The Netherlands: social partners’ involvement in unemployment benefit regimes

  • Observatory: EurWORK
  • Topic:
  • Published on: 20 December 2012



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Country:
Netherlands
Author:
Robert Knegt
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Disclaimer: This information is made available as a service to the public but has not been edited by the European Foundation for the Improvement of Living and Working Conditions. The content is the responsibility of the authors.

Since 2002 the role of social partners in the Dutch unemployment benefit system has been reduced to an advisory one in the development phase of unemployment benefit (UB) programmes. There is no involvement any more of social partners in the implementation, management and monitoring phases of UB programmes. In 2006 unemployment insurance (UI) eligibility criteria have been both tightened (raise of the required number of weeks of previous employment) and lessened (less strict as to the involuntary character of unemployment). In reaction to the financial crisis the government has temporarily opened up possibilities of short-time working arrangements in order to prevent mass redundancies in enterprises that suffered a sudden reduction in demand.

1. The characteristics of the UB system in the country

1.1. Recent changes/transformations of the UB system in your country:

In the last 10 years, has the country’s UB regime been modified? Have new forms of interventions been introduced?

  • Regarding the Unemployment Insurance (UI):

In 2003 and in particular in 2006 a number of changes in the Dutch UI benefit system have been carried through at the initiative of the Dutch government. Apart from alleged budgetary reasons (an ever increasing volume of benefits), they have been based on two policies: activation of the unemployed, and turning away from the use of the UI scheme as a smooth retirement route as it was consciously practised in the 1980’s.

Eligibility has been restricted by denying those getting unemployed after 11 August 2003 the right to a ‘continued benefit’ (a ‘flat rate’ benefit without means test, during two years after the end of earnings-related UI; for those losing their job at age 57,5 the maximum was 3,5 years to make for a ‘smooth slide’ into retirement). The declared aim of the government was both to increase the financial sustainability of the UI scheme and to contribute to the activation of unemployed workers. The measure was confirmed by a change in the law, effective as from 1 January 2004 (Wet 19-12-2003, Stb. 2003, 546).

By abolishing the short-term benefit (a flat-rate benefit for those who had worked 26 out of 39 weeks (the so called weeks-requirement), even if for a small number of hours a week, during 6 months) the government intended to contribute to the simplification and feasibility of the UI benefit scheme and to activation policy aims. Under the new scheme those who only meet the ‘weeks-requirement’ (but have not worked 4 out of the last 5 years) receive an income-related benefit, but only during 3 months. The unions and MKB resisted the measure as an unnecessary and inexpedient restriction of UI-entitlements, VNO-NCW applauded it for its contribution to activation.

In 2006 the government initiated a number of measures all aiming to increase the financial sustainability of the UI scheme and to contribute to the activation of unemployed workers. As of 1 April 2006 the entry requirement of having been employed at least 26 weeks during the previous 39 weeks has been tightened to 26 out of 36 weeks. Different, lower requirements that had been applied to certain categories of (i.p. seasonal) workers have been cancelled (Wet 30-3-2006, Stb. 2006,167).

As from 1 July 2006 the possibilities for unemployed workers to make a start as self-employed workers, while keeping part of their UI benefits, have been expanded (Wet 28-06-2006, Stb. 2006,303).

As from 1 October 2006 the maximum duration of UI benefits has been reduced to 38 months (it was 60 months before. A unified benefit now starts off at the level of 75 % of last earnings during the first two months, and then falls back to 70 % thereafter; as before, these earnings are only considered in so far they do not exceed a maximum day wage of (in 2012) € 191,82 (equals a yearly wage of € 50 065). ) (Wet wijziging WW-stelsel, 28-06-2006, Stb. 2006, 303).

In a reaction to the consequences of the financial crisis, the Minister of Social Affairs has as from 1 January 2009 temporarily allowed for a reduction of working hours by enterprises confronted with a sharp (30%) reduction in the volume of trade. They may apply for an exemption from the ban on working time reduction; if granted, the workers concerned receive a temporary UI benefit. The Minister of Social Affairs intended to end the reduced working hours scheme at 1 January 2010, but the Labour Foundation (Stichting van de Arbeid, STAR) urged him (by letter of 4 December 2009) to prolong it to prevent enterprises from losing qualified workers for the only reason of a temporary reduction in demand. The Minister did prolong the scheme, though subject to budgetary restrictions. At 21 March 2011 (effective as from 1 July 2011) the measure has been withdrawn. In particular companies in the building and metal sectors have lately been applying for short time working arrangements.

  • Regarding the UA:

Two arrangements provide for an unemployment assistance scheme for elder workers whose UI benefit has expired: the Older Unemployed or Partly Disabled Workers Income Scheme Act (Wet inkomensvoorziening oudere en gedeeltelijk arbeidsongeschikte werkloze werknemers: IOAW, Wet 6-11-1986, effective as from 1-1-1987, latest version published in Stb. 1995, 205)) and the Older Unemployed Workers Income scheme Act (Wet inkomensvoorziening oudere werklozen: IOW; Wet 19-06-2008, effective as from 1-12-2009, Stb. 2008, 340). The latter has been introduced as a partial correction of the consequences for older workers (60+) of the 2006 reduction of the maximum duration of UI benefits, mentioned above.

