Labour market measures

The Tax Plan 2020 contains a number of measures relating to the labour market. We have examined each of those measure and have set them out for you. In addition to the measures that form part of the Tax Plan 2020, we will also look at a number of draft bills relating to the labour market that have been announced, are currently in process or have already been adopted.

Work-related expenses scheme

The work-related expenses scheme makes it easier for employers to provide their employees with certain allowances and provisions tax-free. The adjustment to the work-related expenses scheme aims to expand the discretionary margin available. This discretionary margin currently amounts to 1.2% of an employee’s total salary. Under the new arrangement, the discretionary margin will be governed by a dual-band system, in which a percentage of 1.7% will be used for salary amounts up to €400,000 and a percentage of 1.2% will continue to apply to the amount of the salary in excess of €400,000. In addition, the allowance paid by employers to their employees to enable them to apply for a Certificate of Good Conduct (VOG) or a comparable declaration from another country will change. In future, the allowance provided for that purpose will benefit from a targeted exemption, so that it is no longer deducted from the discretionary margin.

 

Furthermore, a small administrative change will be carried out that will make it easier to implement the work-related expenses scheme. At the moment , for the purpose of a final levy, if the discretionary margin is exceeded the excess amount ultimately must be declared when submitting a tax return for the first period for the subsequent tax year. In practice, however, employers have found that deadline to be too short. For that reason, it is proposed that the deadline be extended by a further month, so that employers will have more time to establish the excess amount for the purpose of this final levy. For the majority of employers, this will mean that the final levy will be included in the tax return for February, which must be submitted by 31 March at the latest.

 

Comment by PKF Wallast

The expansion of the discretionary margin within the work-related expenses scheme is especially directed towards employers in SMEs. Relatively speaking, they are likely to derive the greatest benefit from the expansion, due to the introduction of the dual-band system. Despite the fact that the deadline for declaring the final tax amount owing in cases where the discretionary margin is exceeded is being extended by one month, employers in SMEs may still feel that that deadline is too short.

 

Valuation of products from the employer’s own company

Current legislation does not contain any stipulation governing the valuation of products from an employer’s own company that are provided to employees. It is possible that as far as this is concerned, the values used are related to the amount that would be charged to third parties. With regard to the provision of products from an employer’s own company, the work-related expenses scheme operates a targeted exemption up to an amount not exceeding 20% of the market value of those products, and no more than €500 per employee per year. In view of the fact that this reduction scheme makes use of the term “market value”, it is proposed that when determining the value of goods produced by the employer’s own company, the value will be determined in future based on the market value of those products. In most cases, the market value of products from the employer’s own company will equal the price paid by consumers.

 

Adjustment relating to penalties imposed under administrative law

A limitation has been proposed with regard to the reimbursement of employees for penalties and monetary amounts payable in the context of an administrative penalty decision or comparable penalties and monetary amounts payable imposed in another country. This limitation is associated with the restriction regarding the deduction of such penalties and monetary amounts for income tax purposes. Based on the current wording of the law, the employer is able to appoint salary components of that type as a final levy component, so that the employee is not required to pay tax on them. It is proposed that from 2020 onwards, it will no longer be possible for such salary components to be appointed as final levy components and that as a result, employers will be obliged to include them in the amount of salary paid to the employer, on which tax must be paid. The proposed limitation will be applied for the first time to any administrative penalty decision issued after 31 December 2019 and penalties incurred after 31 December 2019.

 

Exemption from insurance tax for self-insurers

It is proposed that an exemption from insurance tax applies to insurance premiums paid by self-insurers for Return to Work of Partially Disabled Persons (WGA) and under the Sickness Benefits Act (ZW). Based on the letter of the current law, those types of insurance policy are not included under the exemption that applies to insurance policies against accidents, invalidity or incapacity for work, even though the public insurance schemes of the Social Security Agency (UWV) under the Partial Capability for Work Act and the Sickness Benefits Act are in fact eligible for that exemption. In practice, the exemption had already been applied to private insurance policies. By putting forward this proposal, the law will be brought back in line with the lawmakers’ original intention and with current practice.

 

Indexation scheme for voluntary workers

From 1 January 2019 onwards, all persons working as volunteers who receive reimbursements and provisions up to a total of €170 per month and €1,700 per calendar year will not be required to pay any tax or social security contributions on those amounts. The organisation for which such volunteers are working will not be owed any premiums under employee insurance schemes. It is proposed that these amounts be subjected to annual indexation, in which they will be arithmetically rounded off to a multiple of €100. On a practical level, this will mean that the maximum amounts will not change every year.

