Deeltijd WW in the Netherlands

1st April 20091 - 1st of July 2011

Deeltijd WW

The Deeltijd WW, (WW= werkeloosheidswet) hereafter DWW, took effect on the 1st of April 2009 till

the 1st of July 2011 and was initiated by Minister Donner from the Balkenende 4 cabinet. The

measure replaced the WTV (werktijdenverkorting) that came into effect in 2008. The act was

designed to “prevent unemployment among specialized employees”.2 The measure took effect on

the the 1st of April and lasted till July 2011 (it was extended two times3).

The DWW can be regarded as a temporary step between the WW (the compensation employees

receive after losing their job) and full employment. During a given period, employees are going to

work less, because there is no work for a full employment anymore. Therefore the employer and

employee can agree on working 70 % of the contractually fixed amount of hours and to compensate

the loose of income, the fund of the WW can be used. In this way the employer does not loses the

specialized employees and the employees keep their employment and income.

Also the shortage on the labor market during 2009 and the expectation on a quick economic

recovery seemed to make an introduction of a DWW more legitimate. With a quick economic

recovery, companies would have been able to keep their scarce employees on board and survive the

short economic decline.4

A more detailed description of the initiative

The core of the initiative is that the employee will not be fired, but is going to work fewer hours than

he was used to. If the agreement is reached between the employer and the employee representative

(which is usually the trade unionism) the employee has to accept it. The time schedule for the DWW

is at least 13 weeks and can last till 65 weeks, where a renewal application should be made after 13

and 39 weeks. During this period the employee is using his saved WW-rights partly. The WW (1949) is

a kind of insurance for unemployment of the employee which is paid by the employer (1,7 % of the

gross income). Since 2009 the employee was freed from paying for the insurance, but in the social

agreement of 2013 was determined that employees pay an amount of € 10 monthly) again.5

In order to prevent abuse of the DWW and let the employees restore their build up WW rights (they

consume this partly during the DWW) the employer has to give the employee the original amount of

hours again when the DWW ends. If the employer does not, the employer can receive a fine. By

doing so, companies it is easier for companies to be productive again when the economical climate is

getting better, because they don’t have to look for new employees and retain the “company specific

knowledge”.

The plan by the Dutch government

The budget created for this measure can be divided into two categories. First the amount of costs

there would have been made anyway, because there would have been a group of employees have

would have used the WW fund anyway. Second there is an additional cost of eventual closing

2 CPB notitie budget deeltijd ww 12 juni 2009

3 http://www.nl.pwc.com/extweb/Bn/Taxnews.nsf/Public/PI32332

4 Kabinetsreactie evaluatie bijzondere wtv-regeling en deeltijd-WW – 11 June 2012

5 http://nos.nl/artikel/494472-vraag-en-antwoord-over-ww.html

businesses (so the knowledge is lost anyway) and there is will be an amount of money used for other

purposes than their initial target.

Two conflicting visions on the Deeltijd WW

In the debate about the DWW two different perspectives are used. From the micro-economical

perspective (usually advanced by labor market economists) the DWW is a measure to ensure

companies to retain company specific capital. This argument is also often used by labor unions and

employers. From this point of view the company is keeping its employees, companies do not have to

fire people and the unemployment payments are lower compared to a full WW.

From the macro- economical perspective, the DWW is rather seen as a harmful, because it keeps up

less competitive companies and therefore slows down labor mobility.6 The target of the DWW is to

prevent companies to fire employees with company specific knowledge.7 This is also where the

legitimacy of the DWW is in doubt. The employer and employee are the ones who both benefit of

their company specific knowledge so therefore support from the government is doubtful. This can

also decrease the misuse of the grants8 which is thought to be around 50%.9

The Case of VDL - Sociaal convenant voor VDL-busbedrijven10

The VDL group (Industrial and manufacturing company from Eindhoven) consist of 80 companies and

9,000 employees. Due to the sharply falling demand the group was looking for a solution for their

employees. After negotiating with the works council, labor union and UWV, the company reached an

agreement (social convenant) that applies to all 550 employees of two subsidiaries (VDL Bus Modules

en VDL Bus Valkenswaard). The agreement was supported only by the company’s works council,

while the labor union did not. A balance was found between the security of job and income and on

the other side the flexible use of the employees in order not to lose the employee’s experience and

knowledge.

The agreement (sociaal convenant)11

After the first of May 2013 all employees of both companies (see above) going to work for 60 %

(phased) of their previous amount of working hours. Income for the missing 40 % will be paid by the

WW (werkeloosheids-wet in Dutch) and the VDL group will fill the gap up to 100 %.12 According to

this agreement the employees earn the same amount of money and save the same amount in their

retirement fund. The agreement also includes that employees can be mutually exchanged easily

between other companies in the region. With the agreement VDL aims at a sustainable long term

employment.

