Dutch Compensation Scheme for Paid Severance in Case of Company Closure Effective as Per 01 January 2021

The Dutch government has decided to do this because the payment of statutory severance in the event of the cessation of business operations may have undesirable financial consequences, particularly for small employers. Employers must pay statutory severance to employees whose employment contract was terminated at the employer’s initiative or was not continued, among other things, when the company is closed down. The compensation scheme for paid severance in case of company closure will enter into force on 01 January 2021.

As of this date, compensation can be requested for a paid severance allowance by the employer or the inheritors if the company is terminated due to retirement or death of the employer and if the other conditions are met. For example, it must concern a small employer (less than 25 employees) and at least one of the employees must have been granted a permit for dismissal by the UWV due to the termination of the business. Compensation due to retirement of the employer is only possible if the employer has reached the statutory retirement age. Only severance allowance paid as of 01 January 2021 can be compensated.

The possibility for compensation in the event of company closure due to employer sickness has not yet entered into force. Discussions are still underway between the Ministry of Social Affairs and Employment, the UWV, and professional associations in the field of occupational health and insurance regarding the way in which the assessment of sickness can be carried out.

Published: Employment Law Newsletter, No.10, Spring 2021 l Photo: ingusk - stock.adobe.com