Pursuant to the Dutch Balanced Labour Market Act (WAB), a system of differentiated unemployment benefit contributions has been in effect since 1 January 2020. This new contribution differentiation has led to some unintended negative effects for employers since the present coronavirus crisis began. Therefore, the government has proposed modifications in order to accommodate employers.
Background to unemployment benefit contribution differentiation
To make it more attractive for employers to offer employees permanent contracts, the amount of the unemployment benefit contribution (WW contribution) is now differentiated according to the type of employment contract. The basic principle here is that lower WW contributions are paid where employment contracts are permanent. For temporary or flexible employment contracts, the employer must pay a higher WW contribution. Likewise, the higher contribution must also be paid for on-call contracts.
Overtime due to coronavirus
In certain situations, a lower WW contribution paid by an employer may be adjusted to a higher contribution . This is the case, for example, when the salaried hours in a calendar year exceed the contract hours by more than 30% (except in case the contract hours amount to at least 35 hours per week).
At present, this adjustment presents problems given the need for additional staff in certain sectors due to the COVID-19 epidemic. This is basically because if an employee works 30% more in a calendar year than is laid down in his/her employment contract, the higher rate of WW contribution must be paid with retroactive effect. According to the government, this is an unintended effect of the regulations regarding premium differentiation. This applies not only to the healthcare industry, but to all industries in which a lot of overtime is being worked due to coronavirus.
Therefore, it has been announced that a modification is being prepared to remove this unintended effect. The modification will apply for the whole of 2020.
Written employment contract
The employer is obliged to state the type of employment contract on the employee’s payslip. Where a permanent employment contract exists, in order to be eligible for the lower contribution, the employer must also include the written employment contract in the payroll records.
At the end of last year, this inclusion appeared to be a problem for many employers. Often, a first temporary employment contract is drawn up in writing and signed by both parties, but when this is converted into a permanent employment contract, the employer merely uses an ‘extension letter’ or ‘conversion letter’ which remains unsigned by the employee. This is not sufficient in order to be eligible for the lower contribution. However, a written addendum signed by both parties is. A digital signature on the part of the employee is also sufficient, as is agreeing to the addendum via email or through an HR system.
In December 2019, the Minister of Social Affairs and Employment stated that employers were being given until 1 April 2020 to draw up written permanent employment contracts or addenda in order to meet the criteria for the lower WW contribution. Because, due to COVID-19, it will not be possible for all employers to meet that criterion before 1 April, this period is being extended to 1 July 2020. In the meantime, employers may pay the lower contribution. However, this leniency scheme only applies if the employee was already a permanent employee prior to 1 January 2020.
Conclusion
Do you have any questions about the differentiation of unemployment benefit contributions? Please feel free to contact Eylard van Fenema and/or Marieke Opdam.
