Observation (CEACR) - adoptée 2010, publiée 100ème session CIT (2011)

The Committee notes the Government’s reply dated 23 February 2009 to the direct request of 2007 and the detailed report on the application of the Convention received in October 2009. It also notes the observations of the Netherlands Trade Union Confederation (FNV) supplied in October 2008, August 2009 and August 2010, where it maintained that the new Dutch legislation on employment injury benefits, the Work and Income (Employment Capacity) Act of 2006 (WIA), is not compatible with the Convention. In light of the trade union’s observations, the Committee has decided to limit the present comments to the examination of the main aspects of the WIA. The Committee will consider changes in other implementing legislation on the occasion of the Government’s next detailed report on the application of the Convention, which is due in 2011.

The Committee recalls that, since the adoption of the Disablement Benefits Act (WAO) in 1967, in the Dutch social security system the employment injury insurance scheme was merged with the general invalidity scheme and ceased to exist as a separate branch. Since 1 January 2006, the WAO has been replaced by the WIA, which establishes social security benefits for total and partial incapacity for work. As was true for the WAO, the WIA does not distinguish between employment injuries and general invalidity and covers both risks. This design of disability benefits in principle is compatible with the Convention, which does not prevent the possibility of covering the risks of employment injury through compensatory benefits provided by other branches of social security (medical care, sickness benefit, invalidity benefit and survivors’ benefit). However, these compensatory benefits should then satisfy the more stringent requirements of the Convention as regards provision of the employment injury benefits for the contingencies covered by the Convention. In this respect, the Committee notes the following developments and would like to draw attention to the following questions.

According to Article 6 of the Convention, employment injury may result in the following covered contingencies, which are covered by different branches of the Dutch social security system:

(a).. A morbid condition covered by the medical care and allied benefits (Article 11), which in the Dutch system are provided by the health care branch.

(b).. Temporary or initial incapacity for work covered by cash benefit (Article 13), which in the Dutch system is provided by the mixed private/public system based on employers’ civil liability to maintain wages during the first two years of sickness underpinned by the public safety net established by the Sickness Benefit Act (ZW).

(c).. Total or partial loss of earning capacity likely to be permanent or corresponding loss of faculty compensated by cash benefits (Article 14), which in the Netherlands are provided by the mixed public/private system under the WIA and the PEMBA Act, 1998, which empowers employers to assume the risk themselves for five years or to have recourse to private insurance.

(d).. The loss of support due to death of the breadwinner covered by cash benefits (Article 18), which in the Netherlands are provided under the General Surviving Relatives Act (ANW).

The Committee requests the Government to give particular attention in its forthcoming detailed report to examining the extent to which the Dutch legislation, especially following the privatization of the health-care branch and the sickness benefit, continues to ensure protection against contingencies (a), (b) and (d) on conditions and at the level required by the Convention. In view of the fact that, as indicated in the Government’s report, victims of employment injuries are required to share costs for certain types of medical care, and are subject to limitations in duration and number of treatments, the Committee asks the Government to examine whether victims of employment injuries in need of prolonged care or particularly expensive treatment find themselves in a situation of hardship.

Within the above continuum of benefits ensured by the Convention, the Committee understands that the WIA provides the following benefits in case of loss of earning capacity:

–           Under Income Provision Scheme for Fully Occupationally Disabled Persons (IVA) benefit for full and permanent incapacity until pension age at the rate of 70 per cent of the monthly wage (Chapter 6).

–           WGA benefit for fully but not permanently disabled.

–           WGA wage-related benefit for employees who are partially capable of working, 70 per cent of the (maximum) daily wage plus wage supplement for those working, paid for up to five years depending on employment history.

–           WGA wage supplement benefit for those performing sufficient paid work.

–           WGA follow-up flat rate benefit at the rate of 70 per cent of the legal minimum wage (or daily wage, if lower) multiplied by the percentage of disability for unemployed persons.

