Dutch Labor Code Reforms in 2020

The Netherlands government recently introduced various reforms to its employment law. The changes in the 2020 Dutch Labor Code, effective from January 1st, 2020, aim to bring balance into their labor market by reducing pay gaps and differences in legal protection for fixed and short term employees.

Termination Grounds
A significant change in the 2020 Dutch Labor Code is the introduction of an additional termination ground known as cumulative ground. It allows employers to present multiple reasons for dismissal to strengthen their appeal for permission to terminate the employment contract.

The new changes can prevent a combination of multiple major and minor reasons to the court. In case the court grants termination based on cumulative grounds, the employee may be entitled to receive additional monetary compensation in addition to the transition allowance or severance pay.

Changes to Transition Allowance 
As of the 2020 Dutch Labor Code changes, employees are now eligible for transition allowance from the first day of employment. The new Act also made changes to the severance pay calculation method.

Employees are now eligible to receive 1/3rd of one month’s salary for each completed year of employment regardless of the years of service. For any additional months, the transition allowance is calculated on a pro-rata basis.

The new labor code removed the additional clause increasing the pay to half of the monthly salary for 10+ years of service.

Successive Fixed Term Employment Contracts
Before the implementation of the new Act, the maximum successive fixed-term contract renewal limit was three times for a 24-month contract. After the implementation of the new Act, the fixed-term contract limit was increased to 36 months/ three years.

Employers can now offer three consecutive, three-year-long fixed-term contracts. After which it will be compulsory for them to offer a permanent employee contract should they choose to retain the employee.

Changes to On-Call Employment Contracts
Employers must provide all employees holding on-call employment contracts a minimum of four days’ notice. It also makes it compulsory for employers to pay employees if work is canceled during the notice period. The notice period requirement may be reduced to 24 hours, provided the employer and employee come to a consensus.

Lower Insurance Contributions
The 2020 Dutch Labor Code also laid out important new legislation pertaining to insurance contributions. Those on fixed-term employment contracts will make higher contributions than those on permanent employment contracts.

Additional Changes including:

  • Adequate pension for pay rollers – these changes have not yet been made effective and will be enforced beginning in January 2021.
  • The new Act also made the inclusion of three new fields on the payslip mandatory. Now the payslip must state whether an employment contract is present in writing or not, is it a permanent employment contract and whether it is a standby contract or not.

The changes in the 2020 Dutch Labor Code aims to create a more balanced labor market in the Netherlands and ensure equal protection for the rights of employees and employers.

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