Employment Law in Motion: The State of Affairs After Budget Day 2026

On 15 September 2026, it was once again Budget Day (Prinsjesdag) in the Netherlands, and the government presented the 2027 National Budget Memorandum and the budget of the Ministry of Social Affairs and Employment. In this item, we update you on the status of key legislative proposals and recent developments, accompanied by a brief explanation of their content.

1. WIA: Developments and Reforms

The coalition agreement for 2026-2030 included far-reaching cuts to the social security system: a 20% reduction of the maximum daily wage as of 2029, a shortening of unemployment benefits (WW) from 24 to 12 months, the abolition of the IVA benefit (for fully and permanently disabled employees) from 2030, and the abolition of the annual allowance for people with disabilities.

On Budget Day, these plans were significantly softened. The proposed reduction of the maximum daily wage has been fully withdrawn, the shortening of WW benefits has been postponed until 2029, and the abolition of the allowance for people with disabilities has likewise been delayed until 2029. With respect to the IVA, the government has opted against unilateral implementation and instead seeks consultation with employers’ organisations and trade unions on a broader and simpler sickness and disability benefits system. No social agreement has yet been reached.

In the shorter term, the government focuses on task redistribution within the UWV, a larger role for occupational physicians in the RIV assessment, and stricter conditions for WIA reassessments, while premiums for the Work Resumption Fund (Whk), WGA, Sickness Benefits Act and Aof will increase substantially.

In practice, the relationship between the 104-week continued salary payment obligation, WIA inflow and employer risks remains highly relevant. The government appears primarily to be buying time for a broader social agreement.

2. Restriction of the Compensation Scheme for Transition Payments in Cases of Long-Term Disability

Since 2020, employers have been able to apply to the UWV for compensation of transition payments made upon dismissal due to long-term disability or business closure (as a result of retirement or death). The original bill, submitted to the House of Representatives on 10 December 2025, limited this compensation to small employers.

Through an amendment, the proposal was expanded, with the government ultimately aiming to abolish the compensation scheme for all employers regardless of size. The Council of State even advised considering abolishing the mandatory transition payment in cases of long-term disability altogether, which would render the compensation scheme unnecessary. The government did not follow this recommendation.

The intended abolition date has been repeatedly postponed: first from 1 July 2026 to 1 January 2027 and, following the Budget Day announcements of 15 September 2026, by another year to 1 January 2028.

Maintaining the compensation scheme in 2027 will cost the Ministry of Social Affairs and Employment approximately €573 million in 2027 and €200 million in 2028. Employers can therefore continue to apply for compensation from the UWV throughout 2027.

However, the planned abolition in 2028 is not yet certain. The government has linked it to a broader reform of the transition payment system, under which employers who demonstrably invest in training and reintegration would pay less. Employees’ entitlement to a transition payment itself remains unaffected; only the reimbursement of employers by the UWV is under discussion.

This development also affects the Dutch Supreme Court’s Xella ruling regarding employers’ obligation to cooperate in terminating dormant employment contracts, as that ruling was based on the existence of the compensation scheme. It remains to be seen how this issue will be addressed.

3. Implementation of the EU Pay Transparency Directive

This legislative proposal implements the European Pay Transparency Directive and aims to make equal pay for men and women performing equal or equivalent work more enforceable.

Employers must inform applicants of the salary or salary range before salary negotiations begin and may no longer ask about current or previous salaries. Employees will receive annual information about their right to remuneration information and may compare their salary with the average, gender-specific salary of colleagues performing equal or equivalent work.

Employers must implement an objective job evaluation and classification system.

Employers with 100 or more employees will be subject to reporting obligations regarding pay differences:

• Companies with 250 or more employees must report annually.
• Companies with 100 to 250 employees must report every three years.

Employers with 150 or more employees must submit their first report no later than 7 June 2028 for calendar year 2027. Employers with 100 to 150 employees will follow from 2031 onwards.

Following the Council of State’s advice, the revised bill was submitted to the House of Representatives on 21 May 2026. Entry into force is envisaged for 1 January 2027, although this is already one year later than required by the Directive, which should have been implemented by 7 June 2026.

The plenary debate in the House of Representatives is expected on 11 January 2027, making implementation on 1 January 2027 unlikely. No major substantive amendments are expected because the bill is closely based on the Directive itself. After parliamentary approval in the House of Representatives, the Senate will still need to consider the proposal.

4. Modernisation of the Non-Compete Clause

The government intends to tighten the rules governing non-compete clauses (including non-solicitation clauses).

Research by the Ministry shows that the use of non-compete clauses has increased significantly. Approximately one-third of employees are now subject to such clauses, often without a compelling business interest. According to the government, this restricts labour market mobility.

The bill includes:

• A maximum duration of 12 months.
• A requirement to explicitly justify the geographical scope.
• A requirement to substantiate the compelling business interest in all employment contracts, not only fixed-term contracts.
• A written notification obligation approximately one month before the end of the employment contract.
• Mandatory compensation to employees if the clause is invoked, amounting to half of the employee’s last monthly salary, up to a maximum of six months' salary.

Existing legally valid clauses will remain in force. Minister Vijlbrief submitted the proposal to the Council of State for advice on 29 June 2026. The intention is to submit it to Parliament by the end of 2026 or early 2027. Until enactment, the current rules under Article 7:653 of the Dutch Civil Code remain applicable.