Prescribed degree of the loss of earning capacity

According to sections 1.2.2 and 2.2.4(3) of the WIA, partial disability is recognized and compensated only when 35 per cent or more of earning capacity is lost. If an employee experiences a loss of capacity for work of less than 35 per cent, he will not qualify for any WIA benefit (sections 7.1.3(2) and 7.2.3(6)). The Committee notes that this threshold is set too high to comply with the Convention. Article 14(1) of the Convention permits to prescribe a minimum degree of loss of earning capacity for which cash benefits become payable. Incapacity below this degree (e.g. less than 10 per cent) may be disregarded for the purpose of compensation under the Convention. Article 14(3) further permits to prescribe a higher degree of incapacity giving entitlement to periodical cash benefit for “substantial partial loss of earning capacity” (e.g. over 25 per cent). Between the minimum degree of loss of earning capacity, which marks the entry point into the scheme, and the higher degree for substantial loss, Article 14(4) covers the range of incapacity corresponding to the partial loss of earning capacity which is not substantial and which could be compensated not by the periodical pension but by the lump-sum payment. The Committee has accepted in some cases that a minimum degree of incapacity fixed below 10 per cent may be compatible with the Convention and that incapacity below 25 per cent could be regarded as not substantial and compensated by lump-sum payments. Depending on the existence of other complementary income guarantees, lump-sum compensation has been admitted by the Committee in certain cases for incapacity up to 35 per cent. The WIA Act does not include lump-sum benefits and does not pay any benefit at all for incapacity below 35 per cent. Thus, persons with less than 35 per cent incapacity are excluded from protection against employment injury, which is contrary to the Convention. The possibility for them to apply for unemployment benefit or for social assistance is not relevant within the legal framework of the Convention.

The Committee notes that in the opinion of the FNV the situation with workers suffering less than 35 per cent capacity loss is alarming. The labour market in the Netherlands is extremely tight and thousands of persons with disabilities less than 35 per cent lost their jobs and are no longer entitled to a disability benefit because of the high incapacity threshold. According to the Institute for Employee Benefit Schemes (UWV) monitoring report, only 52 per cent of all workers who became less than 35 per cent disabled between 2006 and mid 2007 worked in 2008. The Committee further notes that, according to the Government, it is the employers who bear the responsibility for the employees with less than 35 per cent disability. Employers should seek solutions within their own company and, in case of failure to do so, the possibility exists to start working for another employer. The Government sees the finding of the in-depth monitoring of the group of employees with less than 35 per cent capacity loss as promising: while in January 2007 only 46 per cent of the interviewed individuals were working, in February 2008 already 62 per cent of them were employed, showing an increase of 16 per cent. The report states that “the Dutch Government therefore does not intend to change policy in this regard. The main focus for this group of less than 35 per cent disability now lies in giving both employers and employees time and space to continue to improve the situation”. The Committee regrets the Government’s position, and notes that the Government, while recognizing non fulfilment of its international obligation under the directly applicable provision of the Convention, has not yet brought national law and practice into compliance with the Convention on this point and leaves victims of employment injuries with incapacity up to 35 per cent without any form of compensatory benefit.

The Income Provision Scheme for Fully Occupationally Disabled Persons (IVA)

According to the FNV, income protection for the fully disabled has been well organized, as all of them will receive at least 70 per cent of their former wage. However, the eligibility for full disability benefits has become too strict because of the sharpened assessment of disability. Under the terms of the WIA, an employee (section 1.3.1) who is fully and permanently incapable of work (section 6.1.1, subsection 1(b)) shall be entitled to an incapacity benefit of 75 per cent of the monthly wage (section 6.2.1, subsection 1), provided that the benefit shall be reduced by 70 per cent of the income earned by this person from employment or self-employment during this month (section 6.2.2, subsections 1 and 4). The Government’s report states that the eventual earnings or assets of the members of the family of the beneficiary are not taken into account in determining the IVA benefit. The Committee notes that the amount of the incapacity benefit payable to a fully and permanently incapacitated employee who is not engaged in any gainful employment or self-employment, exceeds the level of 60 per cent of the previous wage prescribed by the Convention. The Convention, however, does not authorize any reduction of the benefit in case a fully incapacitated person (80–100 per cent disabled) finds the force to earn additional income from any gainful occupation, leaving him free to combine invalidity benefit with work. The Committee observes that the IVA scheme could be made fully consistent with the Convention by deleting section 6.2.2 of the WIA. It would therefore invite the Government to consider this option with a view to enhance the social protection and well-being of fully disabled persons in line with the Convention, taking into account the likely minimal financial impact of this measure on the insurance scheme.

The Return to Work Scheme for the Partially Disabled (WGA)

Section 1.1.1 of the WIA defines the WGA benefit not as a compensatory benefit for a disablement, but as “work resumption benefit for persons partially capable of work”. The WGA scheme consists of two phases: the wage-related WGA benefit and the subsequent phase, during which the benefit is related to the statutory minimum wage. The Committee recalls that it had previously examined the benefits provided by the WGA scheme in its conclusion of 2008 on the application by the Netherlands of the European Code of Social Security in the context of the invalidity benefit.

