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04 October 2021 General
Jongen achter bar in horecagelegenheid

The draft advisory report on social and economic policy for 2021-2025 of the Economic and Social Council of the Netherlands (SER) provides valuable guidance for the incoming government, in particular for curbing the excessive flexibility in the labour market. This is why, as a member of the SER, we have supported the report. Making permanent contracts more adaptable requires additional policy efforts going forward, in line with the proposals put forward by the Borstlap Committee.

Many workers are involuntarily in flexible employment

The Dutch labour market performs well on many counts, especially when viewed in an international perspective. That said, there is scope for making improvements that will also help to tackle the current tightness in the labour market. Institutional differences between employees on permanent contracts, those on flexible contracts and self-employed workers have contributed significantly to strong growth in flexible labour in the Netherlands over the past decades. The partitions between these different forms of employment keep workers from moving from flexible to permanent contracts. This carries the risk of an ever growing proportion of workers involuntarily working in flexible employment. 

The advisory report which the SER recently presented proposes that important steps be taken to curb the excessive flexibility in the labour market. In many respects, it is in line with the suggestions previously put forward by the Borstlap Committee. The playing field should be levelled, and financial incentives for organising permanent work by means of flexible employment constructions should be phased out. While flexible employment should remain available, it must be further regulated. The proposals limit the possibilities for firms to compete in terms of a flexible worker's terms and conditions of employment. For example, employers should no longer be able to keep on permanent workers indefinitely, temping contracts should be made less flexible, and tax relief for self-employed persons should be further reduced. On-call and zero-hours contracts should be replaced by basic contracts with predictable remuneration. These proposed measures will give the incoming government something to work on to limit flexible employment.

Employers still face obstacles to offering workers permanent contracts

The SER report leaves permanent contracts broadly unaffected. Employers should, however, be given the opportunity to cut working hours if a firm's commercial circumstances so require. Such a reduction should be limited to one day a week in the case of a full-time job. Employers should continue to pay full remuneration, with the government providing them with insurance covering 75% of the wage costs relating to the reduction. While employers should still be obliged to continue to pay an employee's remuneration during the second year of sick leave, there should be more scope for re-integration at a different employer. Many small and medium-sized enterprises consider this second-year obligation a major obstacle to offering a worker a permanent employment contract. In spite of the proposals that should make firms more adaptable internally, employers will still face substantial obstacles to offering workers permanent contracts.

Improved balance between permanent and flexible jobs

The Dutch labour market of the future will be about striking the right balance. A smoothly functioning labour market should provide firms with sufficient flexibility to absorb shocks, while at the same time ensuring an equitable distribution of risks and security between workers, firms and the government. We believe the SER advisory report marks an important step forward, containing recommendations aimed at future-proofing the Dutch labour market. However, it chooses to focus mainly on making flexible employment more secure. We recommend, therefore, that additional steps be taken to make permanent contracts more adaptable.

The Borstlap Committee recommended that employers be incentivised to offer workers permanent contracts by shortening the duration of the obligation to continue to pay remuneration during sickness, increasing employees’ internal agility, relaxing redundancy protection and reducing the accumulation of employers’ obligations. We welcome the proposals but acknowledge that adjustments to permanent contracts are a particularly sensitive issue. It will be up to the incoming government to make the final decisions, in close consultation with the social partners. As long as employers perceive permanent contracts as potentially inflexible, costly and risky, pressures for flexibilisation will persist. As such, finding practical solutions in attempting to make permanent contracts more adaptable will be the best way forward to solidify the gains that have been made in optimising flexible contracts.