Why the Dutch market for temporary work has evil characteristics, making the supply chain risk of retailers sourcing from The Netherlands considerable compared to other jurisdictions in Europe.
Although the most severe forms of modern slavery are not commonly found in the Netherlands, subtle yet widespread labor exploitation practices in a variety of industries should make customers and retailers vigilant.
The Netherlands have a good reputation when it comes to human rights, with their government ranking highest[i] in terms of response rates to modern slavery. Unfortunately, this does not mean that forced or bonded labor – the most common forms of modern slavery – do not exist in the Netherlands. Quite the opposite.
Over one in a thousand (0.104%) people in the Netherlands are subjected to modern slavery; almost six times more than in the US, Australia or the UK (0.018% each)
As modern slavery is estimated to be more prevalent in the Netherlands (17,500 individuals) compared to the UK (11,700 individuals), the problem is all too clear, particularly considering the fact that the UK’s population is almost four times that of the Netherlands.
In my opinion, these high Dutch numbers are caused by the following:
I will briefly elaborate on the backgrounds of all five causes.
Migrant workers
The Netherlands are famous for their agricultural, farm-produced, goods (fruit, vegetables and meat). By its very nature, this industry is prone to pressures on margins as unskilled and low paid workers are called in. As it is difficult to find motivated workers for this type of work amongst the Dutch – particularly in large numbers – the demand for laborers has resulted in a large influx of migrant workers from Central/Eastern Europe. Polish workers are represented most in the Netherlands (>200,000), and Bulgarian (24,000) and Romanian (22,000) workers rank second and third, respectively.
Migrant workers who do not understand Dutch and are oblivious to their legal rights are very vulnerable. Most vulnerable are young and inexperienced workers, as young workers (between the ages of 18 and 23) are much in demand since their wages are far below those for workers aged 23 years and over.
A national living wage does not exist in the Netherlands, but the 2018 legal minimum wage is EUR 9.10/hour. For 18-year olds, it is less than half of that: EUR 4.32/hour.
In my CSR practice in the Netherlands, I have encountered the following practices (shortlist!):
Underpayment based on CBA or compensation terms at the user enterprise
High and/or unlawful withholdings (e.g. for personal protective/safety equipment, pensions or insurance)
Excessive financial penalties and/or compensation for “damage suffered”
Unacceptable living conditions in accommodations arranged by agencies
Overall refusal to provide the information required by law or in another language than Dutch (e.g. employment contracts, health insurance policies)
Unreasonable terms and conditions in disciplinary procedures or employment contracts (e.g. competition clauses, forced waivers of rights and benefits)
Excessive overtime or the exact opposite: underemployment, making people financially dependent
These practices are prevalent throughout the agricultural industry (field crops, greenhouses, meat processing) and food processing in general, but also in horticulture (flowers) and distribution services. Based on Dutch NGO research carried out in 2016, these practices also exist in the construction sector, but that sector does not fall within our scope. Fears are that labor exploitation also exists in professional cleaning/hotel services.
No license required
In the Netherlands, anyone can start an employment agency in one single day. Since its abolishment in the 1990s – in line with the then popular trend of liberalization – there has been no license system in the Netherlands. To incorporate a business, all one needs to do is show up at the local Chamber of Commerce with one’s passport, provide a company name and address, and pay EUR 50 registration fees. Within days, the national tax authorities will then send a VAT number and a payroll tax number as well as credentials for online tax filing, and one is good to go.
Any expertise or service deemed necessary may be hired or outsourced. What is even worse, is that the Dutch authorities do not conduct any prior check on whether beginning labor intermediaries make use of third-party service providers, let alone whether providers are acceptable. I have spoken with owners of mediation agencies (or their assisting spouses) who are doing their best but lack relevant experience and know-how. As there is a great variety of CBAs – even within the same industry – even experts find it hard to interpret clauses properly, so that correctly applying terms and conditions in a CBA is notoriously difficult. It should be noted that – nonetheless – many CBAs are legally binding if the Dutch Ministry of Social Affairs has said so, thus turning them into law. Needless to say that a lack of professionalism negatively affects workers rather than labor providers.
Some agencies are deliberately mala fide, others pretend to be professional whereas in fact they have no clue. I still have not decided which of the two is worse.
High numbers of labor providers
The sheer number of even only legal employment agencies, varying between 3,645 and 12,000 has caused tremendous pressure on margins. Some agencies choose to create margins on accommodation, health insurance (by not paying withholdings to the insurance company), or company transportation, rather than on their commissions for hours worked.
This situation is conducive to a perverted penalty system, ranging from fines of EUR 5 for not making one’s bed (how come the privacy of bed rooms is violated in the first place?), EUR 100 for receiving visitors during curfew hours (are we in times of war?), and over EUR 500 for violating competition clauses if a worker decides to work for another agency or directly for the hiring company (these penalties are illegal in every respect under Dutch law, but considered very real by workers).
Ignorant or indifferent labor users
Regulations on employment contracts are rather strict and rigid in The Netherlands, which -combined with the need for (seasonal) flexibility- contributes to the hiring of “flex workers”, mostly through labor intermediaries.
