Social contract on labor market reforms

Joined by trade unions and employer organizations, the Dutch Social and Economic Council (“SER”) has presented its ‘Opinion on the Labor Market’. According to the advice, drastic measures in tax law, employment law and social security law are inevitable. In the past, agreements between the social partners have proven to have a major impact on political policy choices. Enough reason, therefore, to take a closer look at the advice.

The SER makes various proposals to (further) reduce flexible employment relationships. According to the SER, flexible employment relationships are currently often not used just for ‘peak and sick time’, but to compete on employment conditions. This is at the expense of security of work and income for employees and must change, according to the SER, and flexible employment relationships must therefore be better regulated. In addition, the permanent employment contract must become more attractive to employers. To achieve this, the SER has formulated a number of recommendations that provide insight into the labor law changes that may await us in the coming years.

We highlight a number of these advices:

  1. AMENDMENT OF THE RULES ON SUCCESSION OF FIXED-TERM EMPLOYMENT CONTRACTS

The so-called chain regulation determines when successive temporary employment contracts automatically turn into indefinite employment contracts. Under the current chain regulation, it is possible to conclude a maximum of 3 temporary contracts in 3 years. If there is an interruption of more than 6 months, the chain starts again from the beginning. Many employers choose to apply this ‘cut’ to prevent an employee from obtaining the protection of permanent employment. At the end of this interruption period, the employee may be temporarily employed again by the same employer, often for the same work.

Many employers choose to apply this “cut” to prevent an employee from obtaining the protection of permanent employment.

The SER wants this practice to stop and proposes to abolish the legal interruption period. This should put an end to the ‘permanent temporariness’ of work with the same employer. The interruption period does remain for college/university students and school pupils (6 months) and seasonal work (3 months).

 

  1. BAN ON ON-CALL CONTRACTS

If it is up to the SER, on-call employment contracts will be banned. In short, these are contracts in which either the scope of the hours is not fixed or the employee is not entitled to wages if he or she does not work (“ULV”, exclusion of the obligation to continue to pay wages). The best-known examples are zero-hour contracts and minus-max contracts. These contract forms create work and income insecurity, making on-call employees in general more difficult to build up economic independence. The SER therefore recommends abolishing on-call contracts and the ULV.

If it is up to the SER, there will be a ban on on-call contracts.

Instead, there should be a basic employment contract that provides for a fixed standard of hours per quarter of a year (or less). This will be linked to the current legal presumption of the scope of employment in Section 7:610b of the Dutch Civil Code. This means that the average number of hours for which wages were paid in the past 3 months must be considered. This makes the salary predictable, which, as the SER argues, benefits economic independence. It remains possible to conclude an on-call contract with college/university students and school pupils.

 

  1. MORE PROTECTION FOR TEMPORARY WORKERS

The SER recognizes that temporary work makes an important contribution to bringing together supply and demand in the labor market and to helping people get (back) to work. At the same time, there are concerns about the position and quality of temporary work. In some situations, temporary agency workers remain in the same workplace for long periods of time in agency work on the basis of agency contracts that offer relatively little protection. The current Collective Agreement for Temporary Agency Workers offers the possibility to conclude an unlimited number of temporary contracts with an agency clause and ULV for 78 weeks (phase A). Subsequently, a maximum of six temporary employment contracts can be concluded during four years (phase B).

To increase the job and income security of temporary agency workers, the SER advocates reducing the duration of phases A and B to 52 weeks and two years respectively (without the possibility of extension). The break period, which allows for a restart in phase A with the same temporary employer after a ‘cut’ of more than 6 months, will remain only for college/university students and school pupils (6 months) and seasonal work (3 months).

 

  1. UNILATERAL REDUCTION OF WORKING HOURS

The Borstlap Committee already argued that it should become easier for employers to temporarily reduce working hours if this is required due to economic circumstances. On the basis of the current unilateral change rules, this is practically impossible, meaning that employers are often forced to choose to terminate the employment contract entirely or partially.

The SER takes up the advice of the Borstlap Committee and proposes to make a unilateral reduction of the contractual employment duration of up to 20% possible. The employer must then continue to pay the full wage (in accordance with the NOW regulation). Compensation can be requested from the government for 75% of the wage costs for the reduced working hours. For this, the employer must be able to make a plausible case that economic circumstances would otherwise have led to the dismissal of employees.

 

  1. INSURANCE FOR SALARY PAYMENT AND REINTEGRATION IN CASE OF ILLNESS

The employer’s obligation to reintegrate and to continue to pay wages in the event of incapacity for work due to illness will continue to exist. However, the SER proposes to make it possible for employers to take out (voluntary) insurance for this responsibility and the associated obligations. The employee remains in the service of the employer, but the insurance company takes over the responsibility for continued payment of wages and reintegration from the employer.