As of 1 July 2015, the transition payment will make its entrance on the labour law stage, as part of the new dismissal law. Employers can anticipate the height of this transition payment, however, by incurring so-called employability costs and transition costs for the employee. These costs can be deducted from the transition payment under certain conditions – a draft of which is contained in the Draft Transition Payment Decree. These conditions are the result of the advice from the Labour Foundation.

Transition costs
The transition costs are costs that are related to terminating or not continuing an employment contract and are aimed at preventing unemployment or shortening the employee’s period of unemployment.

What are transition costs? These are costs which are incurred for activities and efforts in the event of (pending) dismissal and which are focused on helping the employee to move from one job to the next. This can include costs for training and outplacement. The costs for taking into account a longer notice period than in effect between the parties can also be deducted from the transition payment. In that case the employee must, however, be exempted from performing work.   Employability costs The employability costs are costs related to promoting the broader employability of the employee on the labour market. The starting point is that employability costs may be deducted from the transition payment if these were incurred in the five-year period preceding the day on which the transition payment is owed.

What costs do not  qualify as employability costs?
These costs do not include the costs directly related to the employee’s current position or a future position at the same employer. The costs that an employer incurs in relation to promoting the permanent employability of the employee within the organisation also cannot be deducted from the transition payment.

What costs do qualify as employability costs?
Costs that are eligible for deduction are the costs of non-work-related language and other courses and costs of personal development courses, for instance. The costs for a management course can also be deducted from the transition payment if, at the moment the employee wishes to follow the course, he has no prospect of a management position at his employer’s business.

General terms and conditions
Specified (transition or employability) costs can only be deducted from the transition payment if:

  1. the employee consents to this in writing before the costs have been incurred; or, if the costs arise from agreements between employers or employers’ associations, employees or employee associations or associations with which the employer is affiliated (for example trade unions or works council);
  2. the costs were incurred by the employer and linked to the employee to whom the transition payment is owed;
  3. the costs are not salary costs;
  4. the costs are reasonably proportionate to the purpose for which they have been incurred.

In line with the legislator’s intention – which is to promote broader employability of employees on the labour market and the transition of employees from work to work – an employer can therefore anticipate any transition payment to be paid by means of transition and/or employability costs. This does not mean that any transition payment to be paid can be spread out, as it were, over the term of the employment contract of the particular employee and need not therefore be paid in one lump sum at the end of the employment contract.

It will have to be assessed for each cost item whether the (general) terms and conditions of the Draft Decree have been satisfied and therefore whether costs incurred can be deducted from the transition payment.

By Carlonia Buddingh