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Want to pay lower unemployment insurance contribution? You will have to arrange it!

Publication date: 26 November 2019
As of 1 January 2020, you must be able to prove that the employee has a contract for an indefinite period to qualify for lower unemployment insurance contribution. This contract must be in writing, provided with a date and signed by you and the employee. In addition, a fixed number of hours must also be agreed upon. If you cannot prove this, you have to pay an additional 5% of the wage sum as contribution.

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High and low unemployment insurance contribution

It must become more attractive for employers to employ people on a permanent basis. That is the aim of the Labour Market in Balance Act. One of the instruments for this is a differentiation in the unemployment insurance contribution. For employees with a fixed-term contract or an on-call contract a 5% higher contribution must be paid than for employees with an indefinite contract. For 2020, the contributions are respectively 7.94% and 2.94% of the wage sum. The difference in contributions can amount to € 2861.60 per employee in the coming year.

Proof of existence of a permanent contract

In order to qualify for the lower contribution, you  must be able to prove that the employee does have a permanent contract. There are three things you need to prove:

  1. You have agreed upon an employment contract with the employee in writing. The contract is provided with a date and signed by you and the employee.
  2. The contract is for an indefinite period.
  3. It is not an on-call contract. The employment contract thus contains a fixed number of hours that the employee has to work.

You can prove this if you have an indefinite contract in your records.

After temporary contract no indefinite contract in writing. Now what?

Many employees started out on a temporary contract which was then converted into a permanent employment contract. If the other terms and conditions of employment have not changed, many employers will not conclude a new employment contract in writing. In that case you will thus not have the required proof to qualify for the lower contribution. How do you solve this?

To prove that you have concluded a permanent contract, you do not need to draft and have signed a completely new work contract. You can use an addition to the existing temporary employment contract, an addendum. Here you can specify the date from which the employee is employed for an indefinite period.

The employee needs to sign the addendum. Normally this will not be a problem. In this case, you will probably not be able to invoke a  unilateral amendment clause due to the obligation to sign.

Our advice

  • Check whether your employment contracts are sufficient as proof for the low unemployment insurance contribution
  • Have a lawyer draft an addendum if necessary

More information

Would you like to have checked whether your employment contracts are sufficient as proof for the lower unemployment insurance contribution? Or do you want us to draft an addendum? Or do you have any other questions about work contracts and dismissal of employees? Please contact our employment lawyers:

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