The new Work and Security Act involves a great number of changes and the devil is in the detail!

As of 1 July 2015 dismissal could be cheaper because of the new transition payment.

  • The transition payment will, in principle, be equal to 1/6 month's salary (including holiday allowance, a thirteenth month, and other fixed salary components, such as an allowance for overtime and variable components, e.g. a bonus or a profit share calculated on the basis of the average thereof during the past 3 years) for each ½ year worked,
  • but ¼ month's salary (including fixed and certain variable income components) for each ½ year worked after 10 years of employment,
  • with a maximum of EUR 75,000 or if higher, one year’s salary (including fixed and certain variable salary components).
  • But employers may deviate from this and offer a higher severance payment or some other but comparable provision.
  • Under certain conditions specific costs (for instance training costs or outplacement fees, approved by the employee or the trade unions) may be set off against the transition payment referred to above.
  • A transition payment will only be due in the event of the termination of employment after 2 years, i.e. also in the event of termination of an employment agreement for an indefinite period of time.
  • Tenure before the employee has reached the age of 18 will not be taken into account if the employee worked no more than 12 hours per week.
  • Please note that the new transition payment will not only have to be paid as a condition for termination by the court but also after a notice of termination after 2 years of service, or if a fixed term employment agreement of more than 2 years is not renewed.
  • No transition payment will be due in the event of termination on or after the employee has reached the pensionable age.
  • No transition payment will be due if the employee can be blamed substantially.
  • No transition payment will be due if the employer is declared bankrupt or in the event of similar situations.
  • Finally, a reasonable severance payment on top of the transition payment may be due if the employer can be blamed substantially.
  • Based on a transition arrangement that will continue up until 1 January 2020 (!), employees over the age of 50 on the termination date and who have worked for an employer for over 10 years – which employer employs at least 25 employees - will be entitled to a transition payment equal to ½ month’s salary (as referred to above) for every ½ year worked after they have reached the age 50, unless a Collective Bargaining Agreement provides for another (but at least comparable) provision.
  • The Minister may provide for additional rules (at a later stage but no later than 1 January 2020) to extend the above rule to include certain employers with fewer than 25 employees.
  • The Minister may also provide for additional rules (at a later stage, but no later than 1 January 2020) to exclude employment years before 1 May 2013 for small companies (with fewer than 25 employees) that are compelled to make employees redundant because of poor financial circumstances.
  • In the event of termination of a fixed term employment agreement that has continued for more than 2 years no transition payment will (yet) be due, if the employer guarantees that the employee may again work for the employer within 6 months after the termination date.

These rules do not apply if the agreement is terminated by mutual consent.

As it is anticipated that it will become more difficult to effectuate a termination by way of a court's decision or by giving notice after 1 July 2015 - also because severance payment will then be lower - employers may still wish to put a proposal to the employee that the agreement be terminated by mutual consent, in which case the employer may have to pay a  higher severance in order to obtain the employee’s consent.

As of 1 July 2015, the employer will also be obliged to afford the employee a two-week period after signing the settlement agreement within which the employee may rescind the settlement agreement. If such ‘withdrawal period’ has not been stipulated in the agreement it will be extended to 3 weeks (!).

Furthermore, the possibilities of entering into a number of consecutive employment agreements for a fixed term period will be restricted as of 1 July 2015.

A number of other rules regarding fixed term agreements entered into force on 1 January 2015. For instance, a notification obligation regarding a possible extension of the agreement has been put in place. Notification needs to be given ultimately one month before the end of the agreement subject to a penalty of a maximum 1 month’s salary (i.e. also if the employment agreement is extended).

Moreover, probationary periods in fixed term employment agreements will be restricted. For example, employment agreements for no more than 6 months may not include probationary periods.

And it will also be more difficult to include and enforce a non-competition clause in fixed term employment agreements.