The Cabinet has plans to abolish the compensation of the transition allowance for organisations with more than 24 employees. This should take effect from 1 July 2026 (the internet consultation of the bill recently closed).
The reason for the abolition is that the Cabinet expects medium- and large-sized companies to be able to pay the transitional allowance without compensation from the government. The proposal is part of the coalition programme and should yield structural savings of €380 million.
Long-term sick employee
It concerns the compensation of the transition compensation due when the employer dismisses a long-term sick employee. The scheme was created to solve so-called “dormant employment contracts”. Employers did not formally dismiss employees who were sick for more than 2 years to avoid having to pay the transition compensation.
Eligibility requirements for the compensation are:
- the employee was dismissed due to long-term illness;
- under the law, the employee was entitled to the transition allowance;
- the employer actually paid the full transitional compensation to the employee.
The UWV pays the compensation only after the employer has convincingly demonstrated that these conditions have been met. The compensation must be requested from the UWV within six months after the transition compensation has been paid in full to the employee.
Retirement or death
For small employers (up to 24 employees), there is also a scheme for compensation of the transition compensation when employees have to be laid off due to the retirement or death of the entrepreneur. Even then, the employer must prove that it actually paid the statutory transition compensation. The compensation must then be applied for with the UWV within 12 months of that payment.