The Dutch government has proposed to limit the compensation for payment of the statutory severance payment (transitievergoeding) following dismissal after two years of illness to small employers only. Currently, there is no size threshold, and employers of all sizes are entitled to compensation from the Dutch Labour Office (UWV). The government deems medium‑sized and large employers sufficiently financially resilient to bear these costs without state support. For small employers, however, the statutory severance payment may represent a significant financial burden. Whether an employer qualifies as small, medium‑sized or large is reassessed annually, on a calendar‑year basis.
The legislative proposal is currently under consideration by both the House of Representatives and the Senate. If adopted, the government intends for the Act to enter into force on 1 July 2026, with transitional rules applying to cases in which the two‑year sickness period ends before that date.
We note that this legislative proposal may have implications for the ‘Xella standard’ (Xella‑norm) as developed in case law, and based on the principle that employers should act as a good and reasonable employer (goed werkgeverschap). Under this standard, an employer is required to cooperate with an employee’s request to terminate a ‘dormant’ employment relationship by mutual consent, subject to payment of the statutory severance payment to the employee. An employment relationship becomes dormant when the two‑year sickness period has lapsed and the wage‑payment obligation has ended. The rationale underlying this standard is that, as employers are entitled to compensation for the statutory severance payment, they lack a reasonable ground to refuse such a request.
If compensation for the statutory severance payment will no longer be available to medium‑sized and large employers, the underlying rationale for requiring employers to cooperate in ending dormant employment relationships against payment of the statutory severance payment seems to fall away. What this means for the Xella standard remains to be seen.