Why the DWW should be continued

6 http://www.mejudice.nl/artikelen/detail/deeltijdww-geen-panacee

7 CPB notitie deeltijd WW 12 juni 2009

8 http://www.mejudice.nl/artikelen/detail/deeltijdww-geen-panacee

9 CPB notitie deeltijd WW 12 juni 2009

10 http://www.vdlgroep.com/?news/1368572/Sociaal+convenant+voor+VDL-busbedrijven.aspx

11 http://www.vdlgroep.com/?news/1368572/Sociaal+convenant+voor+VDL-busbedrijven.aspx

12 The interesting question here is that the company seems to use the WW-verzekering on their own behalf. Is

this possible? Can you make an agreement with the UWV and just have a DWW for your employees.

Bas van der Klauw from the VU University stated indicated the positive effects of the DWW. First the

money that is spend on the DWW would have been spend otherwise on the retraining of people, but

with a bad labor market, the chance that people find jobs due to those programs is still limited.

Studies showed that an training in (especially private) companies works better than a reintegration

training without employer, because the employee is part of the actual working process. Therefore

the budget of reintegration training can be used for the DWW. In short remove the money from

active labor market policies to the DWW.13

The DWW can ensure that especially low skilled people occupy the jobs of young low skilled

graduates. This seems a bad condition, but in an economic recession salaries for young low skilled

people are among the most vulnerable. This can give an incentive to them to continue studying and

enjoy higher education. Higher education brings along many advantages like: less unemployment,

healthier lifestyle and adding to the general economical growth in the long run. 14

The risk of a long term unemployment (in a long recession) is high especially among low skilled

employees working for the same employer for many years, because those people usually master

especially company specific knowledge. Therefore they are not attractive for other employer and

causing a long term unemployment (with the accumulating costs).

Why the continuing the DWW is a bad idea

In an economical recession companies are forced to increase production and lower the cost of this

production. The less competitive companies who are not able to do so, will go bankrupt. The

employees of the bankrupt companies enter the market again to look for new jobs, which they are

likely to find at competitive companies who were able to increase production and lower their

productivity costs. This means that more people work for more competitive companies and therefore

the potential is utilized better. In this case an economy will leave the economic recession better

while entering it. The introduction of the DWW goes against this principle because it keeps less

competitive alive with governmental grants.15

In practice the DWW seems to be really difficult to implement. It seemed that the requirements to

receive DWW are hard to apply on individual companies. Therefore companies use the DWW for

other things than their initial target (deliberately or not). This “deadweight loss” in which the cost of

the waste of money has to be paid by the taxpayer is around 50% for DWW16. With a budget of 1

billion Euros this is around 500 million Euros.

The evaluation of the DWW in statistics

Only after 3 months the initial budget of 975 million Euros was used and Minister Donner had to look

for additional funds in order to continue the initiative. At the 10th of July 2009 the Minister decided

to continue the initiative and an additional 600 million Euros were added to the budget (with

stronger requirements on the companies using the system in the future), which summed the total

amount up to almost 1 billion Euros.

13

http://www.feweb.vu.nl/nl/nieuws-agenda/nieuwsarchief/2009-2010/deeltijd-ww-moet-gecontinueerd.asp 14

http://www.feweb.vu.nl/nl/nieuws-agenda/nieuwsarchief/2009-2010/deeltijd-ww-moet-gecontinueerd.asp 15

http://www.feweb.vu.nl/nl/nieuws-agenda/nieuwsarchief/2009-2010/deeltijd-ww-moet-gecontinueerd.asp 16

http://www.mejudice.nl/artikelen/detail/deeltijdww-geen-panacee

The CPB calculated that in 2009 the DWW tempered the unemployment rate by 0,1 – 0,2 %. These

results were also confirmed by the OESO confirming that the DWW saved some 5000-6000 FTE in the

Netherlands during 2009. In total 7,836 companies used the DWW for a total of 77,430 employees

which is an equivalent of 0,99% of the working population. 70 % of the employees who used the

DWW were people in executive positions and the industrial sector (41%) made used the DWW the

most.17

Conclusion

The extraordinary economic environment around 2009 with a quick decline of demand, the

expectations of a fast recovery and the shortage on the labor market made the introduction of the

DWW an option. The effects on its initial target of tempering growing employment (which is

fundamentally different from creating jobs) were calculated between the 0,1 and 0,2 %. However the

effects of the rule are not always easy to measure. Maybe calculating the effects on the

unemployment rates are but the DWW’s side effect of “creative killing” by subsidizing bad companies

and the “restructuring” of the economy are not. However from the CPB’s analysis this disadvantage

was not big either.

17

Kabinetsreactie evaluatie bijzondere wtv-regeling en deeltijd-WW – 11 juni 2012