The Dutch central bank is recommending the next government reduce some of regulations covering people on permanent contracts, in order to encourage more firms to take staff off temporary contracts.

In particular, the bank has suggested cutting the two-year statutory sick pay requirement, which its says, is a major obstacle to smaller firms in particular. By cutting this back to one year, it would be more attractive for companies to take on permanent staff, the bank said on Monday.

The government’s senior advisory body SER earlier called for more measures to encourage companies to ditch flexible contracts, but stopped short of calling for a reduction in sick pay entitlement.

SER, made up of employer, union and lay members, recommended in June that zero hour contracts should be abolished and people should only be able to work for three years for the same employer on a temporary contract.

The SER report, ‘chooses to focus mainly on making flexible employment more secure. We recommend, therefore, that additional steps be taken to make permanent contracts more adaptable,’ the central bank states.

Central bank director Olaf Sleijpen, who is also a member of the SER, told the Financieele Dagblad that more needs to be done to reform the labour market.

‘The protection offered to permanent staff in the Netherlands is extensive compared with other countries,’ he said. ‘More needs to be done to encourage them to switch jobs. Such dynamics are good for the economy.’