What is WAB?
WAB, the Wet Arbeidsmarkt in Balans (Balanced Labour Market Act), is Dutch employment legislation that took effect on 1 January 2020. It rebalances the regulatory gap between permanent contracts and flexible work arrangements by tightening the chain rule, introducing differentiated unemployment insurance premiums, and entitling every employee to transition payment from day one.
The act is the most significant reform of Dutch labour law since the 2015 Wet Werk en Zekerheid. For foreign employers entering the Dutch market, Octagon's Employer of Record services ensure every WAB obligation is met from the first contract.
How does WAB work?
WAB operates across four interlocking mechanisms. First, the chain rule limits employers to three consecutive temporary contracts within three years, after which the next extension automatically becomes permanent. Second, employers pay a low WW (unemployment insurance) premium for written permanent contracts and a premium roughly five percentage points higher for all flexible contracts. Third, transition payment accrues from day one at one-third of a month's salary per year of service. Fourth, payrolling is separated from temporary agency work, requiring equivalent terms to directly employed staff.
Employers must document the permanent nature of a contract in writing on the payslip to qualify for the low WW rate. See our guide to the chain rule and WW premium differentiation in practice for detailed applications.
Who does WAB apply to?
WAB applies to every Dutch employer, regardless of size or sector, and to every employee on a Dutch employment contract, including payroll employees, on-call workers, and fixed-term staff. Foreign parent companies hiring through a Dutch entity or through an EOR fall within scope. Collective labour agreements (CAOs) can deviate from certain provisions such as the chain rule duration, but the core transition payment and WW premium rules apply universally.
High-impact sectors include hospitality, retail, logistics, and staffing, where flexible contracts dominate and WAB significantly raised the effective cost of non-permanent employment.
When does WAB not apply?
WAB does not apply to genuinely self-employed workers engaged under a business-to-business agreement, since their classification is governed instead by Wet DBA and its successor Wet VBAR. It also does not apply to statutory directors with a management agreement, to interns under a recognised educational scheme, or to workers posted into the Netherlands under the EU Posted Workers Directive where the home-country employment contract continues. Certain seasonal exemptions allow a shorter chain break interval under specific CAOs in agriculture. For dismissal-side obligations, see our Dutch dismissal law guide.