Transition payment compensation for Dutch employers Is set to the end in 2028

What Is Being Abolished, and What Is Not

Two compensation schemes exist, both run by UWV, and both are on the list. The first has been open to all employers since 1 April 2020. When an employee is dismissed after more than two years of illness, the employer owes a transition payment, and UWV reimburses the statutory amount on application. It exists because the employer has already carried two years of sick pay, and a transition payment on top was seen as a second heavy cost for the same employee. The second has been open since 1 January 2021, and only to small employers, those with an average of no more than 25 employees. When the owner retires or dies and the business closes, UWV reimburses the transition payments to the staff. It exists because a retiring owner paying them from private savings was seen as disproportionate.

The timeline has shifted several times. The first plan, from the previous cabinet, was to restrict the long-term sickness scheme to small employers from 1 July 2026. The Raad van State criticised it, warning that employers who lose compensation might keep sick employees on the payroll rather than dismiss them, the so-called slapende dienstverbanden. The current cabinet then moved to full abolition for all employers on 1 January 2027, by a nota van wijziging in May and June 2026 to bill 36 869, extending it to the business closure scheme as well. The government counts on structural savings of about 831 million euros. On 15 September 2026, the Miljoenennota 2027 postponed the abolition by one year to 1 January 2028, alongside postponements of other social security measures. The postponement is a policy intention, and the bill still has to be amended and passed. Until a law says otherwise, UWV continues to apply the current rules.

The distinction that matters most is between the two rights. The abolition removes only the employer's right to be reimbursed. An employee dismissed after two years of illness on, say, 5 March 2028 would still be owed a full statutory transition payment. The government has kept that right partly because withholding it from sick employees risks unlawful discrimination on grounds of disability or chronic illness. Costs on the employer's side keep stacking up too. At 3,500 euros a month, two years of sick pay at the statutory 70% is 58,800 euros, and the transition payment for ten years of service is another 11,667 euros, so about 70,500 euros in total. Many CAOs and contracts require more than 70% in the first year. Today UWV returns the 11,667 euros. After abolition, it does not. How the payment itself is calculated is covered in transitievergoeding Netherlands.

Scheme 1: The 104-Week Trigger and Who Can Still Claim

The most consequential misunderstanding is that the abolition date means the employer has to dismiss the sick employee before it. That is not how the transitional rule is drafted. The trigger is not the date of dismissal. It is the day after the 104-week sick period ends, the period in which the employer cannot dismiss for illness.

As drafted around the original 1 January 2027 date, compensation stays possible when that day falls before the effective date, even if the dismissal, the payment and the application all come later. Take an employee who became sick on 1 December 2024. The 104 weeks end around 30 November 2026, before 1 January 2027, so the employer keeps the right, even if the dismissal is in February 2027, the transition payment in March 2027, and the application in September 2027. The six-month filing window runs from the date the transition payment is paid in full, not from the 104-week date. Now take an employee who became sick on 1 February 2025. The 104 weeks end around the end of January 2027, after 1 January 2027. If the effective date stays at 1 January 2027, no compensation exists for this employee. If it moves to 1 January 2028 as the Miljoenennota says, this employee falls inside the window. The amended text has not been published, so check the final wording before you rely on the later date.

In practice, employers fall into four groups. If the 104 weeks end before 31 December 2026, the right is safe under every version of the dates, and the priority is filing correctly. If they end during 2027, the right depends on the effective date being moved to 2028 in the final law. If they end in 2028 or later, there is no compensation unless the dates move again. And if the employment has already ended and the transition payment has been paid, the only clock running is the six-month filing window. Nobody needs to rush a dismissal to protect the right, because the trigger is the 104-week date and not the dismissal date; what needs care is the paperwork.

A loonsanctie does not change the trigger. If UWV imposed one on the employer for failing its re-integration duties, extending sick pay, that extension is left out when the trigger is determined. An employee sick from 1 December 2024 who triggered a 26-week loonsanctie still has a trigger of around 30 November 2026, and the extra cost of the sanction is not compensated either. The same goes for a third sick year paid under a CAO.

Compensation has a ceiling employers often miss. UWV compensates the transition payment as it stood when the 104 weeks ended. Delaying the dismissal builds up more service, but the extra amount stays with the employer, and UWV does not compensate a deliberately sleeping contract. So waiting past the 104 weeks does not increase what you can recover. Matters like accurate sick leave records and re-integration documentation connect to payroll errors Dutch employers.

Watch out: The 104 weeks count continuous sickness, not calendar years. Sickness periods separated by less than four weeks are added together, while a recovery of more than four weeks starts a new period. The exact end date depends on the first day of illness and any interruptions. Verify it with your occupational health service or HR adviser before assuming eligibility, and do not dismiss during the opzegverbod, because a dismissal during that period is invalid.

Scheme 2: Small Employers Winding Down

For a small employer who built a business over thirty years and is now approaching retirement, the transition payments owed to long-serving staff are one of the largest single costs of the wind-down. Take a retiring owner with eight employees, an average of 12 years of service and an average salary of 2,800 euros a month. The transition payment per employee is 12 times one third of 2,800, which is 11,200 euros, and for eight employees it is 89,600 euros. Without compensation, that comes out of the business or the owner's private funds at the point of retirement, on top of every other cost of closing.

