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ARTICLE · 24 AUGUST 2026

Proposed Withdrawal Of Long-term Illness Compensation: Will Dormant Contracts Return?

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The Dutch government has proposed a complete withdrawal of the transition payment compensation scheme for employers, reversing its original plan to merely restrict it to small employers. This significant policy shift raises critical questions about the future of dormant employment contracts and the legal obligations of employers when terminating employees after long-term illness, particularly in light of the landmark Xella ruling.

NetherlandsEmployment and HR
Kayleigh Bemelmans
Kayleigh Bemelmans
Jolein Vorias
Jolein Vorias

In week 38 of this year, the House of Representatives will debate a legislative proposal that will have implications for employers and employees on long-term illness. In an amendment, the government has proposed completely withdrawing the transition payment compensation scheme. This applies not only to the compensation scheme for termination due to long-term illness but also to the compensation scheme in the event of business closure. If the legislative proposal is passed, the compensation scheme is expected to be withdrawn as of January 1, 2027.

The proposed withdrawal raises several questions. What does this mean for employers who wish to part ways with an employee on sick leave after two years? What significance does the Xella ruling still hold if employers are no longer entitled to compensation? And could the withdrawal lead to a resurgence in dormant employment relationships?

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