Labour Market in Balance Act

The Labour Market in Balance Act of the Netherlands (Dutch acronym: “Wab”) is set to take effect on the first day of January 2020. One of the Act’s components concerns the differentiation depending on type of employment contract between social insurance contributions for Unemployment Act purposes, with the lower unemployment insurance rate applying to the permanently employed (except, it should be noted, where the employee in question works under an on-call contract) and the higher rate, to the temporarily employed. The applicability of the lower unemployment insurance rate is contingent inter alia on a written employment agreement being in evidence.

Given the daunting challenge of ensuring nationwide that written (addendums to existing) employment agreements each bearing the signatures of the employer and the relevant permanent employee should be incorporated in the relevant payroll administration by the start of the new year, the Minister of Social Affairs and Employment has granted employers an additional three months to achieve compliance with the condition governing the application of the lower unemployment insurance rate. What this will boil down to in practice is that it will be permissible for employers to base the unemployment insurance contributions for their permanent employees on the lower rate including where (some of) the indefinite employment agreements have not yet been laid down in writing or provided with both signatures. The employer should fill in YES where the payroll tax return mentions the words “written employment agreement”. Please note that this will only apply to the employment contracts of those having entered in the employer’s service before the first of January 2020.

The employer’s failure by the first of April 2020 to achieve compliance with the condition of written (addendums to existing) employment agreements (for the permanently employed) having been incorporated in its payroll records will prompt the application with retroactive effect, from the first of January 2020 onwards, of the higher unemployment insurance rate.

Dutch version: Uitstel van verplichte schriftelijke arbeidsovereenkomst in kader van de Wab