What is an employment conditions scheme? Explanation and use

What is an employment conditions scheme? It is the collective agreement in which an employer sets out the terms of employment and house rules that apply to all its employees, often known as a personnel handbook or personnel regulations. The scheme exists alongside the individual employment contract and does not replace it. Only when the employment contract refers to the scheme—the so-called incorporation clause—does its content apply between employer and employee. Without that reference, it is little more than an informative booklet.

The short answer

• What: a collective agreement with terms of employment and rules of conduct for all staff.
• Other names: employee handbook, personnel regulations, employee guide.
• Effect: binding via an incorporation clause in the employment contract.
• Amendment: unilaterally only with a written amendment clause and a substantial interest (Art. 7:613 BW).
• Participation: many departments require the consent of the Works Council (Art. 27 WOR).
• Order of precedence: an applicable collective labour agreement takes precedence over the regulation.

What is an employment conditions scheme in practice?

The regulation bundles everything that is the same for everyone: leave, sickness, expense claims, working hours, use of company resources, absenteeism policy, codes of conduct, and complaint procedures. As a result, not every employment contract needs to contain the same ten pages. The employment contract then contains only the individual agreements: job title, salary, working hours, start date, and the duration of the contract.

That setup has a practical advantage. If the leave policy changes, you amend one document instead of thirty employment contracts. It also carries a risk: because the regulation applies to everyone, an error in the regulation immediately affects the entire staff.

The difference between the employment contract and the collective labor agreement

These three documents are often confused with each other, even though they have different statuses.

• The employment contract is the individual agreement between this employer and this employee. In principle, it can only be amended with the consent of both parties.
• The terms and conditions of employment scheme has been drawn up unilaterally by the employer and applies collectively. It only takes effect between the parties through the employment contract.
• The collective labour agreement (CLA) is the result of negotiations with trade unions. If a CLA applies, it takes precedence. Provisions in the regulations that deviate from the CLA to the detriment of the employee are null and void.

For SMEs, this means: first check whether you are covered by a generally binding collective labour agreement. If so, the regulation serves primarily as a supplement and elaboration, not as an independent source of employment conditions.

How does the regulation become binding? The incorporation clause

The incorporation clause is the provision in the employment contract by which the regulations are declared applicable. A common wording states that the employment conditions regulations apply to the employment contract, as they stand on the date of commencement of employment and as amended from time to time.

Three points determine whether that clause does its job:

1. Reference in every employment contract. If the clause is missing for a part of the staff, the arrangement does not apply as a condition of employment for that group.
2. Demonstrable provision. The employee must have actually received the regulation or been able to easily consult it. Record that and when this occurred.
3. A dynamic reference. If the clause refers only to the version at the time of commencement of employment, subsequent changes do not take effect automatically.

Please note: even a dynamic incorporation clause does not give you a free hand to make changes. A separate amendment clause is required for that.

Amendments cannot be made arbitrarily: Article 7:613 of the Dutch Civil Code

If you wish to be able to unilaterally amend the arrangement, you require a written unilateral amendment clause. Pursuant to Article 7:613 of the Dutch Civil Code, you may only invoke this if you have such a compelling interest that the employee's interest must yield to it according to standards of reasonableness and fairness. That is a genuine test, not a formality. Cost savings without substantiation generally do not meet that threshold; a demonstrably economically necessary intervention accompanied by a transitional arrangement has a better chance of success.

If a modification clause is absent, you must rely on the principles of good employer and employee conduct: a reasonable proposal related to changed circumstances, the acceptance of which can reasonably be expected of the employee. Even then, it is not automatic.

A third pitfall is acquired rights. If you consistently grant a benefit for years that is not included in the regulations, such as a fixed year-end bonus, it can itself become a term of employment over time. Abolishing it then requires the same care as amending the regulations.

The role of the works council

If you have a works council, it is not an advisory body but a co-decision-maker regarding a substantial part of the regulations. Article 27 of the Works Councils Act grants the right of consent for, among other things, regulations concerning working conditions and absenteeism, working hours and holidays, appraisal and remuneration systems, appointment and dismissal policies, complaints procedures, and personnel tracking systems. If you implement such a change without consent, the works council can invoke its nullity within one month, and the change is invalid.

Two nuances. Consent is not required insofar as the subject matter is already regulated in a collective labour agreement. Furthermore, primary terms and conditions of employment, such as the level of wages, fall outside the scope of Article 27 of the Works Councils Act (WOR). A works council is mandatory from fifty employees; below that number, you can operate with employee representation or a staff meeting.

What is usually in it

• Working hours, breaks, working from home, and time registration.
• Holidays and leave, including taking, accrual, and expiry periods.
• Illness and absenteeism: reporting sick, control regulations and reintegration.
• Expenses, travel expenses and use of car, telephone and laptop.
• Education and training, with attention to mandatory training that must be free of charge.
• Code of conduct, integrity, social media and the use of company resources.
• Privacy and processing of personnel data.
• Procedures regarding complaints, inappropriate behavior, and disciplinary measures.

Honest recommendation

You do not need a lawyer to understand what an employment conditions regulation is, nor to write the practical chapters. You can perfectly well put working hours, break rules, expense claim procedures, requesting leave, and the handling of company assets on paper yourself. If you fall under a collective labor agreement that already mandatorily regulates most subjects, your regulation is primarily an elaboration, and the legal risk remains limited.

Do ensure that three points are reviewed: the wording of the incorporation clause and the unilateral amendment clause, alignment with the collective labour agreement, and the question of which parts require the consent of the Works Council. These are the areas where an error has a collective impact and is difficult to rectify afterwards.

Read more: drafting employment conditions regulations and having employment conditions regulations drafted. You can have this arranged immediately via the employment conditions regulationspage.

Frequently Asked Questions