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Dismissal: Before or after 1 January 2020?

Publication date: 24 July 2019
The transition compensation will change as of 1 January 2020. The higher compensation for older employees will be cancelled, as will be the more favourable arrangement for small companies. Employees will always be entitled to 1/3 of the monthly salary per year of service, regardless of the duration of the employment contract.

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The transition compensation will change as of 1 January 2020. The higher compensation for older employees will be cancelled, as will be the more favourable arrangement for small companies. In addition, the alternative provision in the collective labour agreement is limited to dismissal due to economic circumstances. Also, the requirement that this provision must be equivalent will lapse. The higher transition compensation for employment contracts of more than 10 years will also lapse.

Higher compensation for older employees to be cancelled

The arrangement whereby employees aged 50 and over will receive a higher transition compensation will lapse. They will then be entitled, just like other employees, to 1/6 of the monthly salary per half year of employment regardless of their age and duration of employment.

Currently, employees aged 50 and over with an employment contract of more than 10 years are entitled to a higher transition compensation. This only applies to employees as from the age of 50. During this period, they are entitled to 1/2 of the monthly salary per half year of employment. This transitional arrangement gives them the opportunity to prepare for a lower compensation than before the introduction of the Work and Security Act (Wwz). This arrangement does not apply to small businesses.

Arrangement for small businesses to lapse

The scheme whereby enterprises with less than 25 employees may pay a lower transition compensation will lapse. Now, they only have to pay transition compensation for the employment as from 1 May 2013. This transitional arrangement only applies to dismissal due to the poor financial situation of the company. The scheme for older employees does not apply either.

Small businesses that have to dismiss employees due to economic circumstances will therefore have to take this time limit into account in the case of long-term employees.

Collective agreement provision in the event of dismissal due to economic circumstances

If the entrepreneur is bound by a collective agreement, it is possible to include a provision into the collective agreement instead of the transition compensation. The requirement that this provision must be equivalent will lapse as from 1 January 2020. This arrangement also only applies to dismissals for economic circumstances.

This arrangement can be used in collective agreements that take effect 1 January 2020 or afterwards. The requirement of equivalence continues to apply to current collective agreements.

Higher transition compensation after 10 years of service to lapse

As from 1 January 2020 the entitlement to the transition allowance will always be 1/3 of the monthly salary per year of service, regardless of the duration of the employment contract. The higher transition compensation as from the 10th year of service will lapse. Also, employees will be entitled to transition compensation from the first day of the employment, even in the event of dismissal during the probationary period.

Can the dismissal wait until 1 January 2020?

In most cases it will not be possible to wait with a dismissal. Waiting to dismiss employees means that the issues are less urgent so that there is less reason for the dismissal of an employee.

As from 1 January 2020, there will also be the possibility for dismissing an employee due to a combination of reasons.  However, it is not clear yet how this will work out in practice. It seems possible, for example, that more often than not a reasonable fee will have to be paid in addition to the transition compensation.

Whether it is possible to wait with a dismissal is a complex matter that will have to be assessed on a case-by-case basis. We will be happy to advise you on this.

More information

Would you like to know what the changes in the transition compensation will mean for your business? Are you looking for advice on dismissal and severance pay? Or do you have any other questions concerning employment law? Please contact us:

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