Rules applying to secondment in the Netherlands

The secondment industry in the Netherlands is changing rapidly due to the changes in both national and European legislation. The Dutch government plays an important role in the revision of European legislation and has repeatedly called for more protection of the internationally seconded workers. CMS has been closely following these developments and this newsflash provides insight into the current and future challenges in the secondment industry.

WWZ

One of the most radical developments in Dutch employment law has been the introduction of the Work and Security Act (“WWZ”). The WWZ has influenced all aspects of Dutch employment law including the secondment of employees. The changes which are most relevant for the secondment industry are the introduction of transitional payment and changes to succession of fixed-term contracts.

The WWZ allows an employee to receive transitional payment if the employment ends after 24 months or more. The amount of (statutory) transitional payment due depends on the employee's length of service.

Another introduction under the WWZ which is relevant when seconding employees is the following. An employer can only offer three consecutive fixed-term contracts with maximum total duration not exceeding 24 months before the fixed-term employment contract is automatically converted into an employment contract for an indefinite period. In case of secondment, a collective bargaining agreement (“CBA”) can derogate from this rule allowing for a maximum of six consecutive fixed-term contracts with a total maximum duration of 48 months. This extension combined with restrictions imposed on other flexible employment schemes poses a great opportunity for growth of the secondment sector.

The Collective Bargaining Agreement

Most secondment companies in the Netherlands have to comply with the Collective Bargaining Agreement for Temporary Agency Workers (“ABU-CBA”). The scope of the ABU-CBA is very wide and includes almost all forms of personnel lease, provided that the commissioning party has control and authority over the leased personnel. In the Netherlands an employer who is not a member of an employer’s organization can be bound by a CBA if the employer falls under its scope and the CBA has been declared universally binding. The ABU-CBA is currently declared universally binding and therefore should be applied by all of the companies falling within its scope. Therefore, most companies which specialize in work force secondment have to apply the provisions of this CBA

The ABU-CBA includes rules on remuneration, shorter notice period, consecutive fixed-term contracts, alternative rules on transitional payment, accrual of paid annual leave and mandatory participation in the Sectoral Pension Fund.

Other CBA may apply instead of the ABU-CBA if the secondment company is solely involved with one particular sector and such a CBA, which is declared universally binding, applies to this sector.

The Posted Workers Directive and the WAGA

Dutch legislation applying to the secondment of workers is heavily influenced by European law. The Posted Workers Directive (“PWD”) had tremendous impact on the European secondment industry. In case of the secondment, the employment is principally ruled by the law of the country of origin but the PWD guarantees a hard core of protective measures which have to be observed in the host state. In the Netherlands the PWD has been implemented in the Terms of Employment (Cross-Border Work) Act (“WAGA”). The scope of the WAGA is broader than that of the PWD and applies to all foreign workers seconded to the Netherlands. Based on the WAGA, an employee seconded to the Netherlands is entitled to a minimum wage, minimum paid annual leave, protection against discrimination based on gender as well as health and safety at work pursuant to the rules of Dutch law, regardless of the law applicable to the employment.

Recent and future developments

As the directive has not been implemented, the PWD has not led to sufficient protection of workers in the host state. Therefore, an Enforcement Directive has been adopted which has to be implemented by the European Member States by 18 June 2016. To comply with this obligation the Netherlands adopted the Act on Combating Sham Arrangements (“WAS”). The biggest change that the WAS introduced is the joint and several liability for the wages throughout the chain of contractual parties. In the secondment sector such liability was already in place with regards to the statutory minimum wage, but is now extended to contractual wages. Moreover, the WAS imposes some administrative obligations onto the employer and prescribes that at least the statutory minimum wage is paid by bank transfer instead of cash. Additionally, the WAS does not allow as of 1 January 2016 to detract or set off costs of food, travel or housing, if the employee receives less than the statutory minimum wage as a result of such offset of costs.

The rules applying to secondment are subject to many changes. The general trend which we are observing is that more protection is being offered to seconded employees. The discussion around the expansion of the European internal market and the big differences in wages throughout the Member States has led to many legislative proposals. In our view the provisions applying to the seconded employees are rapidly approaching the standards applied to national workers. The recently proposed amendments to the PWD confirm this view. These amendments include the maximum period of 24 months of secondment after which the employment relationship is governed by the law of the host state. Under the proposed amendments of the PWD the remuneration including all emoluments pursuant to generally binding collective bargaining agreements in the host state should also apply to seconded workers. Currently this only applies in the construction sector.

These changes prevent the abuse of the secondment scheme, but they also pose great challenges for the secondment industry. The secondment agencies need to be flexible and to adopt their business to the ever-changing legislation. A skilled partner, who can anticipate the developments and provide innovative solutions, is needed to adequately face such rapid changes in the sector. CMS foresees employment challenges and opportunities ahead of time and comes with inventive solutions tailored to the needs of our clients.

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