EU Social Security Reform: Why the proposed changes in unemployment regulations are more nuanced than politicians and media suggest.
In late March/early April, the media again published some disturbing reports about the planned changes to the unemployment schemes in the European Social Security Regulation and the possible abuse of Dutch benefits by foreign workers.
The final vote on this package of measures was scheduled for the European Parliament in early April 2019 and has been postponed. Thus, the Romanian EU presidency will most likely have to carry this over to the next presidency. How the cards are shuffled then and whether that will affect the vote around this package of measures, also taking into account the May 2019 European elections, is not yet clear.
In this post, we briefly summarize the facts. What changes are on the table in Europe? What determines Dutch unemployment legislation? Are the headlines correct and are the (Dutch) politicians telling the whole story?
EU Social Security Coordination Review
The coordination of social security systems in Europe is governed by Regulations (EC) 883/2004 and 987/2009. Member States themselves have had the power to set up their national social security systems since 1957, but must also apply the Regulations in cross-border (employment) situations to determine which national law applies. In December 2016, the European Commission submitted a proposal for revision of the Coordination Regulations. [1] Since then, the changes regarding unemployment, long-term care and family benefits have been negotiated. Negotiations and agreement have also been reached on posting and A1 declarations. In this contribution, we focus on two parts of the revision namely the unemployment export scheme and the minimum waiting period for unemployment. [2]
Unemployment export regime
First, the export regime of unemployment benefits. The current regime [3] provides that an unemployed person may take his benefits with him to another state for three months to look for work. The proposed scheme extends this period to six months. [4] This means that any unemployed person in Europe may export his benefits to another member state for up to six months provided he looks for work in that other member state. The control of the search for other work and the fulfilment of the benefit conditions lies with the authorities of the receiving country.
The Netherlands does not support the extension of the export scheme because in practice it appears that some EU nationals, more than others, make use of this scheme and the Netherlands seems to lose control over this group of unemployed persons as well as the budget. This is partly because in some EU member states wages are a lot lower than unemployment benefits from the Netherlands. The incentive to look for work is then minimal. [5] Also, control in and by the receiving country is less than what is expected in the Netherlands. In recent weeks, unrest flared up, in Dutch politics and society, following reports about the current three-month export option. For example, it appears that for workers from Poland – who have worked in the Netherlands and return to Poland (temporarily) on Dutch unemployment benefit – a job in Poland is financially less attractive than the Dutch unemployment benefit that they are temporarily allowed to take with them under the export scheme. That this export scheme also applies to other EU citizens is not made clear in the reporting. Any EU citizen who is unemployed and believes he has a better chance of finding a job abroad may (subject to conditions) temporarily export his unemployment benefit to that foreign country to look for work there.
The fact is and remains that also under the new regulation the Dutch conditions for obtaining unemployment benefits will continue to apply. This means that a Dutch unemployment benefit will only be awarded to someone who meets all the Dutch conditions: among other things, having worked 26 weeks in the last 36 weeks, having lost sufficient working hours and also being available for work. Then an unemployment benefit of 3 months applies. [6] Only if the four-out-of-five requirement is also met – i.e. having worked sufficient hours for four years in the last five years – is a longer unemployment benefit possible than the basic 3-month benefit.[7] The Dutch conditions for entitlement to unemployment benefit apply to both Dutch and other workers who have worked in the Netherlands.
Minimum Work Period
The second regulation we focus on in this post is the minimum work period. What does this regulation entail? The Regulation allows periods of insurance (usually periods of work) to be added together if one has only been insured in another country for a short time and then qualifies for benefits. [8] This means under the current Regulation rules that one day of work may be sufficient to count periods of work in other countries and thus fulfill the condition of sufficient insurance periods. A classic example here is that of a Dutch employee who has worked in the Netherlands for 20 years, then takes a job in, say, Germany and after a short time there still becomes unemployed because the company goes bankrupt or the short contract is not renewed. Without the aggregation scheme, this person would not be eligible for unemployment benefits. In fact, based only on national law, he cannot receive benefits from the Netherlands because he is no longer insured there. Also, based on German law, he cannot expect to receive benefits because he worked there for such a short time. In order to prevent this kind of situation and encourage the free movement of workers, the aggregation rule is essential. Precisely for situations of being insured in the new country of work for only a short time, this rule is included in the Regulation.
The proposed new rule introduces a waiting period of one month. Therefore, only workers who have worked in a country for at least one month and become unemployed there can invoke the aggregation rule and have their insured periods from previous working countries counted. However, this does not mean that the insured years from former working countries affect the length of unemployment benefits. In fact, the length of unemployment benefits is entirely determined by the last working country, which is competent for unemployment benefits. Applied to Dutch unemployment, this means that insured periods from other countries only count towards meeting the 26-out-of-36-week requirement. If that requirement is met, the right to three months of unemployment benefit arises in the Netherlands. And only if the four-out-of-five requirement is also met can the unemployment benefit be extended. Thus, a person who works in the Netherlands for a short time without having worked elsewhere is not entitled to unemployment benefits. However, unemployment benefits are determined on the basis of last-earned wages. Consequently, as long as the wage gap in Europe remains, the use/misuse of this rule will be attractive. This applies, for example, to Polish workers who come to work in the Netherlands temporarily and then possibly return to Poland with Dutch benefits for the duration of the benefit. But so are employees working in other member states where the unemployment benefit is higher than the wage in the former country of residence and work.
Multiple perspectives
The media, politicians and relevant agencies alike do not hide their indignation about abusive situations. This is partly justified. Abuse or fraud should indeed be fought firmly. But merely pointing the finger at those who exercise their right to the free movement of workers is too short-sighted. There are several concerns that should also be highlighted in the reporting. We mention a few here.
First, that the Polish workers can take Dutch unemployment benefits for a long period of time, can only happen if they have also worked for a long time, in the Netherlands and/or Poland. The simple statement that Dutch unemployment benefits are awarded after just one day of work gives a distorted picture. A Dutch unemployment benefit is awarded only if a sufficient number of weeks and/or years have been worked.
Second, that when determining the right to a benefit, foreign periods also count is a correct application of the Regulation and is part of the free movement of persons.
Third, it is not solely the fault of Polish workers that Dutch unemployment benefits are temporarily exported to Poland without control from the Netherlands. This is a combination of the Regulations and Dutch policy with (too) little control and enforcement by the UWV (due to cutbacks from the government).
Fourth, moreover, it is as a result of Dutch legislation and policy that employers in the Netherlands largely – and more than in other member states – offer temporary, short-term employment contracts instead of long-term or permanent contracts. In this way, certain sectors attract many temporary migrant workers. These workers temporarily return to their hometown during periods of unemployment and later return to resume work, often again on temporary contracts …
ITEM, April 15, 2019, Saskia Montebovi
Footnotes
[1] See COM(2016)815.
[2] See also Letter from the Minister of Social Affairs and Employment to the House of Representatives, March 25, 2019 regarding Motion Revision of Social Security Coordination Regulation (EU Regulation 883/2004) and April 2, 2019 regarding Revision of Social Security Coordination Regulation and Export of WW benefits. See also Parliamentary Papers II, 2018-2019, 21501-20.
[3] Article 64(1)(c) Regulation 883/2004.
[4] Also on the table is the proposal to possibly extend this export period to the full benefit period, if the paying Member State so wishes.
[5] Cfr. News Hour broadcast March 16, 2019.
[6] Article 42, paragraph 1 Unemployment Act.
[7] Article 42(2) Unemployment Act.
[8] Article 6 Regulation 883/2004.
