Social security vacations, paid for by the State

The Netherlands has a problem. Thousands of migrant workers receive unemployment benefits that they are not entitled to. Most of them are Polish seasonal workers, who go on holiday or work on the side in their home country. Bogus intermediaries forge signatures, send fake job applications and falsely register residential addresses for them to receive Dutch state benefits. At the same time, Dutch temp agencies are enabling all kinds of social security fraud with foreign workers, in order to avoid paying pension premiums.

This is how it works: anyone who has worked for at least six months in the Netherlands and loses his or her job is formally entitled to three months of unemployment (WW) benefits. The longer one works, the more benefits one receives. To apply for these benefits at the Dutch UWV, the agency responsible for implementing social regulations, one has to reside in the Netherlands, be available to work and actively apply for a job. As it turns out, thousands of Poles apply for WW after being ‘let go’ from work, and then return to their country without trying to find another job in the Netherlands. After three months they come back to work for another six months, repeating the cycle.

Fake intermediaries that advertise online as bookkeepers or administrative offices send out applications in the job seeker’s name. Letters from the UWV go to a false address, where the intermediaries intercept, answer and sign them. As evidence of residence in the Netherlands, the intermediary will provide Dutch purchase receipts and register dozens of people at the same address. These offices also advise their customers not to use their Dutch bank card in Poland or travel by airplane, to prevent the UWV from discovering the fraud.

The big vacation

This scam is known as ‘the big vacation’ and was revealed by the Dutch current affairs program Nieuwsuur. The news program discovered last year that around 150 Polish intermediaries cover for as many as 9400 welfare recipients, about a third of whom does not currently reside in the Netherlands. Considered only the tip of the iceberg, this means thousands of Polish workers have illegally received millions of euros over the years.   But this issue is not appearing out of the blue. The UWV has known about this massive fraud since at least 2008, but has always kept it under wraps. Having investigated the abuse on sixteen occasions, the agency undertook only a limited number of measures to tackle the problem. Only two people have been convicted of social benefits fraud. The Ministry of Social Affairs and Employment (SZW) was informed by the UWV about the issue in 2016, but the then-minister of SZW Lodewijk Asscher decided not to inform parliament.

The Hague in shock

Dutch parliamentarians have, as can be expected, responded with appropriate political rage to the recent Nieuwsuur broadcast. MP Jasper van Dijk of the Socialist Party (SP) called the situation “very serious and unacceptable”, echoed by his colleagues Gijs van Dijk of the Labour Party (“an assault on our solidarity”); Dennis Wiersma from the governing party VVD (“absolutely insane”) and Pieter Heerma from CDA (“fairly shocking”). All of them wanted to know why the Parliament hasn’t been informed and called on acting SZW minister Wouter Koolmees to come up with answers sooner rather than later.  At a five minutes’ walk from parliament, the Ministry of SZW stated that it has indeed known about the massive scam for years and that it has asked the UWV to provide a full picture of the extent of the fraud. No structural measures seem to have been taken to counter the scam, however, although the UWV “preventively informs and monitors its clients about their rights and obligations when it comes to receiving unemployment benefits.” The UWV says that with its current resources it is simply impossible to check whether all job applications are real and where the applicants actually live. UWV employees do in fact receive training to discover fraudulent behavior and recover illegitimately received benefits.

Rigid system, perverse incentives

But behind the official story, the picture is more complex. UWV employees say that they are constantly receiving reports about exactly this kind of fraud, which are then neglected higher up the chain of command. Neighbors who report that UWV letters arrive for dozens of non-existing unemployed persons next door complain that they are being ignored. And local municipalities and cities trying to actively combat fraud by their residents say they are being undermined by the UWV, since it refuses to share any information about fraudulent WW applications.  One of the main causes of the problem is a perverse incentive that is widespread across the public sector: when things go wrong, more money is allocated to fix the problem. Higher budgets, however, do not mean that the problem is solved, as accountability and control tools are often lacking.

Another cause is that the system itself invites abuse. Over the past ten years, successive governments created laws to make the labor market as flexible as possible. The result has been a proliferation of temp agencies that move seasonal workers around. Employees are entitled to a basic pension 26 weeks after starting their job. By firing Polish or other immigrant workers after six months of work, then rehiring them elsewhere after some time, employers avoid having to pay pension contributions for them. Many temp agencies flat-out send their Polish workers on a ‘WW holiday’ and tell them to come back after three months. In fact, according to Henry Stroek, CNV trade union director, most work migrants come to the Netherlands to work as much as they can, but it is the employers that do not want to ‘get stuck with them’.  The association of temp agencies ABU denies that all this is happening on a large scale. In a statement, ABU says that these kinds of WW holidays are unlikely during these times of labor shortages. “Our members tell us all the time that they desperately need migrant workers to meet the demands of their clients.”

No priority

In response to all the commotion, the head of UWV, Fred Paling, admitted to Nieuwsuur that the issue had simply not been enough of a priority for the welfare agency. The problem has been going on for ten years, and all this time the UWV has kept it to itself. The agency did report some of its findings to the Ministry of SZW, which also decided that it wasn’t a big enough problem to inform Parliament. For now, the UWV has promised to better monitor and prevent fraudulent WW applications. SZW Minister Koolmees said he will provide the results of all WW fraud investigations to Parliament before the summer holidays. Let’s see if we’ll have a Big Vacation again this year.