Major Risks for Companies with Flexible Workforces Due to Lack of Industry Pension Fund (bpf) Protection in the Netherlands

Recent advice from the Council of State (11 November 2024) highlights significant risks posed by new employment laws in the Netherlands. For companies with large pools of flexible workers, obligations to industry pension funds (bpf) present a serious liability, especially due to the lack of an enforcement moratorium. Under the new Assessment of Employment Relationships Act (VBA), flexible workers are more easily reclassified as employees, making pension obligations retroactively enforceable.

And here’s where it becomes critical: because there is no enforcement moratorium—a temporary suspension of enforcement giving companies time to adjust without penalties—pension funds can immediately demand up to five years of unpaid premiums, plus interest and penalties. This unexpected pension debt could push companies from a period of adjustment directly into financial crisis, placing them on the brink of insolvency.

The Issue: New Laws and Unaware Non-Compliance with bpf Obligations With the new regulations, sector-based obligations, such as participation in a bpf, may suddenly apply to large groups of flexible workers. For example, a company employing 40 regular staff and a flexible pool of 100 carpenters could now be required to register these workers with the construction pension fund. Without a moratorium, the fund could demand unpaid premiums dating back five years, making bpf obligations one of the most substantial risks for companies unaware of these requirements.

Financial and Legal Implications of Failing to Meet bpf Obligations Companies that, knowingly or unknowingly, do not meet bpf obligations may face major financial and legal consequences:

1. Unpaid Pension Premiums Without an Enforcement Moratorium: Pension funds can require up to five years of unpaid premiums, creating a serious financial risk. They may also issue enforcement orders, with the danger that an unexpected bpf debt could drive the company toward insolvency.
2. Unexpected Financial Liability Due to Unaware Non-Compliance: Many companies are unaware they may be subject to bpf requirements, making this an especially risky liability that often only becomes apparent once penalties are already severe.
3. Risks for Accountants and M&A Transactions: In mergers and acquisitions, buyers must ensure that thorough indemnities are in place to protect against potential pension obligations. Otherwise, unexpected bpf liabilities could impose major financial burdens on the new owner.

Specific Risks for Companies with Large Flexible Workforces The new law makes it more likely that bpf obligations could apply to flexible workers, impacting companies both in compliance with bpf requirements and those that are (unknowingly) out of compliance:

• Companies Already Meeting bpf Obligations: For companies already fulfilling bpf obligations, the reclassification of additional flexible workers could result in significant cost increases.
• Companies Not in Compliance Despite bpf Requirement: For companies that unknowingly fail to comply with bpf obligations, the lack of an enforcement moratorium greatly increases liability, creating potential for large back charges and enforcement orders that could lead to severe financial hardship.

Strategic Advice: Critical Review, Indemnities, and Financial Provisions For companies with a large flexible workforce, several essential steps are necessary to manage these liabilities:

1. Comprehensive Scope Assessment by Employment and Pension Law Experts: Consult legal specialists to determine whether your company is required to participate in a bpf. This assessment is also essential for due diligence in mergers and acquisitions.
2. Review Contractor Status: Analyze whether your self-employed contractors (zzp-ers) may be reclassified as employees under the upcoming legislative changes.
3. Set Aside Financial Reserves for Potential Premium Claims: Work with financial advisors to establish a reserve fund for potential back-dated bpf premiums. This can act as a buffer should retroactive pension obligations become enforceable.
4. Indemnities in Mergers and Acquisitions: In due diligence, buyers should ensure they obtain extensive indemnities against bpf obligations, including for flexible workers who may be classified as employees.