Legislative proposal to limit the transition payment compensation scheme for dismissal due to long-term illness for small employers
On 5 December 2025, the legislative proposal (in Dutch) to limit the transition payment compensation scheme for dismissal due to long-term illness for small employers was presented to the Dutch House of Representatives for discussion.
In essence, the proposal provides that only small employers will still be eligible for transition payment compensation in the event of dismissal due to long-term illness, as the scheme has turned out to be much more costly than initially expected. The government believes that large and medium-sized employers have sufficient financial resources to pay the transition payment.
‘Small employer’ is defined as an employer with a wage bill of up to 25 times the average wage subject to social security contributions per employee per calendar year.
The Tax Administration determines every year which employers are small, medium sized or large. To be eligible for compensation, employers must submit a notification from the Tax Administration showing that they were designated as a ‘small employer’ on the day after the end of the two-year prohibition of termination due to illness. This day is the reference date for the assessment.
New employers are automatically designated as small in the first two calendar years, because wage information is not yet available in that period.
Employees retain their entitlement to a transition payment in the event of dismissal due to long-term illness, regardless of the employer’s size. However, there is a risk that the absence of compensation will prompt more medium-sized and large employers to keep dormant employment relationships intact, resulting in employees having to forgo their transition payment.
The Supreme Court ruled in Xella that, in principle, employers must cooperate in terminating dormant employment relationships eligible for transition payments, but this standard is partly based on the existence of the compensation scheme. Regarding the concerns expressed during the online consultation, the government indicated that it would be undesirable to prohibit dormant employment relationships or to legally require employers to cooperate in terminating them, as this would interfere too greatly with dismissal law and contractual freedom.
The government also dismissed the Council of State’s advice to completely abolish the transition payment for long-term illness, partly because of the risk of forbidden discrimination on the grounds of disability or chronic illness.
The Act is currently being debated by the Dutch House of Representatives and its proposed date of entry into force is 1 July 2026. The old law will continue to apply to situations with a reference date before this date.
Implementation of the Pay Transparency Directive
The Pay Transparency Directive must be transposed by the Member States into national legislation no later than June 2026. The Netherlands has opted for a pure implementation of the Directive: the legislative proposal closely follows the text of the Directive and only contains what is strictly necessary to meet the implementation requirement.
In September 2025, the Minister of Social Affairs and Employment informed the Dutch House of Representatives that the introduction of the Act Implementing the Gender Pay Transparency Directive (Wet implementatie Richtlijn loontransparantie mannen en vrouwen) would be delayed. More time is needed to work out the national rules and their implementation in a way that enables employers to effectively perform their obligations while keeping their administrative burden to a minimum. As a result, the original introduction date of 7 June 2026 is no longer feasible and has been moved to 1 January 2027.
In response to a question from a member of the European Parliament about this delay, the European Commission reaffirmed in its written answer of 18 December 2025 that it expects all Member States to transpose the Directive by the deadline of June 2026.
The Netherlands has not yet responded to the European Commission’s position, but this could mean that the reporting requirement for employers with more than 150 workers will start to apply as early as the 2026 calendar year (reporting in 2027).
Current situation regarding self-employed workers
On 11 December 2025, the Minister of Social Affairs and Employment sent a letter to the Dutch House of Representatives with an update about ‘working with self-employed workers or in self-employment’.
We discuss the key takeaways below.
Enforcement regarding pseudo self-employment
On 1 January 2025, the Tax Administration reinstated its full enforcement regarding pseudo self-employment.
However, a ‘soft landing’ applied for 2025.
The Tax Administration’s supervision mainly consisted of company visits and discussions about the use of self-employed workers, providing observations and points for improvement without imposing any sanctions. The soft landing terminated on 1 January 2026, marking the reinstatement of penalties and full inspections by the Tax Administration.
Enforcement mostly targets clients: incorrect qualification of an employment relationship may prompt the Tax Administration to levy payroll taxes, plus interest and, if applicable, penalties.
Service providers can also be randomly checked. Absent any profits from business activities, requalification may follow, for example to income from other activities or wages. This may result in adjustments to entrepreneur facilities, such as the tax allowance for self-employed workers and the SME profit exemption.
For 2026, the Tax Administration will again draw up an employment relationships enforcement plan, which will be published on its website.
Assessment of Employment Relationships and Legal Presumption (Clarification) Bill
After completion of an extensive consultation period and the incorporation of additional advice and policy considerations, the Assessment of Employment Relationships and Legal Presumption (Clarification) Bill (Wetsvoorstel Verduidelijking beoordeling arbeidsrelaties en rechtsvermoeden, or VBAR Bill) was submitted to the Dutch House of Representatives for discussion on 6 July 2025.