 

Legislation already announced

 

New legislation governing the hiring self employed workers

The Tax Plan 2020 provides almost no new insights with regard to the new legislation relating to the hiring of self employed workers. The Cabinet is currently preparing new legislation and it is intended that these measures will commence with effect from 1 January 2021. Until then a business working with self-employed staff (‘clients’) will, in principle, not be subjected to any additional wage tax assessments, except in the case of bad faith where companies intentionally allow situations constituting pseudo self-employment to arise or to continue to exist. The new legislation will consist of three main elements:

 

  • First of all, examining the independent contractor’s statement (zelfstandigenverklaring) will make it possible to determine with certainty that the client and contractor have not entered into an employment relationship. This is a measure that will apply at the top end of the labour market. In essence, the effect of this measure is that stipulations under labour law, the taxation of salaries and the payment of employee’s social security contributions can be avoided, if the parties concerned sign an independent contractor’s statement. Subject to certain conditions, pensions and collective labour agreements can also be declared inapplicable.
  • In addition to the independent contractor’s statement, the client declaration (opdrachtgeversverklaring) must still be completed. This takes the form of an online questionnaire that determines whether or not an employment relationship exists and provides a sufficient degree of certainty that no payroll tax needs to be withheld or employee’s insurance contributions deducted. If the web module concludes that the situation qualifies as an employment relationship, no client declaration will be issued. This does not mean, however, that the absence of an employment relationship cannot be demonstrated in some other way, such as by means of the outcome of a prior consultation with the Dutch Tax Authorities.
  • Finally, it will not be made compulsory to enter into an employment relationship, but a minimum rate of 16 euros will be introduced in order to prevent pseudo self-employment and competition based on terms and conditions of employment.
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Other bills already adopted or still ongoing

 

Amendment to the measures governing the State pension age and the incentive allowance for employers providing employment to low-income workers

In the coming years, the State pension age will be increased more slowly. By adopting this policy, the Cabinet is responding to the demands made by the trade unions. In 2020 and 2021, the State pension age will continue to be 66 years and 4 months. In 2022, the State pension age will rise by 3 months and by 2024, will be 67 years. After that, the State pension age will not increase by one year for every year we live longer, but by 8 months. In this way, the State pension age will remain linked to life expectancy, but to a lesser degree.

This slowing of the rise in the State pension age will be financed partly by reducing the incentive allowance for employers providing employment to low-income workers and the incentive allowance for employers providing employment to young low-income workers. From 2020 onwards, employers with employees between 18 and 21 years of age will receive a reduced contribution and the allowance will disappear altogether from 2024 onwards. Furthermore, the allowance paid to employers for employing those with an average salary of between 100% and 110% of the statutory minimum wage will be reduced. A maximum allowance of €1,000 per annum per employee in this category will be available, instead of the current allowance of €2,000.

 

New State pension ages

 

Year

 

The State pension age was

The State pension age will become

2019

 

66 years and 4 months

66 years and 4 months

2020

 

66 years and 8 months

66 years and 4 months

2021

 

67 years

66 years and 4 months

2022

 

67 years and 3 months

66 years and 7 months

2023

 

67 years and 3 months

66 years and 10 months

2024

 

67 years and 3 months

67 years

State pension age for persons born on a specific date

 

Year

 

State pension age

Applies to persons born

2020

 

66 years and 4 months

After 31 August 1953, but before 1 September 1954

2021

 

66 years and 4 months

After 31 August 1954, but before 1 September 1955

2022

 

66 years and 7 months

After 31 August 1955, but before 1 June 1956

2023

 

66 years and 10 months

After 31 May 1956, but before 1 March 1957

2024

 

67 years

After 28 February 1957, but before 1 January 195

The Balanced Labour Market Act

The Balanced Labour Market Act (Wet arbeidsmarkt in balans – Wab), which will enter into force on 1 January 2020, includes, amongst other things, the following changes for employees and employers:

 

Dismissal

  • Under the Act, it will become possible for an employer to request the termination of employment based on a combination of two or more grounds for dismissal that have not been committed in full. In such cases, the employment contract will be terminated on grounds of cumulation, otherwise known as the “i grounds”. This will make it easier for an employer to dismiss an employee.
  • But it may turn out more costly. The consequence of a request to terminate on grounds of cumulation is that the employee may possibly receive up to a maximum of one half of his/her transition payment extra. The court will determine the amount of that additional payment.