  • Regarding the SA (if relevant):

As from 1 January 2004 the General Assistance Law (Algemene bijstandswet) has been replaced by the Work and Assistance Law (Wet werk en bijstand (WWB),Stb. 2003, 375) which tends to prioritize work above assistance and aims to further short-term re-instatement of jobless applicants.

Partly as a consequence of changes in the UI conditions, during the last ten years the percentage of unemployed workers who, after expiry of their UI benefit, claim social assistance has risen from 4 to 8 (source: UWV Kennisverslag 2012).

1.2. The main characteristics of the UB system as it is now

1.2.1. Unemployment Insurance.

  • Coverage:

Insured are employees and some categories of workers that have been put on the same footing as employees (including public servants). Self-employed workers are not covered. The UI is set up as a uniform scheme, with only few exceptions for special categories of workers.

  • Eligibility:

An insured worker who loses five or more hours of work (or, if he works less than ten, at least half of them), who has no more claim for payment of these lost hours, who is not him- or herself culpable for the loss, and who is available for, and actively searching for another job, will be entitled to an UI benefit if (s)he meets the further requirement of having worked during 26 of the 36 weeks immediately preceding the loss of hours (exception: for performing artists the ‘weeks-requirement’ is 16 out of 39 weeks).

  • Duration:

The duration of the UI benefit depends on whether a worker meets the ‘years-requirement’: employment of at least 52 days in at least four of the previous five years. If not, the benefit is restricted to three months. If yes, then the (maximum) number of months of benefit equals the number of years of work experience, with an absolute maximum of 38 months.

  • Replacement rates:

During the first two months the benefit is 75%, from the third month 70% of previous earnings. These earnings are only considered in so far they do not exceed a maximum day wage of (in 2012) € 191,82 (this equals a yearly wage of € 50 065).

  • Financing:

The funds for UI benefits are being filled by premiums to be paid by employers and employees. As from 2009 the government has set employees’ premium to zero, thus making employers the only contributors.

  • SP involvement:

Social partners are only involved in the development of UI programs, by way of consultative institutions at the national level, but not in the implementation.

1.2.2. Unemployment Assistance. Are forms of UA present? If yes, please indicate their general characteristics with specific attention to:

  • Coverage:

The IOAW (see above) provides for an unemployment assistance benefit for workers who became unemployed at or after the age of 50. The IOW is a temporary arrangement (starting 1 December 2009 and expiring 1 July 2016, the government is considering extension) which is somewhat more favourable to those who became unemployed from October 2006 until July 2011 and were at that moment 60 years or older. The difference is that the IOAW includes a means test regarding partner earnings, which the IOW ignores.

  • Eligibility:

One should have the age of 50 (IOAW) or 60 (IOW) at the moment of getting unemployed and have been receiving a UI benefit for more than three months which is now expired. One should also be actively looking for a job.

  • Duration:

Both IOAW and IOW benefits last till the retirement age.

  • Replacement rates:

Benefits are at social minimum level: as to the IOAW depending on household composition and partner income, as to the IOW at a maximum of 70 % of the minimum wage.

  • Financing:

Both are financed from general government funds.

  • SP involvement: No.

1.1.3. Social Assistance. Are SA programmes with a direct relationship with the UB system and/or SP involvement present? If yes, please highlight the factors underlying such a relationship.

The WWB provides for a municipal, general benefit scheme for jobless people whose other sources of income are below minimum level. There are neither special connections with the UB system nor SP involvement in this scheme.

2. SP involvement in the UB regime

2.1. The development phase In your country, did SP participate in the development phase of UB programmes over the last decade?

Yes.

UI programmes:

There is a long tradition of advisory involvement of social partners in the development of social legislation, including UB programmes, both by way of the bipartite Labour Foundation (Stichting van de Arbeid, STAR) and the tri-partite Socio-Economic Council (Sociaal Economische Raad, SER, in which one third of members is appointed by the government), both at the national level. They used to be regularly consulted by the government and their advisory reports have more than once been integrally adopted into new legislation, for instance an unanimous STAR advice in the 1998 Flexibility and Security Law (Wet flexibiliteit en zekerheid). Since 2002, however, the government started to pass over social partners, to their annoyance. Only after a 300,000 strong demonstration on 2 October 2004, organized by the unions, the government was prepared to an agreement, among others containing its request – and the promise to be receptive of them - of SER recommendations on a ‘future-proof’ UI-system. Negotiations within the SER resulted in the unanimous recommendation of 15 April 2005 which has indeed been essentially adopted by the government and has resulted in the 2006 reforms set out above.

The mobilization of resistance by the unions in October 2004 has thus regained some of the influence of social partners; according to government and employers’ spokesmen, however, the considerable internal differences of opinion between unions and employers’ organizations in the SER and the resulting difficulties of reaching unanimous advices continue to undermine social partners’ influence on the design of social policies.

