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Dormant employment – ​​are you ready to claim compensation?

by janeausten

From 1 April 2020, as an employer you can apply to the UWV for compensation of the transition payment you paid to a long-term sick employee. In this blog I discuss what you should pay attention to based on five questions.

Read more: Shlomo Rechnitz – The Jerusalem Post

When are you eligible for compensation?

If the employment contract with the sick employee has ended on or after 1 July 2015 due to long-term disability and you have paid the employee a transition payment, you are eligible for compensation.

How high is the compensation?

The compensation is (in principle) equal to the amount you paid to the long-term sick employee as a transition payment. But please note: the compensation will never exceed the amount to which the employee was entitled at the time you were allowed to terminate the employment contract after 1 July 2015. This is usually the time after a two-year period of illness. This moment can be years earlier than the moment when the employment contract is actually terminated. Previously, you were not obliged to terminate the employment contract with a long-term sick employee, as a result of which many dormant employment contracts arose in the years after 1 July 2015.

The Supreme Court only made it clear in November 2019 that you, as an employer, can in principle be obliged to terminate an employment contract with a long-term sick employee. The amount of the compensation is therefore determined according to the moment that you were legally allowed to terminate the employment contract. As said, this is usually the moment after the two-year period of illness.

No dormant employment and compensation for paid transition payment

Did you legally terminate your employment immediately after the two-year period of illness and did you pay the transition payment? In that case, the compensation is in principle equal to the transition payment paid. This also applies to future cases. Pay attention! You will not be compensated for the full transition payment in all cases. Have you received a wage sanction from the UWV of, for example, six months? 

In that case, you may only legally terminate the employment contract after two years and six months. Due to the period of the wage sanction, a higher transition payment is due. After all, the transition payment is calculated on the basis of the length of the employment history. However, the amount of the compensation is calculated after two years of illness. The (cause of the) wage sanction therefore has consequences for the amount of the compensation.

Dormant employment and compensation for paid transition payment

If you kept the employment contract dormant for a period after the two-year illness, while you were legally allowed to terminate the employment contract, the compensation may be lower than the compensation you paid to the employee. Has the dormant employment (employment contract) been terminated via the UWV or the court? In that case, you will not be compensated for the full transition payment. Due to the period of dormancy, a higher transition payment is due upon termination of the employment contract. As mentioned, the transition payment is calculated on the basis of the length of the employment history. The amount of the compensation is calculated after two years of illness. This means that you will not be compensated for the part of the transition payment accrued by the period in which you kept the employment dormant.

Has the dormant employment contract been terminated via a settlement agreement? In that case, it is first of all important that the reason for termination is explicitly included in the settlement agreement. This is because the employment contract must have been terminated due to the fact that the employee is ill for a long period of time. Secondly, you must have paid a transition payment to the employee on the basis of the settlement agreement. Pay attention! In this case, too, the limitation of the amount of the compensation applies to the moment that you were legally allowed to terminate the employment contract. You will therefore not always be compensated for the entire amount that you have paid to the employee.

When must you apply for compensation at the latest?

Have you paid a transition payment in the past? Then you can submit your application to the UWV from 1 April to 30 September 2020. Will the transition payment be paid to the employee in full after April 1, 2020? Then you must submit the application within 6 months after this payment.

Where can you request compensation?

From 1 April you can fill in the form ‘Application for compensation for transition allowance’ via the UWV employer portal . You must log in with eHerkenning . You must upload at least the following documents:

  • labor contract;
  • proof of termination of the employment contract (for example, a settlement agreement in connection with long-term illness or a termination following permission from the UWV, or a court order);
  • calculation of the amount of the transition payment;
  • proof that the transition compensation has been paid in full to the employee;
  • pay slip from the period before the employee was ill for 1 year and – possibly – a pay slip from the period in which the employee was ill for 2 years (the period in which you kept the employment dormant).

When will you receive the compensation in your bank account?

If you were legally allowed to terminate the employment contract before 1 April 2020, the UWV must decide on your application within 26 weeks. Can you legally terminate the employment contract only after 1 April 2020? Then the UWV must decide on your application within 8 weeks. Are you entitled to compensation? Then you will receive the compensation in principle within 6 weeks after the decision of the UWV on your bank account. Questions about your specific situation with a long-term sick employee? Feel free to contact us. We think in terms of the best solutions.

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