From 1 January 2020, the amount of the unemployment insurance contribution (hereinafter: ''WW-premium'') to be paid by an employer to the Dutch tax authorities depends on the nature of the employment agreement.
In short, employers have to pay a higher WW-premium (7.94%) for fixed-term employment agreements and on-call agreements. A lower WW-premium (2.94%) will be due for employment agreements for an indefinite term.1 The purpose of the changes is to make it more attractive for employers to hire employees on a permanent basis.
The Dutch tax authorities determine the amount of the WW-premium on the basis of payroll records. Consequently, employers will have to include: (i) the number of working hours per unit of time (for example 40 hours per month); and (ii) the nature of the employment agreement (fixed term, indefinite term, on-call) on the payslip. Furthermore, a written and signed employment agreement will have to be kept in the payroll records.
The question is how the amount of the WW-premium will be determined if a fixed-term employment agreement has been extended in an employment agreement for an indefinite term by operation of law before 1 January 2020.2
The Minister of Social Affairs and Employment has clarified that - in order to be eligible for the lower WW-premium in such case – both the employer and employee will have to sign: (i) a new employment agreement for an indefinite period of time; or (ii) a written addendum to the original fixed-term employment agreement confirming that the employment agreement has been extended for an indefinite period.3
Employers should comply with these administrative obligations ultimately on 31 March 2020.4 Please note that in case a fixed-term employment agreement has been converted to an indefinite term employment agreement by operation of law after 1 January 2020, the employer will immediately have to comply with the administrative obligation in order to benefit from the lower WW-premium.
If the administrative obligations regarding employment agreements which were extended for an indefinite period of time before 1 January 2020 have not been met before 1 April 2020, and the employment agreement will continue after 31 March 2020, the higher WW-premium will be due until the date that the administrative obligations are met.5
In short, the employer will need the signature of the employee to confirm that the employment agreement has been extended for an indefinite period of time in order to be eligible to pay the lower WW-premium.
1.Netherlands Government Gazette 2019, Nr. 62011, 14 November 2019. Please note that to specific employees the lower WW-premium also applies (employees younger than 21 years old who work a maximum of 48 hours per 4 weeks or maximum 52 hours per calendar month, students who follow the block or day release (''Beroeps Begeleidende Leerweg'') and if the employer pays an employee insurance benefit as employer payment or own risk bearer).
2. Before 1 January 2020, a fixed-term employment agreement converted into an employment agreement for an indefinite term by operation of law after a two-time extension within a period of maximum two years, with a maximum interval of six months (article 7:668a paragraph 1 Dutch Civil Code). As of 1 January 2020 the maximum period of successive fixed-term employment agreements of two years is extended to three years.
3. Expert Report unemployment insurance premium differentiation version 1.1., Ministry of Social Affairs and Employment, 16 December 2019, pages 6 – 7.
4. Letter from Minister of Social Affairs and Employment dated 9 November 2019, reference 2019-0000170333, page 2.
5. Expert Report unemployment insurance premium differentiation version 1.1., Ministry of Social Affairs and Employment, 16 December 2019, page 7.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.