Important changes to sector classification effective immediately

On Friday, June 29, 2018, the Cabinet approved the Labor Market Improved Equilibrium Act (‘Wet arbeidsmarkt in balans’; WAB). Under this Act, sector-specific unemployment contributions will be replaced as of 2020 by contributions differentiated according to the type of employment contract. Further to this announcement, the Minister of Social Affairs and Employment, Mr. Koolmees, revealed that he and the Deputy Minister of Finance, Mr. Snel, are introducing a number of measures to address problems areas in the sector classification concerning the determination of unemployment contributions. These measures will have retroactive effect to 5:00 p.m. on June 29, 2018. The problem areas are explained below.

Cabinet abandons sector classification

At present, the amount of the unemployment contribution paid by employers is determined by the sector in which they are classified. This manner of classification is largely outdated and no longer representative. Nor does it realize the goal of inducing employers to prevent unemployment, sickness and occupational disability. Furthermore, an increase in the number of applications for reclassification and any associated procedures creates implementation problems for the Dutch tax authorities. These are the reasons why one of the measures in the WAB is the abolition in 2020 of the sector classification for the purposes of determining unemployment contributions. The sector classification for the purposes of determining contributions under the Sickness Benefits Act (Ziektewet; ZW) and the Resumption of Work (Partially Fit Persons) Regulation (Werkhervatting Gedeeltelijk Arbeidsgeschikten; WGA) will also eventually be abolished.

Problem areas addressed

In anticipation of the abolition of the sector classification, the following problem areas have been addressed, effective immediately:

1. Changes to the sector classification upon request of the employer are no longer possible with retroactive effect
   It is no longer possible to submit a request for classification in another sector with a maximum retroactive effect of five years and to have the contributions paid over that period refunded. The sector classification can only be changed as of a date in the future. An exception is made for employers that benefited from a wrong classification: the Dutch tax authorities can change their classification with retroactive effect (and thus impose additional assessments for the contributions).
2. Split registrations no longer possible in new cases
   It is no longer possible to classify various undertakings of a business in different sectors. These requests will no longer be dealt with.
3. Group registrations and registrations of sideline activities and ancillary bodies are no longer possible in new cases
   Requests to have businesses within a group and sideline activities and ancillary bodies classified in the same sector will no longer be dealt with.

These changes will not affect the manner in which employers are currently classified. If there is already a split registration (measure 2) or a group registration (measure 3), it will be maintained for as long as the conditions are met.