With effect from 1 January 2020, WW-premium differentiation will no longer take place because the WW-premium is derived from the sector and risk premium group in which the employer is active. Instead, as of 1 January 2020, the nature of the employment contract will be leading for the level of the WW-premium.
In general, this is defined as a low WW-premium has to be paid in case of an employment contract for an indefinite period and a high WW-premium has to be paid in case of a fixed-term employment contract. However, this is not entirely correct. It is more nuanced than that.
When the employer has to pay the low WW-premium and when the high WW-premium I explain below. I will use examples to clarify this.
WW-premium differentiation: the low or high WW-premium
There are 4 situations in which the employer is eligible for the low WW-premium.
This concerns the following 4 situations:
- when there is a written employment contract for an indefinite period of time, not being an on-call contract;
- in the case of an employment contract with an employee who is younger than 21 years of age and who has been paid for a maximum of 48 hours per return period of 4 weeks or a maximum of 52 hours per return period of a calendar month;
- in the case of an employment contract and practice agreement with a BBL pupil;
- in the case of an employee insurance benefit.
The high WW-premium applies to all other situations.
The employer is obliged to state on the payslip whether there is an employment contract for an indefinite period of time, whether or not there is an on-call contract and whether the employment contract has been agreed in writing.
WW-premium differentiation: low WW-premium in case of permanent employment contract
For the first situation, in which the employer may apply the low WW-premium, 4 requirements apply, namely, that:
- there is an employment contract;
- the employment contract is an employment contract for an indefinite period of time;
- the employment contract is in writing;
- ther employment contract is not an on-call contract.
Employment contract
The requirement of an employment contract means that the low WW-premium does not apply in the case of fictitious employment. A fictitious employment relationship does not meet the requirement for application of the low WW-premium, as referred to in Article 3 Unemployment Insurance Act (WW), which is based on the employment contract.
Employment contract for an indefinite period
An employment contract for an indefinite period is not involved if it is a fixed-term contract or a temporary employment contract with a temporary employment clause. In the case of a temporary extension of an employment contract for an indefinite period, that temporary extension is deemed to be a fixed-term employment contract.
Suppose, for example, that an employee works on the basis of a written employment contract for an indefinite period of time, which is not an on-call contract, for the duration of 15 hours per week, which is temporarily extended by 10 hours per week.
For the written employment contract for an indefinite period of 15 hours per week, the low WW-premium is applicable. The temporary extension with 10 hours per week applies as a separate employment contract. Because it is a temporary extension, it is considered a temporary employment contract. The high WW-premium applies to this.
If the extension had not been temporary, but permanent, it would have remained a single employment contract for an indefinite period of time. The low WW-premium would then apply to this contract. The same applies to a limitation of the scope of employment, which is permanent. Even then, there would still be one employment contract for an indefinite period of time, to which the low WW-premium would apply.
If first there is a permanent extension of the employment contract for an indefinite period of time with a number of hours per week and then there is a permanent limitation of the employment contract for an indefinite period of time with the same number of hours per week, because the employer and the employee, on closer inspection, do not consider the new scope of employment suitable, the employment contract will be considered as one employment contract for an indefinite period of time, to which the low WW-premium applies.
Of course, this only applies if there is a permanent extension in the first instance and this permanent extension is later reversed in whole or in part. The permanent extension and the permanent limitation can therefore not be agreed at the same time. If the permanent extension and the permanent limitation are agreed upon at the same time this is considered to be a temporary extension, meaning the high WW-premium applies.
It should be noted that if the number of hours is restricted on the initiative of the employer, this qualifies as a partly dismissal. It should be borne in mind that partly dismissal is only possible in special situations. Furthermore, it should be taken into account that a situation may arise in which there is a right to a transition fee in the event of partly dismissal.
Instead of a temporary increase in the number of hours, it is also possible to agree on a zero-hours contract in addition to an employment contract for an indefinite period. The advantage over a temporary extension with a certain number of hours is that this gives more flexibility. The advantage compared to a min-max contract is that the employment contract for an indefinite period is subject to the low WW-premium. The same applies to the zero-hours contract as to the temporary extension with a number of hours. In other words: the high WW-premium applies.
However, it should be borne in mind that a situation may arise in which the high WW-premium still applies to both employment contracts. This has to do with the fact that the low WW-premium has to be revised in some situations, namely when the number of paid hours is 31% or more than the number of contract hours. I will discuss this in more detail below.
Written employment contract
If no written employment contract has been concluded for an indefinite period of time, the conditions for the low WW-premium will not be met, unless one of the other 3 situations mentioned above occurs, in which the low WW-premium may be paid.
The condition that an employment contract has been agreed upon in writing is also met in the case of a digital employment contract and/or digital signature. Consent via e-mail or in an HR system is also an option.
