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Written by:
Marcel Frazer


Proposed adjustment of Work and Security Act

Employers are under the obligation to pay transitional compensation to any employee whose service contract is terminated on expiry of a two year term or more, or fails to be renewed, upon the employer’s (rather than the employee’s) initiative including where the employee due to illness or disability has lost the ability to acquit him or herself of his contractual duties.

Employers consider it unfair that they should have to pay transitional fees to employees who are let go following a lengthy period of occupational disability. This is why a proposal has now been tabled aimed at having UWV, the Employment Insurance Agency, reimburse employers for transitional compensation paid out to (former) employees in scenarios such as the one outlined above. The relevant payments are to be made from the General Unemployment Fund, which explains why the associated premium is to be retroactively increased from the first of July 2015 onwards as the government’s proposed effective date. The revised regime is to apply both to non-renewal of temporary service contracts for employees who by the end of the contractual term have been struck down by illness and to termination or dissolution of (indefinite) service contracts involving employees who are no longer able to perform the duties for which they had originally been hired.

Dismissal for economic reasons or because of discontinuation of business operations too involves the employer having to pay transitional compensation to those who are let go. Provisions could be introduced in a Collective Labour Agreement context in lieu of the transitional compensation scheme. As the capitalised value of such provisions should be the equivalent of the amount in transitional compensation due and payable per individual employee, this could foil the successful conclusion of collective arrangements in scenarios involving dismissal for economic reasons. With this in mind it had been proposed that the capitalised value of the provisions should no longer be the equivalent of the transitional compensation the employee would have been entitled to under the original regime, it being sufficient that the employee in the event of his or her dismissal for economic reasons should be entitled owing to his or her CLA to provisions consisting of measures aimed at preventing unemployment or curtailing the length of unemployment, or where the CLA in question already provides for reasonable financial compensation.

In so far as the CLA merely confers entitlement to financial compensation, the latter should be the same as the statutory transition compensation, with the proviso that a cut in financial compensation would be reasonable where the continuity of a particular business, or that of businesses operating in the same sector, were to render it imprudent to fix the payments to be made at the (higher) level of the transitional compensation, or where the parties involved in the CLA in question were already using part of the available resources in aid of other provisions such as a mobility centre or training courses for (former) employees. It would only be in scenarios involving dismissal of employees for economic reasons that a CLA regime in non-conformity with the transitional compensation would be permissible.

Don’t forget to read: Transition allowance: interim arrangement

Dutch version: Voorstel aanpassing Wet werk en zekerheid

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