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By: Jan Dop, Esq.
Russell Advocaten B.V.
Amsterdam, Netherlands

As from 1 January 2016, you will face fewer risks of having to pay high (health care) costs in the event you hire or continue to employ experienced employees who have reached the statutory pension age. This is regulated in the ‘Working After Pension Age Act’ (Wet werken na de AOW-gerechtigde leeftijd) which is then to become effective. What obstacles will be removed by this Act?

Fewer obligations in the event of incapacity for work

The period of the obligation to continue to pay wages for employees who are incapacitated for work and entitled to AOW will be shortened. The employer is obliged to continue pay the incapacitated employee who is entitled to AOW for a period of 13 weeks (instead of having to continue to pay wages for the normal period of 104 weeks). If the employee will become incapacitated for work upon or after reaching the state pension age, and the employment contract will end before the period of 13 weeks has lapsed, the employee will be entitled to sickness benefits for the remaining period. These sickness benefits will, in principle, be recovered directly from the employer.

The prohibition against termination of employment during an employee’s illness will be shortened to 13 weeks. In 2018, the obligation to continue to pay wages and the prohibition against termination will be further reduced to 6 weeks.

In addition, the rehabilitation obligations will be limited. Thus, the employer and the employee entitled to AOW no longer have to make an action plan. Also, the employer no longer has to look for work at another business if it is obvious that there is no suitable work within the business of the employer (the so-called ‘second track’ reintegration). Transitional arrangements will apply to employees who become incapacitated for work before 1 January 2016 and will reach the pensionable age before 1 July 2016 so that they will be entitled to a longer period of both continued payment of wages and prohibition against termination of employment during illness.

Shorter notice period

A standard notice period of one month will apply to the termination of an employment contract concluded with an employee who is entitled to AOW, regardless of the duration of the employment contract. Without this amendment, the usual notice period would apply which could be up to 4 months.

More and longer fixed-term contracts possible

The regulation regarding successive fixed-term contracts will be relaxed for employees entitled to AOW. An employment contract of indefinite duration will take effect after 6 fixed-term contracts (instead of 3) or after a period of 4 years (instead of 2 years). This will allow concluding more and longer fixed-term contracts with an employee entitled to AOW.

Terminating an employment contract of indefinite duration with an employee entitled to AOW

The way the employer is allowed to terminate an employment contract of indefinite duration with an employee entitled to AOW depends on whether the employment contract was concluded before or after the AOW entitlement. Since 1 July 2015, the employer has been allowed to terminate an employment contract concluded before the AOW entitlement upon or after the state pension age without the involvement of the UWV or the subdistrict court. The employment contract will be terminated automatically if it contains a pension age termination clause. If the employment contract was concluded for an indefinite period after the state pension age, the normal rules on dismissal will apply. This means, the UWV permission or rescission by the subdistrict court is required to terminate the employment agreement. Regardless of the date the employment contract was concluded (before or after reaching the pension age), the employer does not have to pay transitional compensation upon terminating an employment contract with an employee entitled to AOW.

Other measures

The ‘Flexible Working Act’ will not apply to employees entitled to AOW. Since 1 July 2015, the ‘The Minimum Wage and Minimum Holiday Allowance Act’ has been effective for employees entitled to AOW, and thus they can claim the statutory minimum wages.

Action
  • Take action if you intend to hire or continue to employ employees entitled to AOW.
  • Check whether you have to take additional measures if an employee reaches the pension age and you no longer wish to employ him or her.

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