- Phase
- Civil code (transition payment); Royal decree on dismissals of 1 July 2016; Balanced labour market act of 1 January 2020
- Native name
- Burgerlijk Wetboek (transitievergoeding); Ontslagregeling UWV van 1 juli 2016; Wet arbeidsmarkt in balans (WAB) van 1 januari 2020
- Type
- Severance pay/redundancy compensation
- Added to database
- 06 August 2015
Article
Article 7:673-673d of Civil code; article 10, Royal decree on dismissals of 1 July 2016; Article XII, XIII, XIV and XV of Balanced labour market act of 1 January 2020
Description
The transition payment
With the introduction of the Balanced Labour Market Act (January 2020) employees have the right to receive transitional payment from the day they began their employment, if their employment is terminated at the initiative of the employer. Employees whose contract concludes or is concluded due to seriously culpable act on the part of the employer, are also entitled to such compensation.
The transition payment has, for the most part, replaced the practice of dismissal compensation packages that were doled out by cantonal courts whenever a dismissal took place without mutual agreement or the longer but often cheaper route by seeking approval from public employment service (UWV). The choice between the two options used to be at the employers' discretion. The main idea behind the new legislation is to make the dismissal process quicker, simpler, and fairer. For small and medium-sized enterprises (SMEs), a special transition period was in place until 2020.
On 14 September 2018, the Dutch supreme court ruled on the employee's right to a transition payment in the event of partial termination of his/her employment contract. It was decided that in this case, the employee is entitled to a partial transition payment.
However the supreme court also stated that there were several conditions to this ruling:
- the partial termination was a necessity, for example, for redundancy reasons or for a long-term incapacity to work;
- the employee lost at least 20% of his/her working hours; and
- the loss of working hours is expected to be permanent.
No transition payment is due in case of serious employee culpability and after retirement age.
For each year that the employment contract has lasted, the transition payment is equal to one third of the salary per month and a proportional part thereof for a period that the employment contract has lasted less than one year. Further rules may be laid down by order in council regarding the calculation method of the transition payment. The transition payment amounts to a maximum of €84,000 (in 2021, reviewed every year) or an amount equal to a maximum of the wage over twelve months if the wage is higher than that amount.
Deviating from the dismissal payment in a social plan
According to the Royal decree on dismissals, an employer can, in cooperation with the works council and/or in accordance with a collective bargaining agreement, set up a social plan. Alternatively, a social plan can be agreed at a sector level. In this case, employer organisations and trade unions are the primary actors in establishing the conditions of the plan. A social plan should outline what will happen in case of a restructuring, possibly extending severance payments and placement policies beyond what is legally required. More frequently, the goal of a social plan is to minimise dismissals by formulating a plan for placing redundant employees at other companies. A collective agreement can also stipulate that a social plan has to be made when a collective dismissal or restructuring is imminent. A social plan can increase an employer's chance of getting a dismissal permit if this becomes necessary.
Citation
Eurofound (2015), Netherlands: Severance pay/redundancy compensation, Restructuring legislation database, Dublin,
https://apps.eurofound.europa.eu/legislationdb/severance-payredundancy-compensation/netherlands