Illness does not take away the right to a transition payment (transitievergoeding). As a rule, the employer may only give notice once the employee has been unfit for work for two years and the UWV (Employee Insurance Agency) gives permission (Article 7:670(1) of the Dutch Civil Code). If the employment then ends at the initiative of the employer, the transition payment is due over the entire period of service, including the period of illness. The employer can claim the payment back from the UWV, up to the amount that was due after two years of illness (Article 7:673e of the Dutch Civil Code). According to the Supreme Court, an employer that keeps the employment in place only to avoid the payment must in principle agree to termination against compensation equal to the transition payment.
Three questions to keep apart
- Is the transition payment due? That depends on how, and at whose initiative, the employment ends (Article 7:673(1) of the Dutch Civil Code) and on the exceptions in paragraph 7.
- How much is the payment? That follows from the length of service and the monthly wage under the Besluit loonbegrip (Decree on the wage concept), as with any other dismissal.
- Does the employer get the payment back? That is a matter between the employer and the UWV (Article 7:673e of the Dutch Civil Code) and does not change what the employee receives.
Dismissal during and after illness
During the first two years of incapacity for work, a prohibition of notice applies (Article 7:670(1)(a) of the Dutch Civil Code). That period is extended, among other things, if the UWV imposes a wage sanction on the employer, if the WIA application was made too late or if the waiting period was extended on request (paragraph 11). Once the period has passed, the employer can ask the UWV for permission to give notice on the ground of long-term incapacity for work. For this, it must among other things be plausible that the employee will not recover within 26 weeks and cannot perform the agreed work in adapted form within that period (Article 7:669(3)(b) of the Dutch Civil Code). The procedure is explained in more detail on dismissal of an ill employee.
If the employer gives notice after that permission, the transition payment is due (Article 7:673(1)(a)(1°) of the Dutch Civil Code). The same applies if a fixed-term contract expires during the illness and the employer does not continue it (under (a)(3°)), and if the parties end the employment with a settlement agreement (vaststellingsovereenkomst) in which the employer agrees to pay compensation; in that last case there is no statutory right, but there is an agreement. Illness changes nothing about the exceptions: there is no transition payment if the employment ends in connection with the state pension (AOW) age or because of seriously culpable acts or omissions of the employee (paragraph 7).
The amount of the payment on illness
Length of service. The period of illness counts in full. An employee who worked for twelve years and was then ill for two years has fourteen years of service.
Monthly wage. The Besluit loonbegrip uses the gross hourly wage times the agreed working hours (article 2(1)). The lower wage paid during illness, for example 70% (Article 7:629 of the Dutch Civil Code), is not the yardstick in that provision. We have not found a judgment of the Supreme Court on this question.
Wage components. Holiday allowance and a fixed year-end payment count as usual. Overtime pay and shift allowances count to the extent they were owed in the last twelve months (article 3(1)(b) Besluit loonbegrip); if the employee did not work during that period, that part may be lower or fall away. Bonuses and profit shares count over the three calendar years before the year in which the employment ends, divided by 36. With varying working hours, months of illness are left out of the average (article 2 of the Regeling looncomponenten en arbeidsduur, the Regulation on wage components and working hours). More on this in which wage components count.
Compensation for the employer
At the employer's request, the UWV reimburses the transition payment it paid on an end of employment after two years of illness (Article 7:673e(1)(a) of the Dutch Civil Code). This applies if the employment ended because the employee could no longer perform the agreed work due to illness, and if a fixed-term contract ended by operation of law while the employee was ill. On termination by mutual consent, the employer can also receive compensation if it would have owed a transition payment on notice or dissolution (paragraph 3).
The compensation is never higher than what the employer paid, and never higher than the transition payment that would have been due on an end of employment on the day after the two years of illness (paragraph 2). Service after those two years therefore earns the employer no compensation, but it does count for the employee. The Central Appeals Tribunal (Centrale Raad van Beroep) held that, for this purpose, the length of service is notionally shortened to the end of the two-year period (Central Appeals Tribunal 1 June 2022, ECLI:NL:CRVB:2022:1180). In addition, paragraph 1(b) provides compensation for small employers that close their business because the employer reaches the state pension age or has died.
The dormant employment contract
After two years of illness, the employer is not obliged to apply for dismissal. It could therefore let the employment "sleep": no more wages, but also no end and therefore no transition payment. Since the compensation scheme, that no longer works. According to the Supreme Court, good employership (Article 7:611 of the Dutch Civil Code) means that the employer must in principle agree to a proposal by the employee to end the employment by mutual consent against compensation equal to the transition payment. The compensation need not exceed the transition payment on an end of employment on the day after the employer could have given notice because of the illness (Supreme Court 8 November 2019, ECLI:NL:HR:2019:1734, Xella).
The employer may refuse if it has a legitimate interest in continuing the employment, for example because there are real reintegration options. The fact that the employee is close to the state pension age is not a legitimate interest. The rule also applies to employees whose two years of illness had already passed before 1 July 2015, but only for proposals the employee made on or after 20 July 2018 (Supreme Court 11 November 2022, ECLI:NL:HR:2022:1575 and ECLI:NL:HR:2022:1576). You can draft a settlement agreement for such a termination with the settlement agreement generator.
Worked example
An employee has been employed since 1 March 2012, with a gross monthly salary of €4,000 and 8% holiday allowance: a monthly wage of €4,320. The employee falls ill on 4 March 2023; the 104 weeks run up to and including 28 February 2025. After permission from the UWV, the employer gives notice; the last day of employment is 30 June 2025.
| Length of service | Calculation | Amount | |
|---|---|---|---|
| Transition payment for the employee | 1 Mar 2012 to 30 Jun 2025: 13 years and 4 months | 13 × €1,440 + 4 × €120 | €19,200 |
| Maximum compensation for the employer | 1 Mar 2012 to 28 Feb 2025: 13 years | 13 × €1,440 | €18,720 |
The employee receives €19,200. The employer pays that amount and gets back at most €18,720 from the UWV. Both amounts have been checked with the calculation engine of the calculator; with the transition payment calculator you can work out your own situation, including varying hours and wage components.
Conclusion
On dismissal after long-term illness, the transition payment is as a rule simply due, over the entire period of service. The employer usually does not bear the cost up to the amount after two years of illness itself: the UWV compensates it. Since Xella, the employer can in principle no longer maintain a dormant employment contract if the employee asks for termination with compensation.
Key legal sources
- Article 7:673 of the Dutch Civil Code (entitlement and amount)
- Article 7:673e of the Dutch Civil Code (compensation after two years of illness)
- Article 7:670 of the Dutch Civil Code (prohibition of notice during illness) and Article 7:669(3)(b) of the Dutch Civil Code
- Supreme Court 8 November 2019, ECLI:NL:HR:2019:1734 (Xella: dormant employment contract)
- Supreme Court 11 November 2022, ECLI:NL:HR:2022:1575 and ECLI:NL:HR:2022:1576
- Central Appeals Tribunal 1 June 2022, ECLI:NL:CRVB:2022:1180 (extent of the compensation)