Wage-related WGA benefit. Under the wage-related WGA benefit scheme, a person with partial disability of between 35–80 per cent retains a certain working capacity and is for that remaining part considered to be unemployed, and as a consequence is obligated to register as a jobseeker, to make sufficient attempts to obtain suitable work, and to accept an offer of such work (section 4.1.4(1) of the WIA) – all conditions which normally apply to unemployment benefit recipients. By combining the unemployment benefit (WW) with the previous disability benefit (WAO), the WIA makes it possible for a partially disabled person to apply for a single benefit, instead of for two benefits, which is calculated so that it is equal to the sum of the WW and the WAO benefits that he would have received.

The Committee observes that this new design integrating social security benefits for unemployment and partial disability is unique and could not have been foreseen by the Convention. The Committee recognizes that this arrangement has the merit of ensuring on the one hand that a partially disabled person automatically receives compensation for his loss in earnings as a result of unemployment and, on the other hand, that he is immediately stimulated to resume work and to use the employment service to speed up the reintegration process. However, subjecting the employment injury benefit to the conditions laid down in section 4.1.4 (being partially capable of work, available for work and actually seeking work) transforms it into an unemployment benefit, as defined in the ILO standards. The entitlement to WGA benefit depends on the insured being also entitled to unemployment benefit. Those not eligible for unemployment benefit are not entitled to the WGA wage-related benefit and can get only WGA wage supplement benefit or the follow-up benefit (section 7.1.1(4)). The Committee considers that under such conditions the wage-related WGA benefit falls outside the scope of the Convention because its eligibility requirements are those of the unemployment benefit and not of the employment injury benefit.

According to section 7.1.1(1) of the WIA, an insured person who becomes sick shall be entitled to the benefit for partial incapacity (WGA) if (a) he has completed the qualifying period, and (b) he is partially capable of work. Section 7.1.5(1) specifies that the entitlement to the WGA benefit is subjected to the qualifying period of performing work as an insured person for at least 26 weeks during the 39 weeks immediately preceding the loss of entitlement to wage in case of sickness or to the sickness (ZW) benefit. The Committee has pointed out in its previous comments that under Article 9(2) of the Convention, eligibility for benefits may not be made subject to the length of employment or the duration of insurance and has asked the Government to explain whether the above requirement (see also sections 7.1.1(3 and 4) of the WIA) of having a period of previous insured employment is applied also in case of sickness and incapacity resulting from employment injury. In reply, the Government states that no conditions with regard to the duration of the employment history are imposed on the entitlement to a WGA benefit, which satisfies all the standards of the Convention. While noting this statement, the Committee requests the Government to explain in further detail to what benefits the abovementioned sections 7.1.1 and 7.1.5 of the WIA refer and how one should understand their provisions.

Section 7.2.1 subjects the duration of the wage-related WGA benefit to the length of previous employment history, the rules of the computation of which are laid down in the three pages of section 1.6.1. As the Convention does not permit the benefit to be affected in this way by the length of previous employment, the wage-related WGA benefit can be taken into account for the purpose of the application of the Convention only in its minimum duration of six months. Furthermore, by virtue of section 7.2.1(3) this benefit may be reduced by the period of previously received unemployment benefit, which is not permitted by the Convention. These provisions and the above qualification requirement impose restrictive conditions, which lead the Committee to believe that the wage-related WGA benefit should be disregarded for the purpose of the application of the Convention. After the wage-related WGA benefit, the disabled person will be entitled either to a wage supplement in case he works and fulfils an income requirement based on his residual earning capacity (section 7.2.3, subsection 3), or to a follow-up benefit (section 7.2.2, subsection 1). Hence, the level of protection guaranteed by the Convention would now be assessed only by reference to the wage supplement benefit and the follow-up benefit.

Wage supplement. Of these, the wage supplement benefit is further subjected to the income requirement (section 7.2.2) that the insured person partially capable of work must earn per calendar month an income from work which is at least equal to 50 per cent of his remaining earning capacity. The requirement to use the residual earning capacity as a condition for entitlement is contrary to the basic philosophy of the Convention, which guarantees benefits at the prescribed level without regard to the residual earning capacity and additional income which can be earned by the workers with incapacity. It appears therefore that only the follow-up WGA benefit could be taken into account for the purpose of the application of the Convention.