5. Self-Employed Persons Act: Letter of 10 September 2026

Minister Aartsen (Employment and Participation) informed Parliament on 10 September 2026 about the next steps regarding the Self-Employed Persons Act.

The purpose of the legislation is to provide greater clarity to self-employed workers and clients and to create a “safe harbour” clarifying when an employment contract does not exist, without undermining employee protections.

The proposal is based on principles of independence, entrepreneurial risk, and freedom to organise work. It introduces:

• A self-employment test focusing on the individual.
• A working relationship test focusing on freedom, independence and the absence of authority within the assignment.

The government's earlier plans for an assessment committee and sector-specific legal presumptions are no longer included.

The implementation assessments, a second public consultation and a second review by the Advisory Board on Regulatory Burden (ATR) are scheduled for late September 2026. The bill is then expected to proceed to the Council of State and Parliament in 2027, with entry into force anticipated on 1 January 2028.

6. Continued Salary Payment During Illness: Scenarios from the Parliamentary Letter of 8 September 2026

In response to parliamentary motions, the government outlined six scenarios to make continued salary payment during illness more manageable, particularly for smaller employers.

These scenarios include:

• Limiting supplementary salary payments above the statutory minimum.
• Reducing the salary continuation period from two years to one and a half or one year.
• Collective financing of part of the second year of illness for small employers.
• Reducing the maximum UWV wage sanction from 52 to 26 weeks.
• Simplifying the dismissal procedure following a positive RIV assessment.
• Expanding the no-risk policy for employees who reintegrate with a new employer via the second-track process.

The government estimates that shortening the salary continuation period would actually increase collective spending due to higher WIA inflow. Moreover, the UWV’s current backlogs make this option impractical in the short and medium term.

These are exploratory scenarios only; no legislative proposal has yet been introduced.

7. Second-Year Reintegration for SMEs

This proposal would allow small and medium-sized employers (with a payroll of approximately €4.3 million or less in 2026) to focus entirely on second-track reintegration from the start of the second year of illness.

The employee would be reintegrated with another employer, without retaining a right to return to the original employer. This requires either employee consent or UWV approval.

The existing 104-week salary continuation and reintegration obligation remains intact. Only the first-track reintegration process can be concluded earlier.

The intended entry into force is 1 January 2030.

8. Disability Insurance for the Self-Employed (BAZ)

The proposal introduces mandatory disability insurance for self-employed individuals up to the state pension age.

Benefits would amount to a maximum of the statutory minimum wage after a two-year waiting period.

Self-employed persons with equivalent private insurance or who operate through a private limited company (B.V.) may opt out.

Due to implementation concerns raised by the UWV, the Tax Administration and the Council of State, implementation before 2030 is considered unrealistic.

9. Employee Retention During Crises Act

This legislation would replace the current Short-Time Working Scheme.

Employers affected by major crises, such as infrastructure failures, pandemics, wars or extreme weather, would receive additional support to retain staff through wage subsidies, reduced salary obligations and redeployment opportunities.

The envisaged entry into force is 1 January 2029.

10. Pension Commitments and Other Pension-Related Matters Act

This bill implements several commitments made during the parliamentary approval process of the Future Pensions Act (Wet toekomst pensioenen).

It includes:

• Harmonisation of the definition of “child”.
• Possibilities for voluntary continuation of orphan's pensions.
• Expanded transitional arrangements for pension accrual during disability.
• Various technical amendments and clarifications.

11. Right to Disconnect

This private member’s bill amends the Working Conditions Act by requiring employers and employees to discuss availability outside working hours as part of policies aimed at preventing psychosocial workload, such as stress and burnout.

The proposal does not prescribe a specific outcome but does require that the discussion takes place and can be demonstrated if requested.

12. Equal Opportunities in Recruitment and Selection Act

This initiative aims to combat discrimination in recruitment and selection processes.

Organisations with:

• 25 or more employees would be required to implement objective recruitment and selection procedures.
• 50 or more employees would have to document those procedures in writing.

13. Bereavement Leave Act

This private member’s bill introduces a statutory right to paid bereavement leave of at least one working week for employees with minor children whose partner or minor child has passed away.

The leave may be taken flexibly within one year after the death and would be fully paid by the employer.

The Council of State issued a critical opinion and advised against proceeding without substantial amendments. Parliament is still awaiting a response from the sponsors.

Conclusion: What Does This Mean in Practice?

The picture is clear: employment law is undergoing considerable change, but relatively few proposals appear likely to become definitive legislation in the short term.

In the areas with the greatest financial impact, including the transition payment compensation scheme, the maximum daily wage, unemployment benefit duration and disability allowances, the government has chosen to postpone or withdraw previously announced cutbacks.

For organisations, this means that the current framework largely remains in place for the time being:

• Two years of continued salary payment during illness.
• The current non-compete clause regime.
• The transition payment compensation scheme for long-term disability at least until the end of 2027.

At the same time, employers would be well advised to prepare for the proposed medium-term reforms to avoid being caught off guard if and when they are implemented.

If you have any questions about what these developments may mean for your organisation, please do not hesitate to contact us. We would be happy to assist you in preparing in a timely and practical manner.