UA programmes:

The 2005 advice and the 2006 legislation comprised also an UA scheme; what has been mentioned above applies here also.

2.2. The implementation phase

In the Netherlands social partners have no role in the implementation of UB programmes.

2.3. The management phase

In the Netherlands social partners have no role in the management of UB programmes.

2.4. The monitoring phase

In the Netherlands social partners have no role in the monitoring of UB programmes. Social partners are, however, participating in the Council for Work and Income (Raad voor Werk en Inkomen, RWI), a consultative institution in which employers’ organisations, unions and municipalities discuss and give advice upon labour market developments and re-integration policies. The government has now withdrawn its financial contribution to RWI which therefore ended its activities by 1 July 2012.

3. Final observations

3.1. Public debates and policy discussion:

In response to the deadlock in the negotiations on the future of dismissals law, the government requested the Commission-Bakker to bring out a report on measures to be taken in regard of the labour market. Its report, issued in June 2008, included a proposal of a new system of UI. The system featured a duty of employers to continue paying their former employees during the first six months of unemployment. Imposed on both parties would be a duty of effort to work hard at reintegration of the employee into another job. The proposal implied a release from the current level of employment protection, and an overall reduction of the duration of compensation to be paid to unemployed workers. Innovative as it was, insufficient social support for its measures as well as the changing economic context of the financial crisis condemned it to the mothballs. Nevertheless, its idea of furthering job-to-job transitions (“van-werk-naar-werk”) remained at the agenda and was an important issue of the Tripartite Agreement of 7 October 2008 and its follow-up during the Spring Consultations between government and social partners of 24 March 2009.

The current Dutch government declared 2010 its intention to keep the maximum duration of UI benefits unchanged. In the context of the current budget deficit, however, reducing the duration of UI benefits figures as one of the policy options. A majority in parliament and the employers’ organizations are in favour of reduction, arguing this will raise labour market mobility and participation. The Dutch Trade Union Federation (Federatie Nederlandse Vakbeweging, FNV) resists this intention, pointing to the expected tightening of labour supply in the years to come, due to demographic developments, which would automatically reduce the amount of use of the UI scheme. Both FNV and the Christian Trade Union Federation (Christelijk Nationaal Vakverbond, CNV) are pleading for a restoration of the control of social partners over the UI scheme and the use of its funds, in particular during the first six months of unemployment, as they are the ones who have close knowledge of the labour market and would be best capable of deploying means for the prevention of unemployment, for training workers, or just for bridging an income gap between jobs. FNV is prepared to accept that employees are going to pay UI contributions again, provided that part of the control will be restored to the social partners.

In an attempt to stop the fast increase in the use of flexwork, the unions have proposed to introduce a differentiation and raise the UI contributions to be paid by employers in case of flexible work contracts. They argue that the risk of unemployment is much larger in case of flexible work contracts and that employers were in fact devolving in this way costs of enterprise risks on society. The employers’ organisations have strongly objected to this proposal, arguing that it would thwart employment and raise the costs of unemployment.

The agreement announced October 29th 2012, on the basis of which a new VVD-PvdA government should be formed, includes an intended reduction of the maximum duration of UI benefits to 24 months and a raise of employer-paid premiums (in exchange for easing dismissal procedures) but no employers’duty to bear the cost of the first months of unemployment.

3.2. Research:

  • Berkel, Rik van, ‘The Provision of Income Protection and Activation Services for the Unemployed in “Active” Welfare States: An International Comparison’. Journal of Social Policy 39 (2010), 1, p. 17-34.
  • Clegg, Daniel, ‘Continental Drift: On Unemployment Policy Change in Bismarckian Welfare States’. Social Policy & Administration 41 (2007), 6, p. 597-617.
  • Nagelkerke, A.G. & W.F. de Nijs, ‘Over de toestand van de Nederlandse arbeidsverhoudingen anno 2006: dilemma’s en onzekerheden’. Sociaal Maandblad Arbeid 61 (2006), 9, p. 354-366 .

4. Commentary

Around the turn of the century a significant change of Dutch social governance has been effected by the government that, making use of serious criticism of social partners’ role in the disability benefit system getting out of hand, has taken her chance to push aside the social partners in their implementing and managing roles in the social security system. Both political and budgetary pressures result in a government policy regarding the unemployment benefit system that subordinates income protection to activation goals. Unions are now arguing in favour of a restoration of social partners’ role in the implementation and management of the unemployment benefit scheme, in particular pointing to their activating potential in the first six months of unemployment, but there are few signs of support. Due to problems in the Dutch federation of unions FNV as well as a rather close affinity between government policies and employers organisations’ interests up to 2012, it has to be feared that even the social partners’ influence in the development phase, which used to be a stronghold of the Dutch consultation model, is eroding. However, the new VVD-PvdA government, to be installed November 2012, has announced its intention to restore social partners’ organized role in Dutch social policies.

Robert Knegt, University of Amsterdam, HSI

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