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Employment Contracts in the Netherlands – Balanced Labor Market Act (BLMA)

Companies that hire employees abroad will always need to have an employment contract that meets local guidelines, even if those rules are very different from the home country.  Contracts may either be open ended or may be for a fixed period of time such as one year.

This is the case in the Netherlands, where there is a limitation on the length and number of fixed term employment contracts that an employer can offer.  This is one way the Netherlands protect employee rights by imposing limitations on employers, and if you are new to hiring in Netherlands you will want to understand the basics.

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Temporary Employment Contracts – The Chain Rule

The ‘chain rule’ in Netherlands is triggered after successive fixed term/temporary employment contracts require the employer to offer an indefinite/open ended contract. 

This rule is designed to prevent employers from engaging employees long term using temporary contracts. 

Prior to January 1, 2020 three temporary contracts (up to 2 years in length for each) could be offered.  The ‘chain’ can be reset if the employee takes a six-month break between any of the contracts.

Changes Effective January 1, 2020

The chain rule has now been modified by the BLMA to allow for temporary contracts of three years in length, but it is still limited to three contracts total before an indefinite contract is created.  The six-month break rule still can be used. This gives the employer a bit more time to use temporary contracts, but also gives the employee a longer term of employment for each.

Client Case:  Employees Affected by the New Dutch Law

Our local partner in the Netherlands notified us of the change and that three employees of Shield’s clients would be affected.  One of the three employees was already on their third contract, and if they remained employed without a break, they would go on an indefinite contract.

Solution:

We contacted our client and offered a solution of placing the employee on a ‘project based’ contract (rather than salaried), which would have a finite maximum end date and be guaranteed.

Do you need more information about Netherlands?

If this rule about employment contract limits is new to you, there might be other questions such as:

Are the notice periods and termination reasons the same for temporary and indefinite contracts?

What if a foreign employer has a home country contract with the employee that is of a different length?

Is the transition from temporary to indefinite contracts automatic by statute, even if a new employment contract is not drafted? 

We address questions like this for our clients to ensure smooth and compliant hiring abroad, in the areas of payroll, benefits and labor rights.  We make international employment simple.

 

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