The VBAR Bill contains two main elements for the assessment of ‘working in the service of’:
- Substantive and organisational directions (element W), including organisational embeddedness
- Working for own account and risk (element Z)
The assessment always starts with W; Z is only reviewed if W applies. It is an integrated weighing of facts and circumstances, not a checklist.
The Decree Clarifying the Assessment of Employment Relationships (Besluit verduidelijking beoordeling arbeidsrelaties, in Dutch), which was also presented for consultation, further explains the main elements, with indications and practical clarification of their interpretation, relevance and weighing.
The decree serves as a direct assessment framework for implementation agencies, workers, employers and the judiciary. The consultation closed on 13 October 2025.
Private member’s Self-Employed Workers Bill
Finally, the government has discussed the private member’s Self-Employed Workers Bill with the initiators from the political parties CDA, VVD, D66 and SGP.
The government supports the bill’s goal to provide more clarity about self-employment, but the proposal lacks sufficient detail. Further decisions and research are needed.
Provision of Personnel (Accreditation) Act
On 27 November 2025, the Dutch Senate approved the Provision of Personnel (Accreditation) Act (Wet toelating terbeschikkingstelling van arbeidskrachten). The new accreditation system for suppliers is expected to take effect on 1 January 2027. From that date, suppliers must meet the system of standards and can apply for accreditation. The Netherlands Labour Authority will start enforcing the accreditation requirement on 1 January 2028. The interim period (2027) will be a transitional phase in which supervision will be gradually expanded.
Flexible Workers (Increased Security) Bill
Last summer, we wrote about the bill for the Flexible Workers (Increased Security) Act (Wet meer zekerheid flexwerkers), which was submitted to the Dutch House of Representatives on 19 May 2025. The bill sets out stricter rules for temporary employment agreements and reinforces the position of casual and temporary workers. The Act’s proposed date of entry into force is 1 January 2027. The element on equal pay for temporary workers might enter into force sooner, on 1 July 2026.
Modernisation of the non-compete clause
On 15 April 2024, the online consultation on the modernisation of the non-compete clause ended. The internet consultation prompted 273 responses from various stakeholders. In general, modernisation is widely supported, but employers and employees disagree about its implementation and details. Employers are concerned about the potentially diminished protection of corporate interests and fear they might face an increased administrative burden, whereas employees and trade unions are positive about the higher level of protection for employees changing jobs and the obligation to state reasons. Employees’ organisations support the proposed mandatory compensation for invoking the non-compete clause, but employers are critical due to the higher costs. The results of the consultation will be included in the further refinement of the bill, which is expected to be submitted to the Dutch House of Representatives in the second quarter of 2026.
Revision of the European Works Council Directive
On 9 October 2025, the European Parliament approved a revision of the European Works Council (EWC) Directive.
The EWC Directive clarifies the concept of ‘transnational matters’: decisions substantially affecting workers in more than one Member State trigger an obligation to inform and consult an EWC.
Directors must now involve the EWC in good time to enable consultation before a final decision is made. Imposing a duty of confidentiality on EWC members is only permitted in the event of legitimate company interests.
In the Netherlands, the EWC Directive has been implemented in the European Works Councils Act (Wet op de Europese ondernemingsraden). This Act will also need to be revised as a result of the EWC Directive’s revision. After the Directive has been published, the EU Member States, including the Netherlands, will have two years to incorporate the revised Directive into national legislation. Accordingly, the revised Directive is expected to be implemented in the European Works Councils Act from 2027.
Leave System Simplification Bill
The government intends to simplify the current leave system (in Dutch).
Various new leave arrangements have been added since the introduction of the Work and Care Act (Wet arbeid en zorg), such as post-birth leave and extended post-birth leave. Previous expansions, such as more accommodating care leave rules and more flexibility in parental leave, have also added to the complexity of the leave system. The government aims to simplify it by reducing today’s 10 arrangements to 3 categories: care for children, care for relatives and personal situations. The simplification will not limit the maximum payment amounts or leave duration, but aims to align the conditions and requirements of the various arrangements, for example in the application process and the period in which leave can be taken. The draft bill is currently in the preparatory phase and its proposed date of entry into force is 1 July 2027.
Progress made with employment market files despite outgoing government
Although the government tendered its resignation in June 2025 and we are waiting for a new government, the Parliamentary Standing Committee on Social Affairs and Employment has declared all employment market files non-controversial. Accordingly, bills in this area will continue to be handled as usual.