Incapacity for work: how to avoid wage penalties

Incapacity for work: employer obligations and pitfalls

When an employee reports sick, a process begins for the employer involving strict legal obligations that can last a total of one hundred and four weeks, with financial consequences that can run into tens of thousands of euros. The combination of the obligation to continue paying wages under Article 7:629 of the Dutch Civil Code, reintegration obligations under the Gatekeeper Improvement Act, and the prohibition on dismissal under Article 7:670, paragraph 1, of the Dutch Civil Code makes incapacity for work one of the most legally complex situations in the SME sector. A single procedural misstep can result in a wage sanction from the UWV for a full year.

The obligation to continue paying wages and the employer's deductible

Pursuant to Article 7:629, paragraph 1 of the Dutch Civil Code, a sick employee is entitled to seventy percent of the last earned wage for a maximum of one hundred and four weeks. In most collective labour agreements and individual employment contracts, this is supplemented to one hundred percent in the first year and seventy percent in the second year. The UWV's maximum daily wage forms the upper limit in this regard.

Continued payment of wages is a direct burden for the employer, separate from any benefits from absenteeism insurance. For SME employers, good absenteeism insurance is therefore generally indispensable. Without insurance, a long-term sick employee with an average salary could cost around seventy-five thousand euros in continued wage payments over two years, excluding replacement costs and reintegration costs.

The Gatekeeper Improvement Act: deadlines you must not miss

The Gatekeeper Improvement Act imposes a strict schedule with mandatory actions in fixed weeks. Reporting to the occupational health service is mandatory within one week. In the sixth week, the company doctor draws up a problem analysis. In the eighth week, the employer and employee jointly establish an action plan. Subsequently, six-weekly evaluations take place.

The sick leave notification must be submitted to the UWV around week forty-two. In week fifty-two, a first-year evaluation takes place during which the reintegration trajectory is adjusted. If there are no or limited possibilities for returning to the original job, the second track is mandatory, aimed at employment with a different employer. In week ninety-one, the employee receives the WIA application from the UWV.

The final piece is the reintegration report (RIV) submitted with the WIA application. UWV assesses whether the employer and employee have made sufficient efforts. In the event of an insufficient file, UWV may impose a wage sanction of up to twelve months of additional continued wage payment pursuant to Article 25, paragraph 9 of the WIA Act. That sanction can easily cost an extra forty to fifty thousand euros.

The prohibition on termination and the exceptions

During the first 104 weeks, a prohibition on termination applies pursuant to Article 7:670, paragraph 1 of the Dutch Civil Code. An employer may not terminate the employment contract due to incapacity for work. The prohibition on termination does not apply to dismissal for other reasons, provided they are demonstrably unrelated to the illness. Consequently, dismissing an employee for poor performance during illness is not impossible, but the burden of proof on the employer is heavy.

The prohibition against termination does not apply either in the case of summary dismissal for an urgent reason within the meaning of Article 7:677 of the Dutch Civil Code, in the event of business closure, or in the case of dismissal during the probationary period. The employment contract may also be terminated during illness by means of a settlement agreement signed by both the employer and the employee, provided that the requirements of Article 7:670b of the Dutch Civil Code are met and the employee has been informed of their rights. When entering into a settlement agreement during illness, please note that the employee may lose unemployment benefit rights.

Frequent absenteeism and short-term absence

It is not only long-term absence that deserves attention. Frequent short-term absenteeism can cumulatively develop into a serious problem. With more than three sick reports per year, an absence interview is standard practice, provided no medical details are requested. Policy regarding the sick reporting procedure, no-shows for the company doctor, and attendance at reintegration interviews should be laid down in the personnel regulations.

Follow-up action

Do you have a long-term sick employee and do you want certainty regarding the steps you need to take, or are you facing a wage sanction from the UWV? Our employment law practice reviews the file and identifies risks in a timely manner. A well-documented reintegration file prevents sanctions and provides the basis for a conclusive WIA assessment.