If a written employment contract has been concluded for a definite period of time that has automatically changed into an employment contract for an indefinite period of time, the low WW-premium is due if a new employment contract for an indefinite period of time has been concluded and signed by both parties or if the employer has a written addendum to the original written employment contract, signed by both parties.
Such an addendum is also sufficient to pay the low WW-premium if the original employment contract has never been written down or is no longer available in the administration of the employer.
The conditions for an addendum on the basis of which the low WW-premium is due are as follows:
- Employee and employer have signed a written addendum;
- This addendum shows that this is an employment contract for an indefinite period of time, which is not an on-call contract; and
- The employer keeps this addendum with the payroll administration.
Employers will have until 1 July 2020 to comply with this administrative requirement for the low WW-premium. This means that employers may pay the low WW-premium until that time. Even if the employment contract for an indefinite period of time, which is not an on-call contract, has not yet been laid down in writing, or if the employment contract or the addendum has not yet been signed by both parties.
In such situations, employers may include ‘yes’ in the ‘written employment contract’ indication section in the payroll tax return for periods up to 1 July 2020.
This coulance only applies to employment contracts of employees who joined the company prior to 1 January 2020. No later than 1 July 2020, the written employment contract or written addendum signed by both the employer and the employee must be present in the payroll administration for these employees. This must show that the employee was already employed for an indefinite period of time on 31 December 2019 at the latest.
If this administrative requirement is not met before 1 July 2020, but the employment contract continues after 30 June 2020, the high WW-premium will still be due retroactively as of 1 January 2020.
On-call contract
An employment contact is considered to be an on-call contract if:
- for the duration of the employment contract, the volume of work is not laid down in a number of hours per unit of time not exceeding one month;
- the volume of work is not fixed for the duration of the employment contract in a number of hours per unit of time not exceeding one year, with pay spread evenly over the year; or
- the obligation to continue to pay wages is excluded on the grounds of Article 7:628 paragraph 5 or Article 7:691 paragraph 7 of the Dutch Civil Code in the event that the employee has not performed the agreed work.
Both a zero-hours contract and a min-max contract are considered to be an on-call contract.
Account has been taken of the fact that it is not always possible to agree on a fixed contract with employees with a fixed weekly or monthly work volume. Therefore, it is also permitted to pay the low WW-premium for written employment contracts for an indefinite period of time in which the scope of employment has been agreed per year if the right to salary is spread evenly over the year (the so-called annual hours standard).
In order not to have an on-call contract, it is really important that the number of hours per unit of time of a maximum of one month or a maximum of one year is fixed for the duration of the employment contract. In the case of an employment contract for an indefinite period, the number of hours per unit of time of a maximum of one month or a maximum of one year must therefore be fixed for an indefinite period.
For example, in the case of an employment contract for an indefinite period of time, with an employment volume of 40 hours per week in July, August and September, and an employment volume of 12 hours per week in the other months of the year, the employment contract is considered to be an on-call contract, because the employment volume is not fixed as a number of hours per time unit for the duration of the employment contract.
A situation in which, for the duration of the employment contract for an indefinite period of time, the scope of the employment is not fixed as a number of hours per unit of time also exists if, in an employment contract for an indefinite period of time, a fixed salary per month has been agreed upon, including any overtime. In that case, no fixed scope of employment has been laid down. As a result, the high WW-premium applies.
If, on the other hand, a fixed scope of employment is set, for example 30 hours per week, and it is agreed that no compensation will be paid for any overtime, for example because this may be necessary due to the nature of the position, the low WW-premium applies. The same applies if a fixed scope of work is set and overtime is paid.
However, in the latter situation – depending on the number of contract hours and the number of hours worked – a situation may arise in which the low WW-premium has to be revised. I will discuss that situation in more detail below.
If it is not a question of a fixed number of hours per week or month, but an average number of hours per week or per month, it is important – in order for the employment contract not be considered as an on-call contract – that the average number of hours is calculated over a period of a maximum of one year. If the period over which the average number of hours is calculated is longer than one year, then this is an on-call contract and the high WW-premium therefore applies.
WW-premium differentiation: low WW-premium employee under 21 years of age
As explained above, the low WW-premium also applies in the case of an employment contract with an employee who is younger than 21 years of age and who has been remunerated for a maximum of 48 hours per return period of 4 weeks or a maximum of 52 hours per return period of a calendar month.
As far as the employment contract in this situation is concerned, it is not only irrelevant whether it is a written employment contract or not, but it is also irrelevant whether it is a fixed-term or indefinite employment contract. Nor is it relevant whether or not it is an on-call contract.
