Compensation scheme for transitional compensation after two years of illness ends: what does this mean for employers?

As of July 1, 2026, employers with 25 or more employees will no longer be able to use the compensation scheme for the transitional compensation in the event of long-term disability. In this article, we explain what this compensation scheme entails, why it is being discontinued, and what you, as an employer, need to know.

What is the compensation scheme?

Employers are obliged under Article 7:673 of the Civil Code to pay a transition compensation if they dismiss an employee or do not renew the employment contract. This obligation also applies if the employment contract is terminated due to long-term disability. This was perceived as unfair by employers. After all, they had already continued to pay wages during illness for two years and had incurred costs in connection with reintegration. In some cases this led to dormant employment files: the employment contract formally continued to exist so that no transition fee had to be paid.

For the aforementioned reasons, as of April 1, 2020, the Transition Compensation Scheme was introduced. From then on, employers could apply for compensation for the transition compensation paid through the UWV. This scheme will be partially abolished next her.

Why is the scheme being abolished?

The abolition of the compensation scheme is included in the bill “Limiting the compensation scheme for transitional compensation in the event of dismissal due to long-term disability to small employers. This proposal was published for Internet consultation by the Ministry of Social Affairs and Employment (SZW) on February 19, 2025.

The scheme will be discontinued for financial reasons. By reducing the number of compensation awards by about 80%, a structural saving of about €380 million per year will be realized. These savings have already been included in the SZW budget.

According to the government, it is reasonable to exclude medium-sized and large employers from compensation, as they are expected to be sufficiently financially strong to be able to pay the transition compensation independently. The situation is different for small employers: for them, the transition compensation after dismissal of a long-term sick employee may be a disproportionately large cost item. Therefore, the compensation for this group remains in place.

 Conclusion

The abolition of the scheme means that employers with 25 or more employees will no longer receive compensation after

July 1, 2026. The compensation scheme will then only apply to small employers (fewer than 25 employees). It is wise to take measures now, for example by surveying current and expected long-term sickness cases. Get proper advice on this in order to avoid risks and unnecessary costs.

Questions

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