Transition payment (severance package)

  • With effect from 1 January 2020, employees will be entitled to a transition allowance from the first day of employment onwards, which therefore falls during their probationary period. Today, they are only eligible to receive a transition allowance once they have been employed for 24 months.
  • The composition of the transition allowance is also going to change. The transition allowance will in future be made up of one third of the employee’s monthly salary for each year of service. The higher transition allowance for employees aged 50 years or over, or for employees in service for a long period, will be abolished.
  • Though it does not form part of the Balanced Labour Market Act, the transition allowance compensation scheme is nevertheless related to that Act. The scheme makes it possible for employers to be compensated for transition allowances paid in cases involving employees who have suffered incapacity for work for a long period. Obviously the use of this scheme is subject to a number of conditions. The scheme is expected to enter into force on 1 April 2020. Employers who have paid such transition allowances for long term illness in the period from 1 July 2015 to 1 April 2020 will also be eligible to receive compensation.

The provisions governing a succession of fixed-term employment contracts

  • The provisions governing a succession of fixed-term employment contracts will be extended from 2 to 3 years. This means that during any 3-year period, employers will be permitted to issue no more than 3 temporary contracts to their employees. In a short time from now, if that period of 3 years is exceeded, the employee’s contract will automatically become a permanent contract. These new provisions governing a succession of fixed-term employment contracts will enter into force with immediate effect on 1 January 2020. It will not matter whether the employment contract was entered into before or after 1 January 2020.
  • The period of six months in which a succession of temporary contracts may be interrupted will remain the same. The Balanced Labour Market Act does make it possible for that period to be reduced to three months, under the terms of a Collective Labour Agreement. This will only be possible, however, in the case of recurring, temporary work that can be performed for a maximum of nine months each year. An exception from the provisions governing a succession of fixed-term employment contracts will also apply in the case of temporary staff in primary school, who are providing cover for a member of staff who is sick.

Payrolling

  • As a minimum, staff employed via a payrolling company will receive the same terms and conditions of employment as employees in the service of the employer, with effect from 1 January 2020. In the case of companies that make use of payrolling companies, payrolling will offer fewer financial benefits and will simply provide a means by which to outsource the administrative tasks associated with employing personnel. Individuals employed under payrolling schemes will be entitled to an “adequate pension scheme”. The principles underlying what constitutes an adequate pension will be included in a separate decree that will enter into force on 1 January 2021.

On-call agreement

  • An employer is required to call upon the services of an on-call employee at least 4 days in advance. On-call employees retain the right to salary for the hours for which they are called up if a company cancels that work less than 4 days in advance. Agreements may be laid down in a collective labour agreement to reduce that period of 4 days to 1 day. These regulations will enter into force on 1 January 2020.
  • Furthermore, an employer must offer an on-call employee a contract for a fixed number of hours, once he/she has been employed under an on-call agreement for a period of 12 months. That offer must be for the same number of hours as the average number of hours that the employee has worked during the preceding 12 months. This regulation will enter into force immediately on 1 January 2020. Employees who, on or after 1 January 2020, have been in service for longer than 12 months under an on-call agreement must receive an offer for a fixed number of hours.

Unemployment insurance contribution

Employers will pay lower unemployment insurance contributions for employees appointed on a permanent contract. From 1 January 2020 onwards, the unemployment insurance contribution will depend on the type of contract, namely, whether that contract is for a fixed term or an indefinite term. The unemployment insurance premium for permanent contracts will be five percentage points lower than it will be in the case of flexible employees. The actual sector in which an employer is active will no longer have any effect on the level of unemployment insurance premiums.

S.H. (Stephen) Vergeer MB RB Advisor
S.H. (Stephen) Vergeer MB RB, Advisor
dr. J. (Jeroen) van Strien Advisor
dr. J. (Jeroen) van Strien, Advisor
Prof. dr. J.C.M. (Hans) van Sonderen Advisor
Prof. dr. J.C.M. (Hans) van Sonderen, Advisor
mr. drs. R.W. (Ruud) van der Linde Advisor
mr. drs. R.W. (Ruud) van der Linde, Advisor
mr. S. (Sicco) van den Berg Advisor
mr. S. (Sicco) van den Berg, Advisor
I. (Ibrahim) Ahmed LL.M. Advisor
I. (Ibrahim) Ahmed LL.M., Advisor
drs. A.T. (Andor) Valkenburg Manager Amsterdam, Advisor
drs. A.T. (Andor) Valkenburg, Manager Amsterdam, Advisor
mr. H.J.A. (Huub) Nacken Advisor
mr. H.J.A. (Huub) Nacken, Advisor
mr. R.C. (Ron) Henzen Advisor
mr. R.C. (Ron) Henzen, Advisor
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