Do you wish to keep valuable employees who are about to retire, but are you afraid termination will be difficult if they remain employed? As of this year, risks related to hiring employees who have reached the state pension age (an Older Employee) are considerably reduced, e.g. the duration of the prohibition to terminate and the obligation to continue to pay wages during illness is significantly shortened. This is due to the implementation of the Working after state pension age Act (the Act). The most important changes resulting from the Act are discussed below.
Long-term illness
Long-term sick leave and the related financial risks are common concerns when hiring Older Employees. These financial risks result from the fact that during illness the employer (i) has the obligation to continue payment of wages, (ii) has reintegration obligations and (iii) is prohibited to terminate the employment agreement. To encourage employers to keep Older Employees employed, the Act reduces the normal period during which the employer has the aforementioned obligations, from (at least) 104 weeks to 13 weeks. This does not apply for employees who reach the state pension age before 1 July 2016 and have been suffering from long-term illness since before January 1, 2016.
Further, the remedy period for Older Employees is shortened from 26 weeks to 13 weeks. Only if recovery is not to be expected within the remedy period, the employment agreement of an ill employee can be terminated. In any case, the obligation to continue payment of wages ceases after 13 weeks.
Please note that the statutory provisions regarding (i), (ii) and (iii) mention a term of six weeks. However, this is currently not the applicable term. Based on transitional law the aforementioned term of 13 weeks applies. In 2018 the legislator will evaluate the Act, including transitional law. After this evaluation will be decided if the term of six weeks shall become applicable.
Employment under fixed term agreement
Since July 1, 2015, unlike before, it is possible to re-employ Older Employees under a fixed term agreement after termination of the indefinite employment agreement based on the ground that the employee reached the state pension age. In general an indefinite employment agreement ends by operation of law when an employee reaches the state pension age. The employer may also terminate the indefinite employment agreement by giving notice on or after that day, without a UWV dismissal permit or a court decision being required and without having to pay any severance payment.
Under the Act, Older Employees can now be employed under fixed-term agreements for up to 48 months and under six subsequent agreements. Prior to implementation of the Act, an fixed term employment would convert into an indefinite employment in case: i) the employee has been employed for more than 24 months under several fixed term agreements or ii) the employee has worked under more than three subsequent fixed-term agreements. This conversion into an indefinite employment agreement creates the risk of long and expensive dismissal procedures. This is because a so-called reasonable ground for dismissal is needed to be able to terminate such an employment agreement.
The possibility to keep Older Employees employed for longer under fixed-term agreements is favourable for employers since it reduces the risks of conversion and expensive dismissal procedures.
Other changes
- The Act provides that in case of termination of an indefinite employment agreement with an Older Employee, a statutory notice period of only one month has to be observed, irrespective of the duration of the employment. Exceptions in favour of the employee can be made.
- The Act provides that, unlike before, the rules on minimum wages apply to Older Employees.
- The Working Hours (Adjustment) Act does no longer apply to Older Employees. As a result Older Employees can no longer request an increase of their working hours.
Should you have any further questions on the above, please feel free to contact Maartje Govaert or Saskia de Schutter.
