Postponement of the entry into force of the Bill to limit the compensation scheme for transition payments

The Minister for Social Affairs and Employment has informed the House of Representatives that the entry into force of the Bill to limit the compensation scheme for transition payments in the event of long-term incapacity for work is being postponed. Whereas it was previously assumed that the Bill would come into force on 1 July 2026, the intended date of entry into force has now been moved to 1 January 2027.

Background

Under the current Compensation of Transition Payment Act, employers who terminate an employee’s employment contract after two years of illness may apply for reimbursement of the transition payment from the UWV. This compensation scheme applies to all employers and was introduced at the time to prevent employers from facing a build-up of costs following long-term incapacity for work.

The bill to limit the compensation scheme for transition payments in the event of long-term incapacity for work aimed to change this, in the sense that only small employers would still be eligible for compensation for the transition payment upon termination of the employment contract due to long-term incapacity for work. For medium-sized and large employers, the compensation would be abolished. The proposal is politically and socially sensitive, partly due to fears of a return to so-called dormant employment contracts.

Reason for the delay

According to the Minister, the delay has arisen due to the outgoing status of the previous government and the current government’s intention to possibly abolish the scheme entirely. In addition, the bill still needs to be debated by both Houses of Parliament. It is also important to note that the implementing body, the UWV, needs time to implement the necessary changes. For this reason, the minister does not consider implementation by 1 July 2026 to be feasible.

Implications for practice

For the time being, the current compensation scheme therefore remains in force for all employers. At the same time, the postponement indicates that the scheme is under pressure and that changes or even complete abolition cannot be ruled out. What the scheme will ultimately look like is still unclear at this stage and depends on further political decision-making.