WGA benefits as a point of attention during a business acquisition

In a business acquisition, as the buyer, you can become responsible for the WGA benefits of (former) employees of the acquired company for up to ten years — even for people who are already ill at the time of the acquisition. Due to a higher differentiated premium, these costs can turn out to be significantly higher than the benefit itself. WGA obligations are therefore an important but often overlooked aspect of an acquisition. Below, you can read how it works.

What is a WGA benefit?

WGA stands for Werkhervatting Gedeeltelijk Arbeidsgeschikten (Reintegration of Partially Disabled Persons) and is a benefit under the Work and Income Act based on Work Capacity (WIA), part of social security law. It is intended for people who are partially or fully incapacitated for work, but with prospects of recovery. After, in principle, two years of illness, an employee can claim a WGA benefit. There are three variants: the wage-related benefit, the wage supplement benefit, and the follow-up benefit.

The WGA benefit is attributed to the employer

The responsibility for reintegration and WGA benefits lies with the employer during the first ten years — fully for the wage-related benefit and partially for the wage supplement and follow-up benefits. How this works out financially depends on your choice:

• Self-insurer: you bear the costs of the WGA benefit yourself, often with insurance to limit the risk.
• Not a self-insurer: an awarded WGA benefit eventually leads to a higher differentiated WGA premium payable to the UWV. This premium increase depends on your total payroll and can turn out to be significantly higher than the benefit itself.

What does this mean for a company acquisition?

If you take over a company completely and there are employees with ongoing WGA benefits, you, as the new owner, bear responsibility for those benefits for up to ten years, calculated from the start of the benefit. This also applies to employees who are already ill at the time of the takeover and receive a WGA benefit later. The self-insurer status of the acquired company makes no difference for this allocation.

In the case of a partial acquisition, the situation is more nuanced:

• Not a self-insurer: the deductible is allocated proportionally to the share of the total payroll prior to the acquisition.
• Self-insurer: the original company remains responsible for the deductible; this does not transfer to the buyer.

In the event of business termination or bankruptcy, the risk transfers to the bank or insurer, with the UWV assuming the obligations. The exact allocation and premium methodology are technical and change periodically; have the current situation and figures checked in the event of an acquisition.

Frequently asked questions about WGA upon acquisition

Do I automatically assume the WGA liabilities in the event of a share transaction?

In a share transaction, the same legal entity continues to exist, so the WGA obligations simply remain with the BV you are purchasing. You effectively “inherit” them. In an asset-liability transaction, it depends on the transfer of personnel and the specific rules.

How do I assess this risk in advance?

Through a thorough due diligence investigation in which sickness absence and WGA files, self-insurer status, and ongoing benefits are inquired about. Based on this, you can adjust the purchase price or negotiate guarantees and indemnities.

Can I protect myself against these burdens?

Partially. You can mitigate the risk with warranties and indemnities in the purchase agreement, a price adjustment, and — depending on your choice — insurance. However, insurance or an indemnity does not replace proper prior screening.

Properly managing personnel matters during an acquisition

In a business acquisition , personnel matters—WGA benefits and the content of existing employment contracts —determine your risk. Through a thorough screening, the legal experts at MKB Juristen map out all current and potential personnel obligations to help you avoid surprises. View our mergers and acquisitions or schedule a no-obligation intake.