UWV sets the conditions. The employer must have averaged no more than 25 employees in the second half of the year before the year in which dismissal permission was requested. The business must close because the owner has reached AOW age, or will within six months of the request, or because the owner has died, in which case permission must be requested within a year of the death. UWV or the kantonrechter must have given permission to dismiss at least one employee. The transition payments must be paid within nine months of that permission, and must be paid on or after 1 January 2021. Only the statutory amount is reimbursed; anything above it is the employer's own cost.

The transitional trigger for this scheme is different from the first one. What counts is whether the first request to UWV for permission to dismiss because of the closure was filed before the effective date. Dismissals and payments can follow afterwards. Because the date may move to 2028, a small employer who is truly planning to close in early 2027 should discuss filing before 31 December 2026, which is safe under either date, while one who closes later in 2027 should confirm the final text. Filing is not a placeholder, though. Once UWV gives permission, notice must be given within four weeks, so the request should match a real closing plan. The wider employer duties for small businesses are covered in hiring staff as a sole proprietor.

The Filing Process: What to Do and When

Both schemes are applied for digitally through the UWV werkgeversportaal, which needs eHerkenning. When an application is complete, UWV decides within eight weeks.

For the long-term sickness scheme, the sequence is as follows. First, confirm the exact end of the 104 weeks from the first day of continuous sickness, and that the employee is still sick when the employment ends. Second, wait for the opzegverbod to expire before ending the contract. Third, end the employment with UWV permission or through a settlement agreement, and if it is a settlement, make sure it states that the end results from long-term illness. Fourth, pay the full statutory transition payment, which is due within a month of the end of employment. Fifth, apply within six months after the day you paid it in full, because a later application loses the right even if everything else is in order. Sixth, upload the employment contract or proof of its start, proof of the end, the payslips UWV asks for from the period before the first year of sickness and from after the opzegverbod, the calculation, and proof of payment.

For the business closure scheme, first confirm the size and the reason for closing. Second, file the request for dismissal permission. Third, once permission is granted, give notice within four weeks and pay all transition payments within nine months. Fourth, apply for compensation within twelve months after you requested permission for the first employee. UWV words it that way, though some advisers count from the date permission is granted, so apply early. UWV only compensates the statutory amount in both schemes.

Most lost claims come from a handful of mistakes. An application filed before the transition payment was paid in full is rejected, and so is one filed more than six months afterwards. A settlement agreement that does not state long-term illness as the reason for the end of employment can undermine the claim. Paying a bovenwettelijke amount does not forfeit the statutory part, but the excess is never reimbursed. And counting the sick period from the wrong day, or including a loonsanctie extension, puts the file in the wrong category. The table sets the two schemes side by side.

The most useful action for the coming weeks is an audit. List every employee who has been sick for more than 18 months and work out the exact 104-week date for each. That takes an afternoon with your occupational health records, and it tells you which employees are protected under any version of the dates and which depend on the final wording. For the wider framework of dismissal rules and employer duties, see CAO Netherlands employer. If you want your sickness and payroll records kept in one place, book a demo or look at bookkeeping and payroll.

FAQs

What compensation schemes for Dutch transition payments are being abolished?

Two: the compensation for a transition payment after dismissal for long-term sickness, open to all employers since April 2020, and the compensation for small employers closing a business on retirement or death of the owner, open since January 2021.

From exactly when are the compensation schemes abolished?

The intended date is now 1 January 2028, after the Miljoenennota 2027 postponed the earlier date of 1 January 2027. That is a policy intention, and the bill must still be amended and passed. Other employer changes on 1 January 2027 are in payroll changes 1 January 2027.

Does the abolition affect my employee's right to receive a transition payment?

No. The employee's right is unchanged. Only the employer's right to be reimbursed by UWV is set to disappear.

My employee has been sick for 20 months. Can I still claim compensation?

You cannot dismiss yet, because the 104 weeks have not ended. Whether compensation will be available depends on the final effective date and the transitional rule. If the employee recently raised concerns about wrongdoing, take extra care, because a dismissal can be challenged as retaliation; whistleblower protection Dutch businesses explains the rules.

The 104-week sick period ends on 15 December 2026. Can I still claim even if I dismiss in 2027?

Yes. Under the transitional rule as drafted, the date the 104 weeks end decides the right, not the dismissal or payment date. You then have six months from the full payment to apply.

What is the loonsanctie and does it affect the transitional trigger date?

A loonsanctie is an extension of sick pay imposed on an employer who failed its re-integration duties. It does not move the trigger date, and its extra costs are not compensated.

I am a small employer planning to retire in 2027. What should I do now?

Check you qualify as a small employer, and if you are truly closing in early 2027, discuss filing the first request for dismissal permission before 31 December 2026 with your adviser. If you close later, confirm the final text first. Notice must follow within four weeks of permission.

How much can I claim from UWV under Scheme 1?

The statutory transition payment, calculated as it stood at the end of the 104 weeks, within the statutory cap of 102,000 euros in 2026 or one annual salary if higher. For ten years of service at 3,500 euros a month, that is about 11,667 euros.

How do I apply for compensation from UWV?

Through the UWV werkgeversportaal, with eHerkenning, using the application form for your scheme. UWV decides within eight weeks of a complete application.

What happens if I agreed to pay more than the statutory transition payment?

UWV reimburses only the statutory amount. Anything above it stays with the employer.