practice area articles


January 26, 2021

By Els de Wind, Cara Pronk and Niels van Boekel 

Back to International Employment Law




Extension of COVID-19 relief measures by the Dutch Government

Emergency Fund Employment Bridging (NOW 2.0)

The NOW relief measures were recently extended by the Dutch Government. The NOW is aimed at financially assisting companies following a decrease in turnover as of 1 March 2020. For the months March, April, and May 2020, employers were able to apply for a wage subsidy under the NOW 1.0. For the months June through September 2020 employers could apply for the newly introduced NOW 2.0.

The following (key) conditions apply:

  • an employer must expect to lose at least 20% turnover over a period of 4 months (June through September 2020);
  • business groups with Dutch and foreign subsidiaries may not take into account any turnover loss from subsidiaries that do not pay Dutch social insurance contributions on wages;
  • an employer must continue to pay its employees in full (100%);
  • if an employer dismisses employees due to business economic reasons, it must repay 100% of the relief received per employee. If the employer intends to dismiss 20 employees or more for business economic reasons, it must have reached an agreement on the same with any applicable unions or other employee representatives. If an employer fails to do so and makes an application for collective dismissal between 29 May 2020 and 1 October 2020, this will result in a 5% discount on the final grant;
  • an employer is obligated to encourage its employees to take retraining or reskilling courses. The employer must include a statement with its application confirming this;
  • an employer receiving a significant wage subsidy under the NOW 2.0 is not permitted to pay out bonuses to key management or dividends to shareholder(s) and may not buy (back) its own shares, subject to certain exceptions;
  • if an employer applies for the NOW subsidy from 6 July 2020 for the first time, the start date to calculate turnover loss can be 1 June, 1 July or 1 August 2020. If the employer has already applied for the NOW 1.0, the period of turnover loss must be continuous;
  • the compensation for wage costs depends on the drop in turnover. The compensation amounts to 90% of the wage costs and is determined by reference to the drop in turnover, as follows:
    • if turnover is reduced by 100%, the allowance amounts to 90% of the employer's wage costs;
    • if turnover is reduced by 50%, the allowance amounts to 45% of the employer's wage costs; and
    • if turnover is reduced by 25%, the allowance amounts to 22.5% of the employer's wage costs.
  • the Employee Insurance Agency (UWV) will generally make an advance payment of 80% of the expected relief and the actual decrease to turnover will be determined afterwards. When determining the relief amount, a correction can be made if there has been a decrease in wages or an increase in turnover.

Self-employed persons

Individuals who are self-employed are not covered by the NOW 2.0, nor were they covered by the NOW 1.0. For self-employed individuals whose businesses are affected by COVID-19, the Self employed Provision of Assistance Decree (1.0) will be extended by four months up to 1 October 2020.

The Self-employed Provision of Assistance Decree will be amended, as follows:

  • a partner income test will apply to the livelihood benefit; and
  • for the application for a working capital loan, it must be declared that no suspension of payments or bankruptcy has been applied for or obtained.

This means that the viability of the holding in question will not be verified and no capital test will be applied. The income support can be applied for in the form of an additional maintenance payment and/or a working capital loan.


Dutch Balanced Labour Market Act 2020

The Balanced Labour Market Act ("WAB") came into force on 1 January 2020 and aims to provide a better balance between permanent and flexible employment contracts.

Amendments to the transition fee

Prior to 1 January 2020, employees were only entitled to a transition fee (statutory severance) if they had been employed for at least 24 months. Under the WAB, employees are now entitled to a transition fee from commencement of employment, regardless of whether they are subject to a probationary period. For each year of employment, the transition fee will amount to one third of a month's salary. The increase in transition fee for the period of employment exceeding ten years has been abolished. It is worth noting that the temporary rules dictating lower payments for smaller employers and extended accrual for older employees have now expired.

Introduction of a new dismissal ground; the combination ground

In 2015, a small number of dismissal grounds were introduced into Dutch legislation. As a result, the (unilateral) dismissal of an employee was generally only permissible if an employer could demonstrate that one of the lawful dismissal grounds could be fully substantiated. In practice, employers were often unable to fully substantiate one particular ground (for example, underperformance) but wanted to use several grounds to justify the dismissal (for example, combining underperformance with a poor working relationship). As of 1 January 2020, a new 'combination ground' (the "i-ground") for dismissal has been established. This makes it much easier for an employer to terminate an employment contract through the courts, by combining statutory dismissal grounds to prove that it cannot reasonably be expected to continue the employment relationship. The courts may award an employee extra compensation of up to a maximum of half of the transition fee, on top of the basic statutory transition fee.

In practice, the Court tends not to be inclined to terminate an employment contract on the basis of a 'thin' combination ground. As such, each of the dismissal grounds should - to a certain extent - be substantiated by the employer to ensure they constitute one valid combination ground.

