Dutch Legislation Change: Transition Payments for Termination of Employment

The biggest Dutch legislation change is on the ‘Transition Payments for Termination of Employment’, due to take place from the 1st of July 2015. This Dutch legislation change results in a statutory transition payment for employees who have been contracted out for more than 24 months should their contract not continue; either on the initiative of the employer or under circumstances where the employer is at fault. The financial amount making up the payment depends on the number of years employed for the company or agency. For example, during the first decade a 6th of the monthly salary will be due for each half year of employment with the agency or company. After this, a quarter of a monthly salary will replace the previous amount if employed there for over ten years. However, the Dutch legislation change states there is a cap on compensation for top end salaries, over EUR 75,000. At the other end, small businesses are allowed to pay out lower amounts of compensation should they have to dismiss staff due to poor financial situations.

A further Dutch legislation change scheme allows employees aged 50 and over to receive half of their monthly salary for each set of six months employed beyond their 50th birthday. In relation to small businesses this over 50’s scheme is non-applicable. This will be allowed up until the 1st of January 2020. While not yet cemented in place, it is predicted and expected that the normal rates of social security and tax will be applied onto these payments. The ongoing analysis concludes that contractors working for over 24 months in the Netherlands only will be affected by this change.

Dutch Legislation Change: Restriction of Probationary Periods

A further legislation change is to the ‘Restriction of Probationary Periods’. This will take effect as of January the 1st, 2015. This highlights that any fixed-term contracts finished after the 2015 date should not include a probationary period at all. If, after this date, there is a probationary period then it is not deemed valid. The main impact with this legislation change is that contracts will need to written up in a different manner; something concerning all contractors in the Dutch market place but not expected to have an impact on the demand for contractors.

Dutch Legislation Change: Restriction of Non-Competition Clauses

A further law to change on the 1st of January 2015 through Dutch legislation changes is the ‘Restriction of Non-Competition Clauses’. This legislation amendment outlines that any fixed term employment contract wrapped up after the start of 2015 will not include any non-competition clause unless it can be shown that the clause is vital or necessary for reasons that could affect the employers business or company. This has only been announced so far, no examples have yet been given and therefore the final result of this change is hard to assess until working cases pop up through time.

The impact this will have is unclear, so experts can only speculate. However, in the light of the other legislative changes, the insertion of non-competition clauses in order to protect a business, agency or payroll provider is not going to be accepted as a valid reason not to include the new legislative requirement. In the end, it will most likely boil down to the upstream providers to manage the risk – as this is the case in other countries such as Switzerland.

Dutch Legislation Change: Notification Obligations

Changes are also being applied to the ‘Notification Obligations’ legislation, also commencing from January 1st 2015 in the Netherlands. This includes all on going contracts. It’s a big one, with any fixed or long-term contract of employment longer than six months requiring an extension or cancellation in writing no later than a month before the contracts end. The printed notice will also be required to include all the conditions and clauses granted for the extension. The consequence of failing to follow this procedure will find the employer paying a full one-days salary (gross) for every day the contractor or employee is held up throughout the delay.

Should the employer completely fail to provide notice then the contract will continue under the same terms as the contract previously.
This legislation update is a touchy one, with contractors and business owners stating that the new law will defeat the point of a fixed-term contract. This Dutch legislation change would also leave it to the employers to administer their workforce and staff and client requirements in order to avoid falling foul of this charge.

Dutch Legislation Change: Limitation of Successive Fixed-Term Contracts

The final Dutch legislation change is to the ‘Limitation of Successive Fixed-Term Contracts’, taking effect on the 1st of July 2015. Hereby, employees can be given a maximum of three fixed-term contracts over a maximum of two years before their employment is considered permanent. Once considered a permanent employee, he or she will be entitled to all benefits and rights. In order to not be considered consecutive, the period in between contracts will need to be 6 months.

Fixed-term successive contracts have always been a very important aspect, not just in Dutch employment law but also in the eyes of the Dutch authorities. This new and restrictive change is intended to encourage employers to be cautious of using a temporary workforce with the result being that businesses are encouraged to work with a higher staff turnover, rather than a high conversion rate to permanent employment. However, only time can tell what this change will result in.

The long-term impacts from all of these changes will likely only be made clear once the following year is over with teething problem and issues ironed out, paired with the intricate rules revealed.