Limiting compensation scheme for transition fee in the event of long-term illness to small employers
When the current government was formed, the parties agreed that compensation for the transition fee paid after the sick employee’s salary has been paid for two years will as of 1 July 2026 only be possible for small employers, being employers with a maximum of 25 employees. Medium-sized and large employers are expected to have sufficient financial resources to bear the transition fee. The legislative proposal limiting the statutory compensation scheme was open for internet consultation from 19 February to 19 March 2025.
Transitional law
After the intended effective date, medium-sized and large employers will no longer be compensated for the transition payment that they pay to ill employees after two years of illness. The current law will however continue to apply to cases in which the two years of illness have passed before the date of entry into force of this bill. The manner in which the amount to be compensated is determined and the manner in which the compensation scheme is implemented will not change.
Back to ‘dormant’ employment contracts?
The Supreme Court ruled on 8 November 2019 that the employer must comply with an employee’s request to terminate the employment contract after two years of illness, granting the transition payment. According to the Supreme Court, this obligation arises from the standard of good employment practices based on the existence of the statutory compensation scheme. Now that the compensation scheme for medium-sized and large employers is being abolished, this ruling by the Supreme Court is seen in a different light. In the explanatory memorandum to the draft bill, the government indicates that limiting the statutory compensation option could influence the effect or scope of this standard developed in case law. The government emphasises that it is preferable that employers, regardless of their possible right to compensation, cooperate in terminating employment contracts with long-term incapacitated employees. The future will have to show whether employers will keep employees ‘dormant’ in employment after two years of incapacity to avoid paying the transition payment.
Entry into force
The restriction of the compensation option to small employers is intended to enter into force on 1 July 2026. The explanatory memorandum to the bill states that an implementation period is taken into account, so if the legislative process is delayed, this date could be postponed.
Want to know more? Feel free to contact the Employment and Pensions Team at Van Doorne, Steven Sterk.
