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Russell Advocaten B.V.
Amsterdam, Netherlands

Is an employee entitled to transitional compensation if he or she chooses to work fewer hours? And if so, what is the amount to be paid?

If the employment contract of an employee is terminated, he or she is entitled to transitional compensation. But is the employee also entitled to this compensation if he or she should agree to a reduction of working hours, for instance due to sickness? Legislation does not provide for this but a recent decision by the Supreme Court provides more clarity.

Reduction of working hours

Legislation does not provide for forced reduction of working hours. However, there are situations where the employee’s working hours can be reduced:

  • Dismissal on economic grounds. UWV may allow forced reduction of working hours if required for business operations. A classic example would be two technicians that are necessary for awning assembly.

  • Partial incapacity for work. UWV will not grant permission as the employee is partially fit for work. Therefore, employer and employee will have to establish agreements themselves.

  • Changes in employment contract. The parties are free to make new arrangements.

  • Unilateral changes clause. In this case, the employer will have to point out due to which interest the change is required and the changed employment contract will have to fulfil the requirements of reasonableness and fairness. In addition, the interest must not consist of economic grounds as these require permission from UWV.

Transitional compensation

Is an employee who loses part of his working hours entitled to transitional compensation? After all, the employment is not fully terminated. On the other hand, the amount of transition compensation is calculated based on the scope of the employment at the time of dismissal. This means, if a forced reduction of working hours is followed by dismissal, the transitional compensation only has to be paid over the remaining hours. The Supreme Court does not find this desirable and thus decided that in case of forced reduction of working hours there is also an entitlement to transitional compensation. However, there are a few conditions. The reduction of working hours is:

  • Substantial: 20% or more.

  • Structural: it cannot be expected in the short run that the employee will work more.

  • Forced by circumstances: it must not be a voluntary choice by employer or employee.

There are no requirements as to how the reduction of working hours is regulated. This may be achieved by terminating the employment contract and concluding a new one, by changing an existing employment contract, by a settlement agreement, or by invoking a unilateral changes clause. In all cases transitional compensation must be paid.

As a result of this decision by the Supreme Court, employees can also claim partial transitional compensation in the event of forced reduction of working hours.

Our advice

  • Check which requirements you have to fulfill in order to reduce an employee’s working hours.

  • In the event of forced reduction of working hours, make sure to check whether you have to pay transitional compensation.

  • If in doubt, contact a lawyer.

More information

Would you like to learn more about the options for forced reduction of working hours and about transitional payment? Or do you want us to draw up or change an employment contract? Please contact us.