, while the vast majority does want to work. The government is discussing how they can reorganise wages, benefits, and subsidies received by disabled workers. Currently, employed and unemployed disabled people receiving welfare are subject to different subsidy and benefits frameworks, despite being covered by the same law. The Ministry for Social Affairs and Employment proposes an adjustment to the law, introducing ‘wage exemption’ for all target groups under the law. This means that the employer pays individuals a certain amount based on their labour capacity, and the state subsidises the rest of the wage to ensure the worker receives the minimum wage. For disabled workers, this should provide them with a higher income than they receive under the current system. In addition, this approach is more economical than the current system, and the money saved will be distributed to municipal governments with the aim of providing further support for disabled workers who need it. This is one of several measures which have been implemented with the aim to help 200,000 disabled workers find employment during the current government’s term.

Government plans to relax laws on dismissals

The Dutch labour market has strict regulations regarding the dismissal of workers on permanent contracts, making employers hesitant to hire workers long term. As a result, the Netherlands has relatively high levels of flexible, short-term labour contracts, which are often renewed consecutively. To help create a more dynamic labour market, the government expressed their intentions to relax the laws on the termination of employment by expanding the circumstances in which employees can be dismissed, increasing the duration of trial periods for new employees, and increasing the maximum duration of temporary contracts from two to three years. The Netherlands Trade Union Confederation (FNV) opposed these adjustments, notably the latter, saying that they will only lead to more temporary contracts, or ‘flex-work’, as it is known in the Netherlands.

Significant pension reform under new coalition

Pensions have been another subject of much discussion recently. Under the current government, the pension system in the Netherlands will change significantly. The obligatory state pension (AOW) remains, which is supplemented by a pension that employees accrue via their employers. The current system is linked to life expectancy, with the expectation that the pension age will rise to 67 by 2022. All workers pay the same percentage of their wage towards pensions, meaning in effect that younger workers contribute proportionately more to the pensions of their older colleagues. Employer organisations such as the FNV opposed this system. The new government cabinet, Rutte III, which entered office in October 2017, intends to change the system by removing the approach where all workers pay the same percentage of their wage. Instead, the cabinet wants to establish wage-independent contributions into personal pensions so that individuals build up their own pension funds. The FNV is against this approach and does not feel the government puts forward enough financial resources to supplement this change in pension build-up. The aim of the government is to make pension payments age related by 2020, which is set to cost €50 billion during the coming years. As a result, pension rates will see an increase in 2020 to help soften the cost of this transition.

Commentary

In general, the Dutch labour market is performing well and the country is in a period of economic growth and increased spending power. The developments outlined above focus on cabinet plans and the reactions of social partners. The new Dutch government, which entered office in October 2017, intends to introduce a number of changes in the coming years concerning the labour market and working conditions; however, plans are currently still being discussed and implemented. More concrete developments are expected to be revealed as the cabinet term progresses.

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