Do you employ someone with a so-called dormant employment contract? In that case, as an employer, you will be entitled, from 1 April 2020, to compensation for the transition payment due (up to the amount applicable on the date the employee has reached two years’ sick leave). This may mean that the employee’s contract of employment is not terminated until 2020. For the employee concerned, this could result in them receiving a much lower transition payment than if they had been made redundant before 2020.
Change to the calculation of the transition payment
Following the introduction of the WAB The calculation of the transition payment will change with effect from 1 January 2020. From that date, it will be as follows for every employee (regardless of working hours or age): one-third of a month’s salary per year of service. For employees on a dormant employment contract who are aged 50 or over and have more than 10 years’ service, the transition payment upon dismissal in 2020 will therefore be considerably lower. This is because, prior to 2020, an exception still applied whereby employees aged 50 or over with at least 10 years’ service were entitled to one month’s salary per year of service. This provision will cease to apply on 1 January 2020.
When should an employee be dismissed?
Employers may therefore wish to consider dismissing an employee who falls under the ‘50-plus’ scheme and has a dormant employment contract (having already reached a continuous period of sickness of two years) before 2020, so that the employee receives the high transition payment. However, as an employer, you will then have to wait a longer period before you are reimbursed for this payment by the UWV. This is because applications for compensation cannot be submitted until 1 April 2020. Furthermore, the UWV has six months to transfer the compensation for the transition payment.
Conditions for compensation in respect of a transition payment for a dormant employment contract
To be eligible for compensation, the following conditions apply:
- the employee was dismissed due to long-term illness;
- The employee was entitled by law to a transition payment;
- The employer has paid the transition allowance to the employee.
This information can be provided as follows:
- the dismissal authorisation from the UWV or the court’s order terminating the contract;
- the termination agreement, if the dismissal was by mutual consent (the termination agreement must state that the employee was dismissed on grounds of long-term illness);
- data used to calculate the amount of the transition payment (for example, documents showing the gross monthly salary and the length of service);
- proof that the (full) transition payment has been paid (for example, a bank statement).