2020 Changes to Dutch Labour Law

Major changes to Dutch labour law are coming into effect as of January 1st, 2020. The Balanced Labour Market Act will specify the difference between recruitment (Agency) and employment outsourcing companies (Payroll).

Whether you are planning on hiring permanent employees through an agency or seconding them from an employment company or outsourcing the recruitment process, it is important to know what option works the best for you and make sure that all parties are 100% compliant with the local labour law.

1. Distinction between “Agency” and “Payroll” agreements

The new laws will see Temporary Work Agencies and Employment Outsourcing or Payroll companies classified separately.

The main distinction between agency agreements and payroll agreements comes down to the actual recruitment activity and whether the placement is exclusive or not.

A relationship where a company were to recruit, employ and place the employee at the disposal of a third party under the supervision of that third party would classify that company as an Agency.

In the meantime, the Payroll agreement is defined as the “agency agreement that has not been established within the context of “bringing together supply and demand on the labour market”. Essentially meaning the company has had no impact on the recruitment of the employee.

A second circumstance is that under a Payroll agreement the employee is offered exclusively to the third-party company and cannot be offered to another party without prior permission.

The consequences of these two distinct classifications are two different employment conditions to be followed by Agency and Payroll companies. Payroll companies will no longer be able to utilize a number of the more flexible employment options allowed by Agencies and in addition Payroll employees must be offered at least the same conditions of employment as the employees of the third-party hirer.

2. Changes for Payroll companies

For Payroll companies the following changes will apply from January 1st, 2020.

• Temporary Contracts
It will only be possible to offer a maximum of 3 temporary contracts (fixed term) to a maximum of 3 years before a permanent contract must be offered.

There will be additional employers’ costs to offer temporary contracts to employees, an increase of 5% will be applicable.

• Equal Treatment
It will no longer be required for Payroll companies to follow the collective agreements for Temporary Work Agencies. Instead it is required follow general employment law of the Netherlands albeit with one caveat.

If the employment conditions of their own internal employees are better than that offered under general employment law, then these are required to be matched and offer to your outsourced employees also.

• Transition Allowance
Transition allowance will be payable from day 1 (instead of after 24 months) upon termination of the employee by the employer.

• Sick Pay
Payroll companies will no longer be obliged to pay 91% of employee’s salary while they are on sick leave (capped at the maximum social daily wage). Under new laws the requirement would only be to pay 70%.

• Agency Clause
As Payroll companies will no longer follow the CLA of Agencies it will not be possible to utilise the Agency clause in their employment contracts.

The above covers the main points concerning 2020 Dutch labour law changes, however, there still are more nuances to consider. If you have any doubts or further questions, don’t hesitate to contact us.