Employees who are made redundant by their employer are entitled to a transition payment. In addition to the previously announced increase and amendment of the transition payment The transitional scheme for small employers is now being extended. Minister Koolmees has announced this, following an evaluation of the scheme, in a letter to the Chamber.
Transitional scheme
Under the bridging scheme, the employee’s period of employment prior to 1 May 2013 is not taken into account when calculating the transition payment. The scheme is set out in Article 673d of Book 7 of the Civil Code.
Who is eligible for this scheme? Employers with:
- on average, fewer than 25 employees;
- who are made redundant on the grounds of business circumstances;
- circumstances resulting from the employer’s company’s poor financial situation.
Pursuant to Article 8 of the UWV Regulations on the Dismissal Procedure the employer may ask the UWV to assess whether the bridging scheme applies.
Redundancy scheme
These terms and conditions are set out in the Redundancy scheme. The number of employees is determined on the basis of the period from 1 July to 31 December of the year preceding the submission of the application for redundancy.
Payroll employees and employees seconded to the employer are included in the count. Where the employer is part of a group, the employees of that group are also included.
Poor financial situation
The conditions imposed in relation to the poor financial situation are very strict:
- the employer’s net profit for the financial year in which the dismissal took place and the two preceding financial years must have been less than zero (a loss);
- equity at the end of the financial year in which the resignation takes place must be negative;
- The value of current assets must be less than the liabilities with a remaining term of one year or less.
Widening
The evaluation shows that these criteria are so strict that, in practice, the bridging scheme is not very effective. As a result, the scheme can usually only be applied once the employer’s bankruptcy is inevitable. In the event of bankruptcy, all employees lose their jobs and receive no transition payment at all.
The relaxation of the first criterion means that the average result over the three financial years taken together is taken into account. This average result must be negative. A year with a small positive result will therefore no longer prevent the bridging scheme from being applied.
The solvency criterion is being relaxed by requiring a solvency ratio of 15% instead of negative equity. According to the Minister, the solvency ratio of a financially sound company lies between 25% and 40%.
The relaxation of the rules will come into effect on 1 January 2019. The transitional arrangement will expire on 1 January 2020.