Severance pay after dismissal
1. What is Severance Pay?
The severance pay is a one-time payment in cash, which the employer must pay to his employee when the working relationship with the employee terminates.
This payment is calculated on the basis of the number of years of service by the employee. The legal ground for the payment lies in the immaterial damage that the employee suffers through the dismissal and the loss of seniority.
The severance payment results from a legal obligation of the employer, stated in the Severance Ordinance (Cessantia-landsverordening) (P.B. 1983, no. 85).
2. Who is entitled to a severance payment?
An employee in the Netherlands Antilles, whose working relationship terminates other than through his or her own fault, is entitled to a severance pay. This right originates after the first full year of service of the employee.
When an employee is dismissed due to a reason, which is accountable to, himself or herself, he or she cannot derive any rights from the Severance Ordinance. This is the case, for example, when an employee is dismissed on the spot due to a legally urgent reason, like a serious form of theft.
An employee also doesn't have a right to severance pay when he or she quits his or her job, unless he or she ends the working relationship because of an urgent reason caused by an act of the employer.
Whether or not one is entitled to a severance pay, it does not matter if the employee is in permanent service, or works on the basis of a temporary contract (provided that the duration of it is longer than one year).
Public servants or employees working in the public sector and teachers in subsidized denominational education are not entitled to severance pay.
3. When does not a right to severance pay exist?
When an employee passes away, there is no right to severance pay for the next of kin. On the other hand, when an (former) employee already had a severance claim on the (former) employer, at the moment of his passing away, his next of kin (like his wife or children) can claim the right to this payment.
Furthermore, there is no need to pay severance pay if the employee receives at the end of his service a pension or a benefit by way of a pension. The amount of this pension or benefit has to be the same or more than the amount of the then valid legal old-age pension. If the legal old-age pension is deducted as a whole or partially form the above-mentioned company pension or benefit by way of a pension, this pension or benefit must be at least the same as twice the amount of the then valid legal old-age pension.
Whether or not one is entitled to severance pay is not attached to a certain age, like reaching the majority age or the pensionable age.
4. What is the amount of the severance pay?
The amount of the severance pay is calculated as follows:
· For the first till the tenth full years in service: one week’s wage per year in service;
For the eleventh till the twentieth full years in service: one and a quart times the week’s wages per year in service;
For the next full years following: twice the week’s wages per year in service.
Mind you: in a collective working agreement a more convenient way of calculation can be used for the employee!
For the calculation of full years in service a period of more than six months after the first year of service counts as a full year of service.
A week’s wage can be calculated by multiplying a month’s wages with 12 and dividing it then by 52. The hours’ wage can be deduced from the week’s wages by multiplying the hours’ wage by the number of working hours per week, a day’s wage by multiplying it by the number of working days per week.
An employee has been working for 14 years and 8 months for the same employer for a lastly enjoyed gross monthly payment of NAfl. 1.800,-. The employer dismisses this employee due to business economical reasons. The employer must now pay to the employee a one-time severance pay for the first till the tenth years of service one week’s wage (calculation of week’s wages: NAfl. 1.800,- * 12 = NAfl. 21.600,- : 52 = NAfl. 415,38 per week). Multiplied by ten gives NAfl. 4.153,80. For the eleventh till the fifteenth years of service (the last 8 months count as a full year of service) the employer will have to pay five times one and an quart the week’s wage. This is five times (1,25 * NAfl. 415,38 =) NAfl. 519,23 = NAfl. 2.596,15. In total the employer will have to pay the employee a severance pay of NAfl. 6.749,95.
5. The claim of the employee to severance
The employee must claim his severance pay from the employer within one year; otherwise his right to severance will become superannuated.
If an employer goes broke, has asked for a letter of license, or is in a position where he has stopped paying (this is to be judged by the Social Security Bank), the employee can make a claim on the Social Security Bank (Severance fund), however, till a certain amount.