Compensation for transition payment in 2020? Make sure your administration is in order and pay attention to the time frames.
On 10 July 2018 the Upper House of Parliament approved the legislative proposal that regulates a compensation for the statutory severance compensation, referred to as ‘transition compensation’, paid by employers to employees in the event of dismissal due to long-term incapacity for work.
Pursuant to Section 7:673 of Book 7 of the Dutch Civil Code, this severance compensation is payable by the employer if the employment contract has lasted at least 24 months and:
- the employment contract has been terminated by the employer;
- the employment contract has been dissolved by the Court at the request of the employer; or
- the employment contract for a definite period of time which has expired has not subsequently been continued at the initiative of the employer;
or in the event that as a result of serious culpable acts or omissions by the employer:
- the employment contract has been terminated by the employee;
- the employment contract has been dissolved by the Court at the request of the employee; or
- the employee has rejected an offer to extend an employment contract for a definite period of time which has expired.
Severance compensation after two years of illness
Aforementioned payment obligation also applies if the employment contract with an ill employee is terminated after two years of illness. This is regarded as unfair by employers because they have already been forced to pay salary over this two-year period of illness. In view of this, it has been recommended to compensate employers for severance compensation paid to the employee in the event of termination after two years of illness.
According to the draft legislative text, the request for compensation can be submitted if the employer has paid a severance compensation after UWV/Court proceedings or by termination by operation of the law. The employer is also eligible for compensation if it has paid severance compensation on the basis of a settlement agreement.
According to the draft legislative text, a request for compensation can be submitted as from 1 April 2020. A request for compensation is possible in respect of compensation granted from 1 July 2015. Please note that in respect of severance compensation granted between 1 July 2015 and 1 April 2020, the application must be submitted ultimately by 30 September 2020. For severance compensation granted on or after 1 April 2020, the maximum time limit for applying for compensation is six months after the payment has been made to the employee.
When applying for compensation, the employer must provide the following information:
- an employment contract with the employee in question;
- the judgement of the UWV/Court showing that the employment contract has been terminated due to long-term incapacity for work or the settlement agreement agreed between parties;
- a statement from the employer that the employee left the company whilst being ill, the period of illness and the name of the company doctor;
- salary slips that show that salary payments were made during illness;
- the data used to calculate the severance compensation;
- proof of payment of the severance compensation.
Although it will take some time before the request for compensation can be submitted, it is advisable to document matters properly.
For more information, please contact: