Per 1 July 2015, an employment contract with an employee may be terminated at or after reaching the applicable AOW (Dutch state pension age) or pension age (the "Pension Dismissal"). The employer can make use of the Pension Dismissal if the employment contract does not contain a pension dismissal clause, which provides that the contract shall terminate automatically when the employee reaches the applicable AOW or pension age.
The Pension Dismissal can take place on the day on which the employee reaches the AOW age. An employer may also decide to continue the employment contract of the employee and invoke the Pension Dismissal on a later moment. This is only possible when the employment contract is concluded before the employee reaches the AOW age.
The introduction of the Pension Dismissal offers a number of benefits for the employer:
- The employer is allowed to terminate the employment contract unilaterally; the employee's consent is not required. Involvement of the UWV or the Court is also not required.
- The employer may decide, without further obligations, when the employment contract will end after the employee reaches the AOW age.
- The transition payment is not due if the employment contract ends when the employee has reached the AOW age or when the employment contract is not continued because the employee has reached this age.
However, the employer should pay attention to the following issues:
- The legislative history explicitly mentions that an employer can use the Pension Dismissal only once. It is still unclear whether the Pension Dismissal is also possible when a pension dismissal clause has been agreed upon between parties.
- With regards to the Pension Dismissal, the applicable notice period should still be taken into account. Furthermore, certain dismissal prohibitions could block the use of the Pension Dismissal.
- The new article does not clearly show which pension age an employer should apply when parties have agreed upon a different pension age. It is still uncertain how this article shall be explained. In addition, the use of an earlier pension age may lead to possible age discrimination.
- In addition, there are other conditions, limitations and uncertainties regarding the Pension Dismissal. For a detailed outline of the matter, please see: De WWZ introduceert de Pensioenopzegging.
Working after the AOW/pension age simplified
Furthermore, working after the pension age has been simplified, because the so called Ragetlie-rule no longer applies to this group of employees. The Ragetlie-rule implies that a fixed-term contract, which replaces a permanent contract within 6 months with the same (or subsequent) employer, does not end by operation of law. This means that the fixed-term contract can only be terminated with the consent of the employee, dissolution by the Court or with a dismissal permit from the UWV. The Ragetlie-rule no longer applies when the employment contract ends after reaching the pension age, thus it is possible to conclude upon a fixed-term contract for these employees, even if such employment contract succeeds a permanent contract. It is noted that the provisions on succession of fixed-term employment contracts remain applicable to employees who continue working after the AOW / pension age. For more information, please see: Total term of provisions on succession of fixed-term employment contracts significantly reduced.
Legislative Proposal "Working after the statutory pension age"
The government is planning to limit obstacles for employers to hire employees who have attained the pension age to an even greater extent. CMS will keep you updated.
- Consider timely whether it would be an option for you and for the employee if the employee would continue working after the AOW/pension age.
- Be cautious with deleting the pension dismissal clause from the employment contracts and seek advice with regard hereto. Given the uncertainties that still exist regarding the Pension Dismissal, the pension dismissal clause is still a safe method to terminate the employment contract with the employee who reaches the AOW / pension age.