As of 1 January 2020, the Dutch Balanced Labor Market Act (Wet arbeidsmarkt in balans, WAB) provides a 5% reduction in the unemployment insurance (UI) contribution premium (WW-premie) rate for employers with employees under permanent contracts (i.e., indefinite term contracts). Employers can pay a UI contribution rate of 2.94% for employees with permanent (indefinite term) contracts rather than the rate of 7.94% that applies for employees with fixed term contracts. There is no longer a premium rate based on sector.
Permanent Versus Temporary Contracts
In the Netherlands, a fixed term contract is a temporary contract because it provides a definite end date. An indefinite term contract is a permanent contract because it applies for an indefinite period of time until the employer or the employee terminates it. Dutch law provides more protection to employees under an indefinite term contract. The reduced UI premium rate is meant to encourage and reward employers that provide more job security to employees.
Employer Qualifications
An employer can qualify to pay the lower UI premium rate of 2.94% if any of the following conditions apply:
- The employee has an employment contract for an indefinite period that was agreed to before 1 January 2020.
- The employee is younger than age 21 and has been paid a maximum of 48 hours (per reporting period of four weeks) or 52 hours (per reporting period of a calendar month).
- The employee is a student who follows the Beroeps Begeleidende Leerweg (BBL), the agreement has a date, and the employer has a copy in its records.
- The employer pays an employee insurance benefit (WW, SW, WIA, WAO, WAZO) as an employer payment or as a deductible.
Written Employment Contract by 1 April 2020
The Ministry of Social Affairs and Employment has announced that – so long as the employee was already employed for an indefinite period before 1 January 2020 – employers have until 1 April 2020 to draw up a written employment contract or addendum, get it signed by both parties, and keep a copy in its payroll records.
Mavanee Anderson, Esq., is Editor of Payroll Information Resources for the American Payroll Association