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1 April 2020: Transition Payment Compensation Scheme for employers in the event of dormant employment

Publication date: 1 April 2020
From 1 April 2020, employers may claim compensation for the compensation paid upon termination of employment with an employee who has been sick or incapacitated for work for more than two years. The scheme applies retroactively to transition compensation paid from 1 July 2015. A request for compensation can be submitted to the UWV.

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From 1 April 2020, employers may claim compensation for the compensation paid upon termination of employment with an employee who has been sick or incapacitated for work for more than two years. The scheme applies retroactively to transition compensation paid from 1 July 2015. A request for compensation can be submitted to the UWV. This scheme is intended to put an end to the dormant employment of sick of incapacitated employees.

Conditions for compensation

The Compensation Scheme only applies if:

  • the employment contract was terminated due to two years of sickness or incapacity for work of the employee
  • the employee was entitled to transition compensation, and
  • the compensation was paid

If the employee had been ill for two years before 1 July 2015, he/she is not entitled to transition compensation and the employer is not entitled to compensation.

The following types of compensation are covered by the scheme:

  • transition compensation in the event of termination with consent from UWV
  • transition compensation in the event of dissolution by the court
  • compensation paid in the event of termination by mutual agreement

If the compensation is paid in instalments, compensation may be claimed only after the last instalment has been paid. The Scheme also applies if the employee is working at least 20% less due to incapacity for work.

Termination of dormant employment

Because of the Compensation Act, the employer is obliged, upon request of the sick employee, to terminate the contract after two years and pay the transition compensation. If the employer fails to do so, the employee is entitled to damages. The amount of damages is equal to the amount of the transition compensation the employer would have had to pay in the event of termination on the day after the two-year waiting period in the event of sickness has elapsed.

Amount of compensation

The compensation does not exceed the transition compensation that would have to be paid in the event of termination on the day after the two-year waiting period in the event of sickness has elapsed. The compensation does never exceed the amount actually paid by the employer. The employer may have paid a lower transition compensation because he was allowed to deduct costs he made. These costs are also covered by the Compensation Scheme.

Since 1 January 2020, the calculation method for transition compensation has changed. As a result, employees employed for 10 years or longer and employees aged 50 and over are no longer entitled to a higher transition compensation. When the waiting period of two years lapsed before 1 January 2020, and the termination procedure started before that day, the employer will qualify for compensation according to the old calculation method. In all other cases, the new calculation method applies to the calculation of the compensation, even if the old calculation method was used for the calculation of the transition compensation.

The Act says that if the total amount of wages paid to the employee during the two years of sickness does not exceed the transition compensation, the maximum amount of the wages paid will be compensated. This scheme does not apply yet. It was overlooked that this can also be the case if the employer makes use of a subsidy scheme for hiring or employing disabled people.

Application deadline compensation

Please note: The compensation must be applied for in time. Have you paid a compensation to a long-term sick employee before 1 April 2020? In that case, you will have to submit your application for compensation to the UWV up to and including 30 September 2020 at the latest. If you pay the transition compensation on 1 April or later, you have to submit the application for compensation within 6 months after the payment of the total transition compensation. If you pay the transition compensation in instalments, the application period starts to run on the day you paid the last instalment.

Decision period UWV

In new cases, the UWV has eight weeks to take a decision. In old cases they have six months. Old cases include the situation in which notice could have been given before 1 April 2020, but the transition compensation was not paid until 1 April or later. If the UWV has decided that you are entitled to the compensation, the money will be paid into your account within five working days.

What if you disagree with the UWV’s decision?

You can lodge an objection against the decision of the UWV. If you do not agree with the decision on your objection, you can lodge an appeal with the Administrative Court and then with the Central Appeals Tribunal.

More information

Do you have any question about the Compensation Scheme? Would you like to know, for example, how this will turn out in your employee’s situation? We will be happy to help you. We are also happy to assist you in matters relating to the reintegration of sick employees or the termination of an employment contract. Please contact us:

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