On 1 January 2020, the Balanced Labour Market Act (Wet Arbeidsmarkt in Balans, “WAB”) will enter into force. This new Act provides a package of measures in the fields of flexible labour, dismissal law and the Unemployment Insurance Act (Werkloosheidswet, “WW”), with the goal of improving the balance between flexible and permanent employment agreements. In the coming period, we will be discussing the main changes in several news reports. This week we will look at the transition fee.
The transition fee until 1 January 2020
Since 1 July 2015, if an employee is dismissed he is only entitled to a transition fee if he has been employed for at least two years.
Until 1 January 2020, the amount of the transition fee is 1/6 monthly salary for each six months the employee has been employed.
Employees who have been employed for more than 10 years are entitled to a higher accrual of transition fee for the period from 10 years onwards. For the period from 10 years onwards, the transition fee amounts to 1/4 monthly salary for each six months the employee has been employed.
A higher fee applies also to employees who are 50 years or older on the date of dismissal and have been employed for at least 10 years. These employees are entitled to a transition fee of 1/2 monthly salary for each six months they have been employed starting from the age of 50.
Moreover, until 1 January 2020 there is a transitional arrangement for employers who have 25 employees or less if the dismissal is due to a bad financial situation.
The changes for the transition fee as of 1 January 2020
As of 1 January 2020, the calculation of the transition fee will change. As a result of these changes, the employee will be entitled to a transition fee sooner, but the amount of the fee is lowered.
The changes in the WAB with regard to the transition fee are the following:
Consequences of the new calculation as of 1 January 2020
The changes may lead to big differences in the calculation of the transition fee as of 1 January 2020. The illustration below, showing the transition fee until 1 January 2020 (in blue) and the transition fee starting from 1 January 2020 (in grey), indicates the consequences of the new calculation.
Compensation for transition fee
Starting from 1 April 2020, employers can apply for compensation for transition fees that have been paid to employees whose employment is terminated due to long-term occupational disability.
Compensation of the transition fee is also possible if jobs are lost as a result of company closure due to illness, retirement, or death of the employer.
Transitional law
In principle, the new calculation of the transition fee will immediately enter into force on 1 January 2020. This means that the new calculation must be applied to all employment agreements that end after 1 January 2020. However, the act provides for transitional law for certain cases.
In the following situations, in which the employment agreement ends after 1 January 2020, the former calculation of the transition fee will be applied:
- The employment agreement was terminated prior to 1 January 2020;
- Prior to 1 January 2020, the employee has consented in writing to the termination of the employment agreement. Please note: the employee has 14 days’ time to revoke his consent. If the employee consents prior to 1 January 2020 and revokes his consent after 1 January 2020, the employment agreement will not have ended, and the employer will have to start new proceedings, calculating the transition fee according to the new calculation;
- The application for rescission has been submitted to the Court prior to 1 January 2020;
- The application for dismissal to the UWV was submitted prior to 1 January 2020.
Do you have any questions about the above changes or other changes? Please do not hesitate to contact us.
