Dutch employment budget sets out significant changes to employment law

Among the changes intended to reform the Dutch labour market are provisions to increase security for flexible workers, modernise non-compete clauses, increase flexibility around employee reintegration obligations for small employers and support the retention of employees during crises.

With most of the changes to employment law expected to be pursued by the Dutch government in the coming year, employers should monitor these changes as they develop to ensure the timely implementation of relevant measures within their organisations and compliance with the new rules.

Labour market reforms

The government has indicated a commitment to creating a more secure labour market, with several reforms being introduced to increase job certainty, clarity, and flexibility. The aim is to minimise regulatory burdens and consider the impact on small employers, ensuring they have the freedom to hire staff effectively.

Increased security for flexible workers

A bill intended to increase security for flexible (‘flex’) workers was previously submitted for internet consultation and will be sent to the Council of State for advice. The bill contains measures to provide more security for flex workers. It also includes stricter rules for fixed-term employment contracts and intends to extend the interim period - after which a chain of temporary employment contracts will break - from six months to five years.

Zero-hour contracts will also be abolished, with certain exceptions for students, and replaced by ‘band-width’ contracts with a guaranteed minimum number of working hours, intended to provide more schedule and income security for ‘on-call’ workers. On-call workers will have to respond positively to ‘calls to work’ relating to hours up to 30% above the guaranteed minimum number of working hours but they will not have an obligation to agree to calls to work for working hours that exceed this threshold.

In addition, the most uncertain phases of temporary agency work will be shortened. This relates to ‘Phase A’ - during which the contract automatically ends if the hirer ends the assignment - and ‘Phase B’ – during which the agency worker works based on a fixed-term contract. The total period of these phases will be a maximum of three years, with Phase A having a maximum period of one year and Phase B having a maximum period of two years.

Modernisation of non-compete clauses

The government intends to continue with its plan to amend the rules around non-compete clauses, to prevent the misuse of such clauses by employers. The government aims to strengthen the position of employees and improve labour mobility, ensuring that non-compete clauses are used fairly and justly.

Flexibility in reintegration obligations

The government has indicated that a previously announced bill to amend employers’ reintegration obligations in the second year of illness will continue as planned. The bill will allow small and medium-sized companies to – if certain conditions are met – replace sick employees in their second year of illness and, as such, manage their workforce more effectively.

With this bill, the government aims to arrange for increased flexibility in reintegration obligations for small employers – those with a wage bill up to and including 25 times the average contributory wage per employee - and medium-sized employers – those with a wage bill between 25 and 100 times the average contributory wage per employee.

Employee retention during crises

The government stated it will proceed with a bill relating to employee retention during crisis, which recently completed a period of internet consultation.

The bill aims to help employers retain employees during crises that fall outside regular business risks. It will allow employers to temporarily reassign employees within the company or reduce working hours with wage subsidies, ensuring workforce stability and allowing employers to offer permanent employment contracts.

New legislation regarding self-employed persons

The government intends to go ahead with a bill to clarify assessment of employment relationships and legal presumption. The bill aims to resolve the current ambiguity regarding the distinction between independent contractors and employees by introducing a legal assessment framework based on recent court decisions. In addition, it will introduce a legal presumption of employment for work where the remuneration is within a certain hourly fee.

Lifting the enforcement moratorium on false self-employment

From 1 January 2025, the enforcement moratorium on false self-employment by the Dutch Tax Authority will be lifted. Due to the legislation being perceived as unclear, it was decided that the Dutch Tax Authority would, in principle, not audit the use of independent contractors and, if an audit did occur, a reclassification would only follow in the case of malicious incorrect qualification of the relationship by the parties.

The lifting of the moratorium means an increased risk of reclassification as an employment relationship, including imposing correction obligations, tax assessments and fines which can take retrospective effect until the moratorium is lifted on 1 January 2025.

However, according to the state secretary, the Tax Authority will be lenient when imposing penalties on parties if the parties can demonstrate efforts to reduce false self-employment. In the first year after the moratorium ends, no penalties will be imposed for corrections regarding employment classification, for both employers and employees if they can demonstrate that they have made such efforts.

The manner of enforcement from 1 January onwards continues to be the subject of discussion in the House of Representatives and developments should be closely monitored by companies that engage contractors in the Netherlands.

The government is also working to introduce a mandatory disability insurance for self-employed individuals, protecting them against income loss due to long-term disability and ensuring a fairer competitive environment.

Increasing workers’ health and safety

The Arbovisie 2040 initiative, a long-term vision set by the Dutch government to ensure that workers in the Netherlands can work in the healthiest and safest conditions possible, aims to reduce workplace accidents, illnesses and deaths.

The government has announced that employers will be required to take more preventive measures. The government is exploring the best ways to implement this, including possibly broadening the responsibilities of companies for the health and safety of contractors.

In 2025, the government will also focus on tackling ‘psychosocial workload’ - leading to employee burnout, among other things - and workplace harassment. 

Simplifying the leave system

The government intends to simplify the leave system under the Work and Care Act to help employees balance work and caregiving responsibilities. The Work and Care Act provides leave entitlements which include pregnancy and maternity leave, adoption leave and short-term and long-term care leave.

In 2025, the government will evaluate the Paid Parental Leave Act that came into effect on 1 August 2022, which provides parents with nine weeks of partially paid parental leave at 70% of the maximum daily wage. This evaluation will focus on the Paid Parental Leave Act’s usage and effects while also exploring ways to make the broader leave system more accessible and straightforward for workers.

Limiting labour migration

The government wants to limit labour migration to specific categories of workers deemed important for the Dutch labour market. Key measures put forward by the government include making flexible employment less attractive to limit migration, tightening the highly skilled migrant scheme and holding employers accountable for housing and language training for long-term labour migrants. In addition, the Dutch Labour Inspectorate will conduct risk-based supervision, paying special attention to those working in certain parts of the labour market, such as labour migrants working in low-paid jobs.

The government announced it would explore options for employers and municipalities to make agreements on short-term or temporary housing and facilities for their employees. This includes making employers of labour migrants responsible for any inconveniences and costs that may arise in situations where labour migrants do not have regular accommodation.

Limiting compensation for statutory severance payments

Under current law, employers are eligible for compensation for statutory severance payments paid to employees whose employment is terminated due to long-term illness after the employer’s obligation to continue to pay sick pay has lapsed. The government intends to limit this compensation to small employers - those with fewer than 25 employees - from 1 July 2026.