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Compensation for transitional payment for employees with a long-term illness confirmed

After a long process, the ‘compensation for transitional payment for employees with a long-term incapacity for work’ bill was adopted by the House of Representatives without a vote on 5 July 2018, after which the Senate also approved the bill on 10 July 2018. So, what does this mean?

Under previous employment law, an employee was rarely entitled to severance pay in the event of dismissal due to long-term incapacity for work.
After the entry into force of the Work and Security Act (Wet Werk en Zekerheid, WWZ), however, an employer not only has an obligation to continue to pay wages for at least 104 weeks, but in the event of dismissal due to long-term incapacity for work, they must also pay the statutory transitional payment.

As a result of the compensation scheme now adopted, an employer who terminates the employment contract with an employee after and because of 104 weeks of incapacity for work and pays a severance payment is in principle entitled to compensation. This compensation is paid to the employer by the Employee Insurance Agency (UWV).

The conditions for obtaining the compensation are that a transitional payment was due in connection with the termination or discontinuance of the employment contract, and that the termination of the employment contract (by termination, dissolution, or mutual consent) is related to the long-term incapacity for work of the employee.
The compensation paid to the employer is equal to the transitional payment calculated per the day after which the employee was incapacitated for work for 104 weeks. This means that, if a higher level of severance pay is paid, only the part that was equal to the transitional payment on the day after which the employee was ill for two years is compensated.

Moreover, the compensation cannot exceed the amount of the salary paid by the employer to the employee during the period in which they had to continue to pay their sick leave.

The application for compensation can be submitted as of 1 April 2020 and there is a deadline for submitting an application of no later than six months after payment of the transitional payment.

The compensation also applies to severance pay paid in the period from 1 July 2015 onwards. For cases that fall within this period, the scheme has a retroactive effect and the application must be submitted by 30 September 2020 at the latest.

It is therefore important for employers to keep records of all dismissals due to long-term incapacity for work from 1 July 2015 onwards in order to be able to apply for compensation as of 1 April 2020. This concerns the employment contract, documents showing that the employment contract has been terminated due to long-term incapacity for work, the payslips of the salary paid during illness, the data used to calculate the amount of the transitional payment, and proof of payment of the payment.

If you have any questions about the scheme or the conditions, the specialists from our employment law practice group will be happy to assist you.

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