Amendments to the rules on successive fixed-term employment contracts

The period after which successive fixed-term employment contracts convert into a permanent contract has been extended from two to three years. A chain of successive employment contracts for a fixed-term may still be broken by an interval of at least six months between the contracts. This six month period can be reduced under a collective labour agreement to three months in certain circumstances.

New rules for payroll employees

The WAB prevents payrolling (i.e., companies using third parties to employ employees on their behalf) being used by companies to compete on employment terms. Companies engaged in payrolling must offer employees on a payroll contract the same employment terms as their regular employees, with the exception of a workplace pension. An adequate pension scheme is to be provided to payroll employees, which could either be the pension scheme in which the company's regular employees participate or a pension scheme which meets certain conditions as laid down in a Governmental decree.

Changes to social security premiums leading to higher costs for flexible contracts

The WAB provides that employers must pay a lower social security contribution for insurance (WW-premie) for employees on permanent contracts than for employees on flexible contracts (including fixed-term contracts). An employer must make reference to the type of employment contract on the employee's pay slip in order to qualify for the lower contribution.

New rules for on-call contracts

Employees working on the basis of an on-call contract are no longer required to be permanently available for work. The employer must contact the employee at least four days in advance (to be reduced to a minimum of one day in a collective labour agreement), failing which the employee is not required to respond. If the employer cancels the assignment within four days before the start of the work, the employee is still entitled to be paid for the assignment. Once an on-call contract has been in place for a period of 12 months, the employer must, within a month, offer the employee a fixed number of working hours, equal to at least the average monthly hours worked in the preceding 12-month period. If the employer fails to make such offer in writing, the employee can make a claim for additional pay if working in excess of their average number of working hours at any moment in time.


Pension Agreement

On 12 June 2020, employers' organisations, trade unions and the Government reached an agreement on the adjustment of the pension system. It has taken more than one year to negotiate certain crucial details relating to how the money in the Dutch pension pools is distributed.

Some of the most notable themes in the Pension Agreement are as follows:

  • retirement age rises less rapidly;
  • abolition of average premiums and the introduction of age-independent premiums and compensation; and
  • compulsory disability insurance for self-employed persons.

At the time of writing, the finer details of the Pension Agreement have yet to be finalised and certain conditions are yet to be met (for example, the Pension Agreement requires legislative changes that will be realised in the coming years).




Proposed reforms to Dutch employment law

On 6 November 2018, the government presented the proposed “Balanced Labour Market Act” (Wet Arbeidsmarkt in Balans or WAB) to the Lower House of Dutch Parliament. The WAB is currently pending in the Second Chamber of Dutch Parliament, but is expected to come into force on 1 January 2020.

The most important elements of WAB are:

  • cumulative dismissal ground: the introduction of a cumulative dismissal ground, for use in cases where the facts and circumstances are not sufficient to substantiate one specific dismissal ground. If the employment contract is terminated based on this new dismissal ground, the court may grant the employee additional compensation of up to half the statutory severance pay;
  • changes to the statutory severance pay: service after ten years will be weighted the same as previous service years: at 1/3 of a month’s salary per year of service instead of 1/2 of a month’s salary per year. Employees will start accruing entitlement on the first day of employment instead of after two years. Furthermore, employers will be compensated for paying the statutory severance pay where they dismiss employees because of long-term illness (lasting at least two years);
  • changes to rules around fixed-term contracts: under the current rules, no more than three consecutive fixed-term employment contracts can be agreed in a two year period before the employment converts into a permanent contract, unless the employment is interrupted for a period of six months or more. This two year period will be extended so fixed-term contracts can be agreed for a maximum period of three years before the contract converts;
  • changes to rules on probationary periods: if an employer offers a permanent contract for the first time, a probationary period can be agreed for a maximum of five months (rather than the current two). For contracts lasting two years or longer, a probationary period of maximum three months may be agreed instead of the current maximum of two months;
  • changes for payrolling employees: employees who are permanently seconded; so-called “payrolling employees”, shall be entitled to (with the exception of pensions) the same terms and conditions of employment as the employees employed by the legal entity where the payrolling employees are seconded to;
  • changes for on-call employees: an employee with an on-call contract no longer needs to comply with a call if:
    1. the number of working hours is not, or not clearly, laid down in the employment contract (which is the case in so-called zero hours contracts); and
    2. the employee is given less than four days’ notice of the start of the work.

If the employer cancels the assignment within this period, the employee is entitled to be paid for the hours the assignment would have lasted; and

  • social security premiums: employers will pay a lower unemployment social security contribution for an employee with a permanent employment contract in contrast to employees working on fixed-term contracts.




