The 'Confidence in the future' coalition agreement – labour law consequences

On Tuesday 10 October 2017 the VVD, CDA, D66 and ChristenUnie coalition parties presented the 'Confidence in the future' Coalition Agreement. What are the most important intentions as regards labour law?

The transition allowance 

If the government plans are implemented, employees will henceforth start to accrue entitlement to a transition allowance from the beginning of their employment contract. Currently this right only exists once the employment contract has been in effect for at least two years, apart from exceptions.
The amount of the transition allowance will stay the same, so one-sixth gross monthly wage (including holiday allowance and several other wage components) per half-year of service during the first ten years of service and one-fourth gross monthly wage per half-year of service during the following years of service. A more favourable arrangement applies - as a temporary transitional arrangement - to employees aged 50 or older and who have been employed by the employer for at least 10 years, unless the employer is a small employer (SME's with, on average, fewer than 25 employees).
Another exception that applies to such SME's is the arrangement that no transition allowance is owed in case of very bad financial circumstances. The new government wishes to ease the relevant applicable criteria, so that SME's can more easily invoke this exception.
In addition to this, SME's who discontinue their enterprise due to illness or retirement will be compensated for the transition allowance.

Continued payment of wages during illness   

The obligation to continue to pay wages during illness for SME's will be shortened from two years to one year. The costs of the continued payment of wages during the second year of illness will be apportioned among all SME employers using a uniform cost-effective contribution.

The trial period

In case a contract for an indefinite term is immediately offered it will become possible for employers to include a trial period of five months in such contract. It will also become possible to include a trial period of three months in contracts for a fixed term exceeding two years.
An important fact for the employer is that it will continue to be impossible to include a trial period in a contract for a fixed term of less than six months.

Succession of fixed-term employment contracts provisions                       
It will become possible again to conclude consecutive fixed-term contracts during a period of three years (instead of the current period of two years). The period after which consecutive temporary employment contracts turn into an employment contract for an indefinite period is being extended from two to three years.

The grounds for dismissal

It will become easier for employers to dismiss employees. Even if a well-considered ground for dismissal is missing (for example, a dismissal on the basis of unsatisfactory performance is missing a complete file with a completed improvement procedure), a court may set aside an employment contract in case, for instance, there is also tension that has arisen as a result of a damaged working relationship. In this case the employee is entitled to an additional payment of no more than one half of the transition allowance.

Naturally, we will watch the announced legislative proposals closely.

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