The situation may arise that the employer has to pay the low WW-premium one return period and the high WW-premium the other return period for an employee who is younger than 21 years of age. After all, it is possible that, in one return period, the hours worked remain below the maximum of 48 and 52 hours respectively, and the other return period does not.
Even if the employment contract is terminated during the return period, the total number of paid hours for that return period must be taken into account.
Suppose the return period is one month and the employee has only worked 3 weeks in the return period in question. If the employee has then worked 15 hours each week, the low WW premium applies, because the total number of paid hours is 45 and therefore lower than 52.
If, in the latter example, the employee has worked 24 hours each week, the employer must pay the high WW-premium, because the total number of paid hours is 72 and therefore higher than 52.
To determine whether the employee is younger than 21 or not, the age that the employee had on the first day of the relevant return period of four weeks or a month is important.
If the employee enters into employment during the relevant return period, the first day of the relevant return period is not the starting point. In that case, the employee’s age on the first day of the employment contract applies.
Hours paid
In order to determine the number of hours paid during a return period, the hours paid under different employment contracts must be added together.
The concept of ‘hours paid’ should be understood literally. The main rule is: each remunerated hour is a paid hour. So the paid, agreed upon hours are paid hours. Regardless of whether or not work has been performed or not.
So even if the employee was incapacitated for work due to illness, but is entitled to payment of wages during this incapacity for work, these hours are also referred to as paid hours. Regardless of whether the employee is paid 100% wages during incapacity for work or a lower percentage.
Extra hours worked, such as overtime hours, that are paid out, are paid hours. Unpaid hours are not paid hours. Therefore, if overtime hours are not paid, they are not paid hours. Unpaid leave is not considered as paid hours either.
The paid hours follow the time when the wages are paid. The employer shall therefore include them in the return period in which the employee received the wages. The hours are rounded off arithmetically to whole hours in the declaration. Less than 0.5 hours is rounded down. 0.5 hours or more is rounded up.
If an employee sells leave hours and therefore has these hours paid out, the number of hours paid out goes up. If an employee buys leave hours by surrendering salary or reserving holiday allowance, then the number of paid hours goes down.
Atv hours are not paid hours. This is because the hours that the employee works extra are not compensated with wages, but with extra time off.
If the employer has agreed with the employee that an allowance is paid per hour for on-call time, then these hours are regarded as remunerated hours. This also applies if the employer does not pay the normal hourly wage for these hours.
If the employer reimburses part of the hours that the employee must be available, only the reimbursed hours are regarded as paid hours. If the employer pays a fixed allowance per on-call shift regardless of the number of hours the employee is available, this does not result in paid hours.
WW premium differentiation: low WW premium employment contract BBL pupil
If an employer enters into a practical agreement with a BBL pupil, which is dated and included in the administration, the employer may pay the low WW-premium if the employer also has an employment contract with the BBL pupil on the basis of the Education and Training Act.
BBL stands for Beroepsopleiding in de Beroepsopleidende Leerweg. This is a form of education in which the pupil learns by working. The pupil usually goes to school one day a week. The other four days the pupil works at a recognised learning company. The practical agreement can therefore be accompanied by an employment contract because both agreements are concluded by the parties or because the nature of the actual activities to be carried out and the relationship within which these activities are carried out also constitute an employment contract.
It is important that the employment contract exists on the basis of the BBL as this exception relates only to an employment contract based on BBL. If, in addition or instead, there is an additional job and the employee is younger than 21 years of age, it will have to be considered whether the situation referred to above occurs with regard to the additional job.
If, in addition, the employee has a part-time job, the exception to the situation referred to above as the second situation will generally not apply to the part-time job. After all, as explained above, in the case of an employment contract and a practice agreement with a BBL pupil, the pupil generally goes to school one day a week and works the other four days at a recognised training company.
Those other days, which are usually four, concern paid working days and thus paid working hours. The total of these will therefore generally exceed the maximum of the situation mentioned above as the second situation. This applies in particular if the number of hours of the part-time job is added to this.
For the employment contract on the basis of the BBL, the low WW-premium applies. However, for a part-time job, the high WW-premium applies if the number of hours paid in accordance with the employment contract on the grounds of the BBL and the part-time job together are higher than the permitted maximum number of hours of the situation referred to above as the second situation.
WW-premium differentiation: low WW-premium benefit employee insurances
The employer pays the low WW-premium on benefits under the employee insurance schemes (WW, ZW, WIA, WAO, WAZO). This is both the case if the UWV pays the benefit directly to the employee and if the employer receives the benefit from the UWV and continues to pay it to the employee, or if the employer is an individual risk bearer and pays the benefit itself.
WW premium differentiation: difference between low and high WW-premium
The premium difference between the low and the high WW-premium is 5%. The low WW-premium in 2020 is 2.94%, while the high WW-premium in 2020 is 7.94%.