Which actions do you have to take after the first two years of long-term sickness absence of an employee?
During the first two years of an employee’s incapacity to work, there are various obligations you, as an employer, have to fulfil. But what happens if your employee will still be unable to work after two years? In that case, you are allowed to:
- Cease continuing to pay wages, and
- To terminate the employment contract.
Do not continue to pay wages
During the first two years of sickness absence, the employer has to continue to pay the wages of the ill employee. After two years, the employment contract will continue to exist but the obligation to continue to pay wages will cease. If the employee is still unable to work after two years, you will, in principle, not be required to pay wages anymore.
If you have not fulfilled the re-integration requirements during the first two years of illness, UWV (Employee Insurance Agency) can determine however that you will have to continue to pay the employee’s wages for a maximum period of one more year.
What if the employee will be incapacitated for work for at least 35% after two years but not completely and lastingly unable to work? Then, the employee will be entitled to a WGA (Partially Disabled Persons Regulations) benefit. This benefit will be charged on to you. You can take out insurance to cover this risk.
Terminate the employment contract
During the first two years of sickness absence you are not allowed to dismiss the employee. After two years, the prohibition to terminate will cease and you can terminate the employment contract. This can be done by mutual agreement and the employee or you can apply to UWV for a permit to terminate the contract of employment.
Since the introduction of the Work and Security Act, you will have to pay transition compensation upon termination of the contract of employment, even if you have been continuing to pay the employee’s wages for two years. For this reason, employers often choose to keep the employment dormant. Then, the employer will still be required to make an effort regarding the re-integration of the employee and has to allow the employee to work and must pay wages when he is better.
The government has proposed a bill containing measures to compensate employers for the transition compensation in case of dismissal due to long-term sickness absence. These measures are expected to become effective in 2019.
This newsletter provides a brief insight into Dutch employment law and the potential consequences for your Embassy. But the Embassy desk of our firm also focuses on:
- Labour law
- Rent law / Real estate
- Investment / Doing business in the Netherlands
- Matrimonial issues
- Immunity issues
Head of Embassy Desk