Attorney at Law
Attorney at Law
Employers who terminate an employment contract after 104 weeks of incapacity for work can currently, subject to certain conditions, be compensated by the Employee Insurance Agency (UWV) for the transition payment they have paid. The scheme was due to be abolished with effect from 1 January 2027, but this has now changed: the abolition of the scheme has been postponed until 1 January 2028.
Since 1 April 2020, employers have been able to apply for compensation for the transition payment they pay upon termination of the employment contract after the end of the waiting period (the 104-week period during which wages must continue to be paid in the event of illness).
The scheme was introduced to combat the practice of so-called “dormant employment contracts” (slapende dienstverbanden): employment relationships that were formally kept in place after 104 weeks of illness solely in order to avoid paying the transition payment.
In its Xella decision, the Dutch Supreme Court held that an employer is, in principle, required to cooperate with a reasonable request from a long-term incapacitated employee to terminate the employment contract, with payment of a transition payment calculated as at the day following the end of the waiting period, precisely because the transition payment can be recovered under the compensation scheme.
In June 2025, the bill entitled “Limiting the compensation scheme for transition payments in cases of long-term incapacity for work to small employers” was submitted to Parliament. Under that bill, only small employers would still have been entitled to compensation from 1 July 2026. Whether an employer qualifies as a small employer is determined by reference to its total wage bill (2026 threshold: less than EUR 1,082,500).
In a letter dated 24 April 2026, Minister Vijlbrief announced that the entry into force would be postponed until 1 January 2027. The reasons given were the caretaker status of the previous cabinet; the current cabinet’s intention to abolish the scheme in its entirety, partly in light of its wish to revise the rules on the transition payment; the fact that the bill has yet to be considered by both Houses of Parliament; and feasibility of implementation, as the UWV would otherwise have had to take irreversible steps in the coming months.
On 29 May 2026, the cabinet amended the bill and decided that the compensation scheme would be abolished in its entirety with effect from 1 January 2027. It has now been announced that this date will be moved to 1 January 2028. This means that, from that date onwards, no employer will be able to claim compensation under the scheme.
The postponement creates an additional period during which employers can still apply for compensation under the current rules. If the waiting period (in principle 104 weeks) ends before 1 January 2028 and you subsequently terminate the employment of the employee with payment of the transition payment, you will in principle still be eligible for compensation from the UWV, provided that you apply in time (within six months of the payment having been made in full).
From 1 January 2028, employers will no longer be able to recover the transition payment from the UWV upon termination after the waiting period. This has direct budgetary consequences and also raises questions, such as whether an employer, in its capacity as a good employer, is still obliged to cooperate with a reasonable request for termination from a long-term incapacitated employee. After all, in the Xella decision the Supreme Court reached that conclusion on the premise that the transition payment would be compensated, an option that may then no longer exist.
On 2 June 2026, the Minister acknowledged these concerns in a memorandum. He expects the decision to lead to an increase in the number of dormant employment contracts. It is to be hoped that the legislature will provide clarity on this point in the run-up to 1 January 2027.
Do you have any questions about (the abolition of) the compensation scheme and/or the termination of the employment contract of a long-term incapacitated employee? Please do not hesitate to contact Lisa van Baarsel, Rose Horstman or any of our other employment law specialists.
Attorney at Law
Attorney at Law