The Balanced Labour Market Act (Wet Arbeidsmarkt in Balans, “WAB”) will enter into force on 1 January 2020. This new Act provides a package of measures in the fields of flexible labour, dismissal law and the Unemployment Insurance Act (Werkloosheidswet, “WW”), with the goal of improving the balance between flexible and permanent employment agreements. In the coming period, we will be discussing the main changes in several news reports. This week we will look at the sequence system.
Sequence System
The purpose of the sequence system is to offer employees certainty about their job and income after some time. Therefore, limits are set to the time employees can work under a fixed-term employment agreement. The law determines that a fourth fixed-term employment agreement between the parties will be deemed to be an employment agreement for an indefinite period. Also, if the sequence of fixed-term employment agreements exceeds two years, from the moment on the last employment agreement will be deemed to have been entered into for an indefinite period of time. Any interval of more than 6 months breaks the sequence.
The sequence system applies also if there are successive employers: employment agreements with different employers, who – in respect of the work performed – must reasonably be deemed to be each other’s successors, will count in the sequence.
Balanced Labour Market Act
The WAB relaxes the options of employing an employee under a fixed-term employment agreement. The legislator considered that it may be necessary for an employer to retain the flexibility to deploy an employee under a fixed-term employment agreement during a period of three years. Therefore, the WAB provides for a maximum sequence of employment agreements of three years.
The current rule that the sequence is interrupted after a period of more than six months will remain unchanged. However, the option is offered to limit this period to three months in a collective labour agreement. This will only be permitted in the case of recurrent temporary work that can be done for nine months per year as a maximum, such as jobs in the cultural sector (given the theatre season).
It will remain possible to extend the sequence system in a collective labour agreement for specific jobs to a maximum of six contracts within a period of four years. Such an extension will only be allowed where the intrinsic nature of the business operations so requires.
Options to Use the New Act Already Now
No transitional law has been planned for the above-mentioned measures. This means that the regime will already have immediate effect on 1 January 2020. It is therefore possible to use the relaxed options already now. No employment agreement for an indefinite period will arise if the two-year period is exceeded on or after 1 January 2020. This can be illustrated by the following situation:
- Employment agreement 1:
1 April 2018 – 1 October 2018 - Employment agreement 2:
October 2018 – 1 October 2019 - Employment agreement 3:
1 October 2019 - 1 October 2020
In this case, no employment agreement for an indefinite period will arise. The two-year period is exceeded on 1 April 2020. On that date, the new sequence system will be in force.
Please Note: A Fixed-Term Employment Agreement is More Expensive
Of course, it is advantageous to employers that they can keep employees under a fixed-term employment agreement for a longer time. However, the WAB also has a downside on this point. The employer's contribution to unemployment benefits (“WW benefits”) will be differentiated according to the nature of a contract. For an employee under a fixed-term employment agreement, the employer will have to pay higher WW benefits contributions than for an employee working under an employment agreement for an indefinite period. The high contribution has been fixed provisionally at 7.94 %, while the low contribution is expected to amount to 2.94%.
The low contribution will only apply if the parties have agreed on a written employment agreement. This means that when a written fixed-term employment agreement changes into an employment agreement for an indefinite period by operation of law, without having been adjusted to the new situation in writing, the employer will have to start paying the higher WW benefits contribution.
Do you have any questions about the above changes or other changes? Please do not hesitate to contact us.