In cases where we urge suppliers to the big brands and retailers to check up on their recruitment agencies in respect of sufficient payments to workers (e.g. following a SMETA supply chain audit), many of them object, stating they should not need to perform checks for work they have outsourced. Additionally, many object that intermediaries are already subject to a licensing system, referring to the industry’s Labor Standards Register (LSA). This register lists the names of all intermediaries holding a valid “LSA certificate” (Dutch: “SNA keurmerk”) after being audited in respect of NEN-4400 criteria. From a risk point of view, labor users should never make use of employment agencies that do not hold a valid certificate, but there are widespread misunderstandings about what elements of are in scope.
The number of audits for LSA certificates are on the rise, but the main focus lies on worker identification (whether or not they can work in the EU), agency registration with Chambers of Commerce and compliance with obligations to pay statutory payroll taxes (including social security contributions) and VAT to the national tax authorities.
LSA certification aims to reduce financial supply chain risk in terms of being held liable for labor users in case intermediaries fail to make the obligatory tax and social security payments; it does not warrant any guarantee that workers are paid up to the mark.
The scope of audits has become broader and the following shows key elements on what is currently included and what is not included in NEN-4400 audits (which precede LSA certification).
Differences in scope between LSA certification (based on NEN4400) and SMETA (based on ETI Base Code):
NEN4400
Minimum wage: Legal minimum wage + 8% vacation pay
Wage deductions: Check that wage payment does not fall below legal minimum
Working hours: Hours worked = hours paid
ETI Base Code (SMETA)
Minimum wage: According to CBA and/or labor user framework
Wage deductions: Acceptability of deductions other than those legally required
Working hours: Correct payment of (overtime) premiums (where relevant), rest breaks and compliance with Working Hours Act
According to Siddarth Kara[i], any type of enslavement requires only two economic forces of demand:
Exploiter demand for maximum profit
Consumer demand for lower retail prices
The above forces are not restricted to but especially true for the food industry with its thin margins, which is a breeding ground for both hard and forced labor. Under such economic circumstances, user enterprises tend to ignore or downplay signs of modern slavery while putting blind faith in an LSA certificate.
With the absence of national retailers properly managing their domestic supply chain risk, all hope for positive change in the Netherlands is on Anglo-Saxon brands and retailers
In due time, French retailers may follow the US and UK retailers, following the recent introduction of their version of the Modern Slavery Act ('Devoir de Vigilance'). Currently I do not see measures and/or due diligence activities, which effectively discourage the combined practice of bonded and forced labor in The Netherlands.
[i] Source: International Human Rights Conference at ABN AMRO, 4th edition (Amsterdam, 12 December 2017)
No dedicated authority in respect of labor abuse within the temp industry
The Netherlands lack a pro-active authority to prevent and detect labor abuse within the temporary employment industry – comparable to the British GLAA (Gangmasters and Labour Abuse Authority). Above, I already pointed out the lack of a certification scheme for labor providers, which is managed by the GLAA in the UK.
The Inspection Service of the Dutch Ministry of Social Affairs and Employment – also referred to as “I-SZW Inspectorate” – have limited capacity to detect labor exploitation. Investigation and prosecution are mostly reactive, given the high number of labor intermediaries. Cases may be reported by phone (in Dutch) or online (in eight languages, including Polish, Bulgarian and Romanian).
Labor exploitation is on the agenda of the I-SZW Inspectorate and they have a dedicated “AMU” (Dutch abbreviation for ‘tackling mala fide temp agencies’) Response Team in place to deal with mala fide agencies. As per their data, between 33% (following regular checks) and 70% (after indications or reported cases of abuse) of employment agencies have been imposed with fines .
Reporting sexual and/or labor exploitation can also be done thru NGOs such as FairWork or – in case of non-compliance with legally binding CBAs – thru SNCU (Dutch abbreviation for “Foundation for the Compliance with Collective Labor Agreements” (CBA), nick-named the “CBA Police”. Complaints may be reported in Dutch, English or Polish.
Conclusion
Good governance (a legal framework and law enforcement) alone has proven to be ineffective to prevent labor exploitation in the Netherlands.
Consequently, sourcing (food) products from the Netherlands implies an inherent risk of modern slavery in one’s supply chain.
Though the most severe forms of slavery are not commonly found in the Netherlands, the risk of modern slavery cannot be considered low, whether it is bonded or forced labor. Concentrated in the food industry, exploitation is usually so subtle that, though maltreated or underpaid, many workers do not feel they are being exploited. This subtleness of labor exploitation and the Dutch reputation on the subject add to the fact that many customer brands have a blind spot for modern slavery in the Netherlands, consequently rating the risk as “low”. Now, they should know better.
For further reading and research, refer to the report “Profiting from dependency - Working conditions of Polish migrant workers in the Netherlands and the role of recruitment agencies” (June 2016) by SOMO and FairWork, https://www.somo.nl/nl/wp-content/uploads/sites/2/2016/07/Profiting-from-dependency.pdf
[i] “A”-ranking: The government has implemented key components of a holistic response to some forms of modern slavery, with strong victim support services, a strong criminal justice framework, demonstrated coordination and collaboration, measures to address vulnerability, and may have taken action to ensure that government procurement policies do not encourage slavery. Source: Global Slavery Index 2016, pg. 43