“Employers are going to pay more for former employees who are sick
Recently, an important amendment was made to the Dutch Sickness Benefits Act (Ziektewet). Pursuant to this new legislation, as an employer you now have even more responsibility for the costs of sick former employees than you had previously.
As you probably know, the employer is obliged to continue paying the salary of an employee who is disabled for work for a period of two years. In that period the employer and the employee have far-reaching re-integration obligations, which are primarily the employer’s responsibility (on the ground of the Dutch Gatekeeper Improvement Act (Wet Verbetering Poortwachter)).
The new law increases (among other things) the financial responsibility of employers for employees who leave the employer’s employment while they are sick. What is new is that the sick pay and the benefits pursuant to the Dutch Resumption of Work (Partially Fit Persons) Regulation (Regeling Werkhervatting Gedeeltelijk Arbeidsgeschikten) for those former employees will be charged on to the individual employers directly to a greater or lesser extent by means of contribution differentiation.
Previously, the expenses related to benefits that were granted to those former employees pursuant to the Sickness Benefits Act and the Dutch Partial Capability for Work Act (Wet gedeeltelijke arbeidsgeschiktheid) were not allocated to the (most recent) employer, but rather were paid only from a contribution that was fixed for the sector in question. Since the beginning of 2014 that has changed. Now, a differentiation is made between large, medium-sized and small employers:
- Large employers: liability to pay social insurance contributions in 2012
The contribution burdens related benefits under the Sickness Benefits Act and the Partial Capability for Work Act for former employees will be charged on to large employers in full by means of an individual contribution.
- Small employers: liability to pay social insurance contributions in 2012
For small employers the contributions in accordance with the Sickness Benefits Act and the Partial Capability for Work Act will be determined solely in respect of the sector in question.
- Medium-sized employers: liability to pay social insurance contributions will be between the two above-mentioned amounts.
The contributions in accordance with the Sickness Benefits Act and the Partial Capability for Work Act will be determined in part individually and in part on the basis of the sector in question.
The new law can have significant consequences for the costs (increase in the contributions), particularly for large employers. In the event that an employee is disabled for work for a long period of time, the employer will have to pay increased contributions on (possibly) the sum of Sickness Benefits Act period and as much as ten years of benefits pursuant to the Partial Capability for Work Act.
What is especially onerous is the fact that the increase in the contributions applies not only in respect of employees who leave the employer’s employment while they are sick; the new law can also apply in respect of former employees who report sick within four weeks after the employment relationship has ended (on the ground of the ‘residual effect’ of the Sickness Benefits Act).
It is also noteworthy that the calculation of the amount of the contributions in 2014 is based on the outflow of sick former employees from the employer in question in the year 2012 (the year in which the law was enacted). Of course that means that the employer will no longer be able to exercise any control over that (or in any event only to a very limited extent).
How can an employer influence or avoid the consequences of the new legislation?
First, it is important for the employer to carefully review the decision rendered by the UWV benefits agency to grant of benefits to the employee pursuant to the Sickness Benefits Act and/or Partial Capability for Work Act and the decision with respect to contribution or recovery issued by the Dutch Tax and Customs Administration (Belastingdienst), and to lodge an objection in a timely manner if necessary.
As is now often the case, when an employee’s employment ends employers will often demand that the employee report that he has recovered (and thus that the employee’s employment will not end during sickness). However, that is useful only in the event that the employee actually has recovered, as there is a risk that the UWV benefits agency may determine in retrospect that the employee improperly reported that he had recovered, in which case it will impose financial sanctions on the employer.
An alternative is ‰ÛÒ as the legislature had in mind ‰ÛÒ to offer the sick employee a, possibly temporary, continued employment contract, so that the employee can re-integrate under the guidance and supervision of and, of course, at the cost of the employer.
Employers can choose to be the ‘own risk bearer’ in respect of the expenses related to the Partial Capability for Work Act (rather than the public insurance applying a differentiated contribution). The advantage of this can be that the employer can take control of the re-integration itself, and thus also the role of the UWV benefits agency. A disadvantage is that this option entails considerable organisational burdens.
We advise imposing well-considered contractual obligations on the employees, both in the employment contract and in any termination agreement to be concluded.
First, we advise employers to agree that the former employee must apply for unemployment benefits in a timely manner. In the event that the former employee is entitled to unemployment benefits after the employment relationship has ended and reports sick within four weeks, it is highly likely that the increases in the contribution expenses will not apply. Another option is to impose re-integration obligations on the former employee, on pain of penalties. The purpose of that obligation is get the former employee back to work as quickly as possible, in order to limit the employer’s costs. In the relevant legal literature the opinions vary regarding whether such agreements are legally valid. The question is thus how courts will assess such stipulations.
The purpose of the new law is in any event clear: the responsibility for sick employees and their successful re-integration will now be borne by the employer all the more, in order to prevent an influx of sick former employees claiming benefits under the Sickness Benefits Act and Partial Capability for Work Act.
If you like to learn more about this subject please call one of our lawyers, who would be happy to provide you with a brief explanation (tel: +31 (0)20 344 61 00).