Employee sickness and statutory termination compensation under Dutch employment law

 

When advising international clients about Dutch employment law, we often receive surprised reactions about our level of employee protection. This is especially the case when it comes to issues arising from employee sickness.

The main rule under Dutch law is this: if an employee falls ill, the employer is obliged to pay the employee (70% of) his salary during the first two years of sickness. Moreover, the employee is protected against dismissal until the end of the second year of sickness. At the end of the second year, the obligation to pay salary ends, unless the employer’s efforts to re-integrate the employee are found insufficient by the Dutch Social Security Agency (UWV). In such a case, the two year period may even be extended by (maximum) one year.

Even though these obligations are already considered as a heavy burden for employers, this is not the entire picture.  Since new Dutch employment legislation was implemented in 2015, a statutory termination compensation applies. That compensation is also due in case an employer decides to terminate the employment agreement of an employee who has been sick for two years or longer.

In other words, in case of long term illness, the employer can end up paying the employee for two years (or even three) before being allowed to terminate the employment agreement. When that moment comes, the employer will be liable to pay statutory compensation sum on top of that. Many employers believe this is unfair and it has led to a lot of discussion, also at a political level.

In 2016 a change of the law was proposed to tackle this issue. The minister in charge proposed that a special fund would compensate employers for the statutory termination compensation paid to employees in cases of termination after two years of sickness. However, due to elections and a difficult government formation process, this piece of legislation is still not more than a plan.

For the time being, many employers decide not to terminate the contracts of sick employees after two years. The idea is that as such they will not be obliged to pay the statutory termination compensation, while on the other hand, after two years, they are not required to pay salary either. Once there is more clarity on the legislative proposal, this could well change.

In case of any questions about this complex topic, contact:

Saskia Boonstra

Labré advocaten (Amsterdam)

e: saskia.boonstra@labre.nl

t: +31(0)20 3052030