Dutch employers get more flexibility

When the so-called Flexibility Act was introduced Dutch labour law changed drastically. The purpose of the act is to give employers more flexibility and to secure the position of flexible-working employees. Martin Beijneveld looks at the key issues.

The Flexibility Act (known as the “Flex Act”) was introduced in Holland on 1 January 1999. It is based on two presumptions of law. First of all the Flex Act states that an employment agreement is presumed to exist where an employee works (for payment) for a period of three consecutive months on a weekly basis or at least for 20 hours a month. The second presumption is that when an employment agreement has lasted for three months, the number of hours worked by the employee in any month is presumed to be equal to the average of number of hours worked in the previous three months.

A written contract of employment is not required under Dutch law. However, certain provisions, for example any probationary period and non-competition provisions, are enforceable only if they are made in writing and are duly signed.

An employment agreement may be entered into for a fixed period or for an indefinite period.

Employment agreements for a fixed period terminate on the expiration of the agreed period. The fixed period need not necessarily be defined in the agreement by reference to a particular date. The period may also be dependent upon, for example, completion of a particular project.

The Flex Act provides the so-called “chain theory”. This means that the chain of successive employment agreements for a fixed period never can have more than three links. If there are three or less links a termination permit of the Regional Director Agency (RDA) is not required if the employer desires to terminate. The first, second and third employment agreement all terminate automatically on the expiration of the agreed fixed period.

When there are more than three links or the total duration of the employment agreements chain is longer than three years, the employment agreement for a fixed period automatically changes into an agreement for an indefinite period. Employment agreements, which follow each other within a period of three months or less, are considered to be a part of the chain.

The Flex Act allows the employer to agree to an employment agreement for a fixed period longer than three years, in which case the above mentioned three years employment agreements-chain is not applicable. This agreement terminates automatically. Parties to such an agreement may continue the agreement by a further agreement for a fixed period, subject to a period of no longer than three months.

The arrangement is more flexible for employers and gives the employee the security that this flexible period will not continue for longer than three years.

Probationary period

The parties may agree on a probationary period. The Flex Act prescribes that a probationary period is only enforceable when the provision is made in writing and the period is the same for both parties. The maximum for the probationary period depends on the duration of the employment agreement.

For an employment agreement based on a fixed period of less than two years or for a period that is not referenced to a particular date, the maximum probationary period is one month. The statutory maximum probationary period is two months when the employment agreement is entered into for an indefinite period or for a fixed period longer than two years. If the duration of the employment agreement depends upon the occurrence of certain events, the statutory maximum is one month.

Parties to a probation provision may terminate the agreement during that period without prior notice. The termination may take effect immediately. However, from a legal point of view, a dismissal during probation may be reversible. In the event of discrimination, a probation clause may not be invoked by the employer. Dismissals before the probationary period, prior to commencement of the actual work, and dismissals after the probationary period will be dealt with by the courts on the basis of the abuse of a right and the principles of reasonableness and fairness. The most well-known exception to the rule that an employment agreement may be terminated at any time during probation is a dismissal due to pregnancy. Dutch labour law explicitly prohibits distinguishing between men and women when terminating an employment agreement. Such a dismissal will be null and void and render the terminating employer liable.

Foreign employees

Foreigners employed in The Netherlands benefit from the prevailing Dutch wages and labour conditions and most social security schemes. The foreign employee is also subject to the same duties and obligations, for example, social security contributions and wage taxes.

The 35%-facility

The Dutch tax system provides a special tax-free allowance to employees who have been assigned to the Netherlands from abroad, which is known as the “35%-facility”. To apply for it the employee must have specific expertise and has to be recruited from abroad or the employee has to be assigned to The Netherlands. Further the employer has to be a wages- withholding tax agent in The Netherlands or has to be registered as such (i.e. in absence of a (deemed) permanent establishment/representative, in the case of a foreign employer). International employers and their employees may benefit from the 35%-facility if and when both the employment and tax situation are properly structured.

Edited by Clare Murray

  • Martin Beijneveld is an employment law partner at Van Harmelen Beijneveld Tubbergen Van Houten, The Netherlands

  • Clare Murray is an employment law partner at foxwilliams and editor of hrlaw.co.uk

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