Prinsjesdag 2026: postponement of the abolition of the transition allowance compensation scheme

Prinsjesdag 2026: postponement of the abolition of the transition allowance compensation scheme

According to ‘leaked’ Budget Day documents (called ‘Prinsjesdag’ in the Netherlands), the abolition of the compensation scheme (which would mean that the transition allowance following dismissal after long-term disability for work would no longer be compensated) is being postponed until 1 January 2028. This means that, subject to certain conditions, employers will still be able to apply for compensation for the transition allowance in 2027 in the event of termination of the employment contract due to two years’ illness.

What does the compensation scheme entail?

In the event of an employee on sick leave, the prohibition on termination generally lapses after two years of continued salary payment (unless the UWV imposes a wage penalty, in which case this period is extended by a maximum of 52 weeks). The employment contract may subsequently be terminated (subject to prior authorisation from the UWV) and the employer is then obliged to pay the statutory severance payment (transition allowance). This obligation has encouraged employers to maintain what is known as a ‘dormant employment relationship’. The employee remains on the payroll, no wages are payable and the transition allowance does not need to be paid out. In response to this (undesirable) effect, the statutory compensation scheme was introduced in 2020. Under this scheme, the employer is compensated by the UWV for the transition allowance, subject to certain conditions, if an employment contract is terminated following long-term disability for work. This way, the employer’s financial incentive to maintain the dormant employment relationship was removed. This compensation scheme subsequently led to the development of the so-called Xella standard in case law: under the legal principle of good employership, the employer is obliged to agree to an employee’s request to terminate a ‘dormant employment contract’ whilst awarding the transition allowance. If the option for compensation is abolished (currently planned from January 2028), whilst this forms the basis for the Xella standard, the question arises as to whether this standard will continue to apply.

Background to the change

In 2024, the Schoof government proposed limiting compensation for the transition allowance in the event of long-term disability for work to small employers. Employers with a total wage bill exceeding 25 times the average contributory wage per employee per calendar year would no longer be compensated. The aim of this was to achieve structural cost savings. Under the original proposal, the scheme was due to come into force on 1 July 2026. The Council of State was critical of this bill and suggested that the mandatory transition allowance in the event of dismissal due to long-term disability for work should be abolished for all employers (see our previous article). In that scenario, the transition allowance would therefore no longer be payable at all in the case of employees on long-term sick leave. The Jetten government has postponed the (criticised) bill until 1 January 2027. The coalition agreement stipulated that the compensation scheme would be completely abolished with effect from 1 January 2028. Incidentally, this does not include the abolition of the obligation to pay the transition allowance, which remains payable.

Change to full abolition

On 2 June 2026, Minister Vijlbrief submitted a bill to abolish the compensation scheme for all employers with effect from 1 January 2027. The Government considers it undesirable to first restrict the scheme and then abolish it. This would place an unnecessary burden on the UWV. The legislative proposals would therefore be merged, and the compensation scheme would be abolished in its entirety with effect from 1 January 2027. Meanwhile, the government is also working on a reform of the transition allowance. The coalition agreement stipulates, amongst other things, that employers who have made every effort to reintegrate an employee would have no obligation whatsoever, or a reduced obligation, to pay the transition allowance. However, this reform is still in the preparatory phase and has not yet resulted in a concrete bill.

What does this mean for you as an employer?

In the leaked Prinsjesdag documents, the abolition of the compensation scheme appears to be postponed by one year. This would give employers an extra year to still receive compensation for the transition allowance. Furthermore, the government has an extra year to assess the implications of the changed legislation for the so-called Xella standard. It is possible that the abolition of the compensation scheme will be combined with the reform of the transition allowance. We hope to gain more clarity on this matter on Prinsjesdag (15 September 2026). In any case, we will keep you informed of further developments.

Are you dealing with long-term disability for work or dormant employment contracts? We would be happy to discuss with you the implications of the proposed changes for your organisation.