Dutch Labor Reforms Will Do Little to Encourage Hiring

Companies still need to pay two years of sick leave.

Dutch labor minister Karien van Gennip in The Hague (ANP/Laurens van Putten)

Instead of making it easier for companies to hire workers on a permanent basis, the Dutch government is banning various types of temp work and making freelancers more expensive.

Labor minister Karien van Gennip argues:

Too many workers with a flexible contract or who are self-employed don’t have … security. At the same time, especially small business owners are reluctant to hire people on a permanent basis. This needs to change.

Yet she is doing little to reduce risks for entrepreneurs while taking abundant steps to give workers more “security”.

Dutch get two years of sick leave

64 percent of Dutch workers are employed by a small business. That is low by European standards. In all EU countries except France, Germany and Sweden, small business is a larger employer.

The reason — and the Dutch small-business association has complained about this for years — is that the Netherlands is the only country in the world that requires companies to pay up to two years of sick leave.

Big companies manage, but for small businesses the threat of having to pay an ill worker 70 percent of their wages for two years is a major reason for not hiring workers at all. Or they hire contractors, who aren’t eligible for sick pay.

It doesn’t often happen that companies go bankrupt because they can’t afford sick pay. But it happens.

Van Gennip’s proposal is to have an independent body “evaluate” after one year of illness if the employee may still be able to return to their job.

Again, this is the sort of policy that helps large companies, who can deal with the paperwork and afford to leave a position unfilled for a year. It won’t convince a business with one or two employees to hire a second or third person.

Companies could reducing working hours in a crisis

Another reason companies are slow to hire is that firing employees can be costly and time-consuming. Companies need to either prove cause to a judge or pay severance, which can reach up to one year’s salary.