Follow-up WGA benefit. If the WGA recipient does not work, s/he is entitled to the follow-up benefit. The Government indicates that any recipient of the WGA benefit is considered to be unemployed to the extent that his remaining working capacity is not utilized and is therefore placed under the obligation to register as a jobseeker, to make sufficient attempts to obtain suitable work, and to accept such work, if offered (section 4.1.4, subsection 1, of the WIA). The WGA recipients are also obliged to prevent the occurrence of incapacity, to limit the existence of such incapacity, to acquire the potential to perform suitable work and to make sufficient reintegration efforts (sections 4.1.2 and 4.1.3). Non-fulfilment of these obligations or failure to do so properly is sanctioned by the benefit being refused wholly or partially, permanently or temporarily, or by applying fines (Chapter 10 of the WIA). The Committee observes that the nature and the extent of many of these obligations go beyond limitations permissible under Article 22(1) of the Convention. Taking into account that the Convention does not permit subjecting the entitlement to the benefit to an obligation to make use of the remaining earning capacity, the Committee would ask the Government to consider bringing the regime of legal obligations and sanctions imposed by the WIA on the recipients of the follow-up WGA benefit into line with Article 22 of the Convention. 

The level of benefits

The WIA scheme includes wage-related benefit (IVA benefit for total incapacity and wage-related WGA benefit) and flat benefit (follow-up WGA benefit). It appears that the replacement level fixed by Article 19 of the Convention for wage-related benefits – 60 per cent of the reference wage of the skilled manual male employee for a standard beneficiary – would be attained by the IVA and WGA benefits for total incapacity, as well as by the WGA wage-related benefit. The situation however may be more problematic as regards the level of the WGA follow-up benefit for partial incapacity.

According to Article 14(3) of the Convention, the benefit for partial incapacity should represent a suitable proportion of the benefit for total incapacity. The WGA follow-up benefit should therefore represent a suitable proportion of the IVA benefit calculated on the basis of the monthly wage. This apparently would not always be the case taking into account that the follow-up benefit is a flat rate benefit calculated on the basis of the legal minimum wage and not as a percentage of previous wage. The example given by the FNV shows that an employee with incapacity of 50 per cent will receive the follow-up WGA benefit representing only 12 per cent of his last-earned wage, which is not “suitably” proportional either to the IVA benefit for total incapacity, which would amount to 75 per cent of his last-earned wage, or to the wage-related WGA benefit, which would in that case amount to 60 per cent of the previous wage. The FNV concludes that there is an unacceptably large difference of income protection between the IVA and wage-related WGA benefits on the one hand, and the follow-up WGA benefit, which results in hardship for many recipients of the follow-up WGA benefit.

The FNV points out that since the entry into force of the WIA, the labour participation of the partially disabled in the Netherlands has dropped sharply: while 69 per cent of the beneficiaries of the WAO worked five months after their disability assessment, for the WGA beneficiaries this figure is only 49 per cent. The explanation for this, according to the FNV, is found in the continuously deteriorating health condition of the WGA beneficiaries and the fact that employers are very hesitant to employ partially disabled with severe infirmities. There is no obligation for the employers to employ persons with disabilities. On the contrary, the employers are free to terminate partially disabled workers, who then have to find another job, which is not easy in the Netherlands, particularly in the context of the economic downturn. It is the full responsibility of the employee with disabilities to find and keep a job or else face a very low income. The FNV further observes that the requirement to use the residual earning capacity could cause deterioration of the health condition of the partially disabled. The situation becomes particularly hard for temporary workers, who represent 15 per cent of all workers in the country. It is much more difficult for a partially disabled flexible worker to stay in the labour market because he is not covered by the employer’s responsibility for his sick pay, rehabilitation and reintegration during the first two years of sickness. The FNV does not support a system whereby partially disabled persons who cannot find a job, have to turn to unemployment benefit and to social assistance.

The Committee observes that the disproportionately low level of the follow-up WGA benefit might result, contrary to the objective of Article 14(5) of the Convention, in hardship for many partially disabled persons obliging them to apply for social provisions or assistance in case they do not find sufficiently paid employment. This is a situation that the Convention was designed to avoid by obliging the ratifying State to institute a scheme that excluded the need for victims of employment injury to have recourse to social assistance. Means-tested social assistance benefits, such as the TW supplement, therefore are not considered as the appropriate forms of protection under the Convention. It appears that the low level of the follow-up benefit, while encouraging partially incapacitated persons to resume employment, might at the same time push the categories of persons who could not do so, including for labour market reasons beyond their control, into hardship and poverty, which would be against the objectives of the Convention. The Committee invites the Government to explain its position, including the provision of additional information with respect to this level of benefit situation.