Proposed Reforms to Dutch Employment Law

On 11 October 2017, the newly formed Dutch government published its plans for the next 4 years. The most important proposals are:

  • the introduction of a cumulative dismissal ground, for use in cases where the facts and circumstances are not sufficient to substantiate one of the other dismissal grounds. If termination is based on this new dismissal ground, the court may grant the employee additional compensation of up to half the statutory severance pay;
  • amendments to statutory severance pay such that service after ten years will be calculated at a third of the monthly salary per year instead of half of the monthly salary per year. Employees will start accruing the payment on the first day of employment instead of after 2 years;
  • under current rules, no more than 3 consecutive fixed-term employment contracts can be agreed in 2 years before it converts to a permanent contract. This will be extended so that fixed terms contracts can be agreed for a maximum of 3 years before it converts. For permanent contracts, probationary periods can be in place for up to a maximum of 5 months (rather than the current 2). Companies employing up to 25 employees will be required to continue salary payments only during the first 52 weeks of sickness absence (instead of 104 weeks);
  • current paternity leave entitles partners to 2 days’ leave with full wage after childbirth, which should be taken within 4 weeks. As of 1 January 2019, this will be extended to 5 days. The plan is that partners will receive additional paid paternity leave of 5 weeks from 1 July 2020, to be taken within the first 6 months after childbirth; and
  • the existing legislation on wage tax and social security when hiring independent contractors is expected to be abolished, and new legislation introduced to determine whether a work relationship qualifies as an employment agreement or an independent contractor agreement.


Pre-Pack is TUPE Transfer

On 22 June 2017, the European Court of Justice rendered its judgment in the Dutch Smallsteps (previously Estro) case. The ECJ ruled that this pre-pack of Estro Group (flitsfaillissement) qualified as a transfer of undertaking, and the intention was for a continuation of (part of) Estro’s business, not the liquidation. This matter was referred back to the Dutch court for reconsideration.




Proposed change to the statutory redundancy payment in cases of business related dismissals

Under the new dismissal rules, an employee who has been employed for at least 24 months and whose employment contract is terminated or not extended at the employer’s initiative is in principle entitled to a statutory severance payment called the ‘transition fee’. Parties to a collective labour agreement may agree on a similar arrangement as long as the value of total compensation to which the employee is entitled is at least at the same level as the statutory transition fee to which the employee would have been entitled. A recent proposal (if legislated) would permit employers to agree via collective agreements for transition fees which are lower than the statutory transition fee for dismissals for business related reasons. These new rules are scheduled to enter into force on 1 January 2018.


Proposed change to statutory transition fee in case of long term illness

Since 1 July 2015 employers have been required to pay employees who are ill a statutory transition fee in case of dismissal within the period of two years from the period of illness. Following protests from employers, the Dutch Minister of Social Affairs has proposed that employers are repaid this statutory transition fee (which is paid to its employees who are ill for two years or more) out of a government fund. The nationwide social security contributions for employers are intended to be increased to fund this proposal. These new rules are scheduled to take effect on 1 January 2018.




Changes in the assessment of payroll tax liability for independent contractors

With effect from 1 May 2017 a new and stricter regime means that payroll taxes do not need to be withheld by the client who has engaged a contractor if (i) the contract between the contractor and the client is based on a template contract published by the Dutch Tax Authority; or (ii) the contract drafted by the contractor and the client was ‘preapproved’ by the Dutch Tax Authority, provided that (in both situations) the contractor and the client act directly in accordance with the contract terms. In any other case, payroll taxes will be due. If the client fails to withhold and pay these payroll taxes, this may result in a tax claim. This may be increased with interest and a penalty of up to 100% of the payroll taxes which have not been withheld and paid.


New fines for businesses acting in breach of the Dutch Data Protection Act

On 1 January 2016, two important changes were made to Dutch data protection law. Under the revised law, Data processors are required to notify the Dutch Data Protection Authority (“DDPA”) (and on some occasions the data subjects concerned) in the case of a personal data security breach. As of the same date, administrative fines can be imposed in case of a breach of the Dutch Data Protection Act. These fines can be up to EUR 810,000 or 10 percent of the annual turnover in case of a legal entity. Employers can be data processors so they should make sure that they meet the Dutch employee data protection rules, particularly if data are stored in, transferred to, or accessible from locations abroad or if they are shared with third parties.

Considering the new risk of fines, employers should ensure that their internal privacy policies are in line with the guidelines provided by the DDPA.



From 1 July 2016, employers employing 50 employees or more were required to have a whistleblowing scheme in place. An independent governmental body called the House for Whistleblowers can investigate wrongdoings at the request of whistleblowers, advise whistleblowers on their position and possible actions and provide protection against detrimental measures of their employers. It is expected that there will be more whistleblowing claims by employees.

With thanks to Els de Wind, Niels van Boekel and Cara Pronk of Van Doorne N.V. for their invaluable collaboration on this update.


Image: Suzanne Horne
Suzanne Horne
Partner, Employment Law Department

Image: Kirsty Devine
Kirsty Devine
Associate, Employment Law Department

Image: Aashna Parekh
Aashna Parekh
Associate, Employment Law Department