Working after pensionable age – new legislation takes effect
Over the coming years the Dutch pensionable age (currently 65) is set to increase gradually, in order to offset the costs associated with an ageing population. By 2021 the pension age will be 67, with possible future increases as of 2022 to be determined annually from 2017.
On 1 January 2016, new legislation took effect, aimed at encouraging continued employment beyond pensionable age. Those within this age group are entitled to State Old Age benefits (in Dutch; “AOW”). Nevertheless, many people who are entitled to AOW wish to continue working; but when they do so it is usually in a self-employed capacity. There are a number of reasons for this, including the principle of automatic retirement, corresponding pension arrangements and employer concerns about tackling long term sickness and poor performance, with employers having limited scope to reduce the negative effects due to the law being very employee protective, including dismissals being complicated and costly. The new Act aims to remove these barriers to continued employment.
The main employment law changes in relation to AOW employees are as follows:
Rights and obligations during sickness:
- The period during which employers are required to continue salary payments during sickness will be shortened from 104 to 13 weeks, as of reaching the pensionable age. Ultimately, the sick pay period may be reduced to 6 weeks if, by 2018, the Act is having its desired effect.
- The obligations to re-integrate a sick AOW employee will be reduced: no action plan will be required and the option to re-integrate a sick employee with another employer will not apply.
- The statutory prohibition on dismissing a sick employee will be shortened from 104 to 13 weeks (and may be reduced still further to 6 weeks in 2018).
- For a dismissal due to sickness, the employer will only need to prove that the employee’s recovery is not expected within a period of 13 (and eventually 6) (instead of 26) weeks.
- A dismissed sick AOW employee will be entitled to sickness benefits (instead of salary), which will be reclaimed from the employer.
- If employment began before the pensionable age then, unless agreed otherwise, the employer may give notice to an AOW-employee without prior approval of the UWV or the court.
- The statutory prohibition on giving notice will be of limited application.
- No transitional remuneration will be due to the AOW-employee upon dismissal.
- The notice period for both parties will be one month.
- Where an employment contract for an indefinite term is terminated because someone has reached pensionable age, and the parties then enter into a fixed-term employment contract, that contract expires by force of law.
Change of fixed term agreements:
- For AOW employees, there are also adjustments to the rules concerning fixed term contracts. Usually, if three fixed term agreements are concluded within a period of two years, with intervals of six months or less, the next fixed term agreement will be deemed unlimited. For AOW employees this rule will only apply if six such contracts are entered into over a four year period.
- The minimum wage and vacation allowance Act applies.
In this note we have outlined only the most significant changes made by the Act. The Act itself is far more detailed and the transitional provisions are quite complex.