TL;DR: Starting July 1, 2026, most Dutch employers pay transition payments for long-term sick employees without government reimbursement. Small employers (under 25 employees) keep the reimbursement. Everyone else absorbs the full cost, up to €102,000 per case. The government saves €380 million annually. You pay it instead.
Who pays transition payments after July 1, 2026?
- Small employers (under 25 employees): Government reimburses transition payments
- Medium and large employers (25+ employees): Pay full transition payment from own funds
- Maximum payment: €102,000 gross per employee in 2026
- Cases ending before July 1, 2026: Still eligible for reimbursement under current rules
- Annual government savings: €380 million transferred to employers
The Dutch government saves €380 million annually by making one change to employment law.
That money doesn’t disappear. It transfers.
Starting July 1, 2026, most employers pay transition payments for long-term sick employees entirely from their own balance sheet. No government reimbursement. No safety net. The cost is yours to absorb.
This is a structural shift in who bears the financial consequence of employee illness in the Netherlands.
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How Does the Current Transition Payment System Work?
When an employee is sick for two years and you terminate the employment relationship, you pay a transition payment. The government reimburses you. The system spreads the cost across society.
Under the new law, only small employers keep that reimbursement. If you employ 25 people or more, you pay the full amount yourself.
The logic is simple. Larger companies have resources. Smaller companies don’t.
The reality is more complicated.
Bottom line: The 25-employee threshold determines whether the government protects you or leaves you exposed.
What Does Long-Term Sick Leave Cost Employers?
Long-term illness creates multiple costs that stack up over time.
Wage continuation costs:
- 104 weeks (two years) of continued salary
- Minimum 70% of salary (legally required)
- Most employers pay 100% in the first year
Additional expenses:
- Replacement staff costs
- Reintegration support services
- Occupational health consultations
Transition payment:
- Maximum in 2026: €102,000 gross (source)
- Calculated based on monthly salary and total employment duration
- Includes sick leave periods in the calculation
Add it up. Two years of continued salary, replacement costs, reintegration expenses, and a six-figure severance payment you fund entirely yourself.
The Dutch system is generous. Employees claim sick leave for up to two years at 70-100% wages. In contrast, UK statutory sick pay covers only 8.68% of weekly salary. Dutch workers are well protected during illness.
That protection has a price. Someone pays for it.
Until now, the government shared that burden. After July 2026, most employers carry it alone.
Bottom line: Long-term sick leave costs extend far beyond wage continuation, and after July 2026, employers with 25+ staff absorb the entire transition payment without reimbursement.
When Does the July 1, 2026 Deadline Apply?
The effective date determines your financial exposure.
Two-year period ends before July 1, 2026:
- Current rules apply
- Government reimburses transition payment
- All employer sizes eligible
Two-year period ends on or after July 1, 2026:
- New rules apply
- No reimbursement for employers with 25+ employees
- Small employers (under 25) still get reimbursement
This creates a planning window.
You know today which employees are on long-term sick leave. You know when their two-year period ends. You know which side of July 1, 2026 they fall on.
The complication: your employer size classification changes annually.
Bottom line: The date your employee’s two-year sick leave period ends determines whether you pay the full transition payment or get government reimbursement.
How Does Employer Size Classification Work?
The Dutch Tax Authority determines your employer size annually. That classification affects your disability insurance and unemployment insurance contributions.
It also determines whether you qualify for transition payment compensation.
Classification is not static:
- Grow from 24 to 26 employees: You cross the threshold
- Shrink from 27 to 23 employees: You cross back
- Classification is reassessed annually
- The classification when the two-year sick leave period ends determines eligibility
This introduces volatility you don’t fully control. Hiring decisions, business growth, and seasonal staffing all influence your classification.
A single hire near the threshold shifts your financial exposure by tens of thousands of euros.
Bottom line: Your employer size classification changes yearly, and crossing the 25-employee threshold eliminates government reimbursement for transition payments.
What Do the Numbers Reveal About System Pressure?
The €380 million annual savings reveals the government’s current exposure to long-term illness terminations.
Workplace illness costs in the Netherlands:
- Stress-related illness: €3.1 billion annually
- 34% of Dutch employers report concern about sick leave because they lose productivity while paying wages
- Per-case cost of work-related injuries and illnesses: €73,410 (highest in Europe)
- Total cost of work-related ill health: 3.5% of GDP annually
European comparison of per-case costs:
- Netherlands: €73,410
- Italy: €54,964
- Germany: €47,360
- Finland: €45,816
- Poland: €37,860
These numbers frame the policy change. The government responds to a system under financial pressure, not just redistributing cost.
Bottom line: The €380 million shift reflects substantial government exposure to workplace illness costs that are highest in Europe on a per-case basis.
What Happens If You Fail Reintegration Duties?
You have mandatory reintegration duties for sick employees. You must help them return to work. If you fail, the UWV imposes a wage sanction.
Wage sanction consequences:
- Additional 52 weeks of wage payments (on top of the standard 104 weeks)
- Total obligation extends to 156 weeks (three years)
- Employees claim fair compensation reaching tens of thousands of euros
The cost extends beyond the transition payment. Your reintegration process failure triggers extended wage obligations.
Documentation requirements:
- Record every reintegration step
- Track every occupational health consultation
- Prove every reasonable accommodation offered
- Store communication records with the employee
The system doesn’t measure your effort. It measures your proof.
Bottom line: Failed reintegration duties add 52 weeks of wage payments on top of existing costs, making documentation your primary defense.
Is the July 1, 2026 Date Guaranteed?
The July 1, 2026 effective date is expected. Not final.
The law must pass through both the Lower House (Tweede Kamer) and Upper House (Eerste Kamer) of Dutch parliament. Until that happens, the timeline stays uncertain.
Legislative process creates political risk:
- Implementation date could change
- Threshold criteria (25 employees) could be adjusted
- Parliament could delay or modify the law
You model the impact. You don’t guarantee the implementation date or final threshold criteria.
Planning approach:
- Budget for both scenarios: implementation as planned and delayed implementation
- Account for threshold changes if you operate near 25 employees
- Monitor parliamentary progress through official government channels
Bottom line: The law awaits parliamentary approval, which introduces timing and threshold uncertainty into your financial planning.
How Does the 25-Employee Threshold Affect Hiring?
The 25-employee threshold creates distorted incentives.
If you employ 23 people and face a potential long-term sick leave case, hiring two more employees costs you €102,000 in lost reimbursement eligibility.
That’s a financial trap, not a hiring decision.
Threshold effects on growth:
- Pressure to stay under 25 employees
- Pressure to jump quickly past the threshold to where costs become proportionally manageable
- Distorted growth planning based on employee count, not business performance
Why the threshold is problematic:
- Doesn’t account for revenue
- Ignores profitability
- Ignores cash reserves
- Only counts employees
A 24-person consulting firm with high margins gets protection. A 26-person logistics company with thin margins does not.
The policy assumes size equals financial capacity. Reality differs.
Bottom line: The 25-employee threshold distorts hiring decisions because it ignores financial capacity and only measures headcount.
What Control Points Should You Install Now?
You don’t prevent employee illness. You reduce your exposure to the financial consequences.
1. Track your size classification actively
- Know where you stand relative to the 25-employee threshold
- Monitor quarterly
- Model scenarios where growth or contraction shifts classification
2. Document every reintegration action
- Keep records of occupational health consultations
- Record accommodation offers and work modifications
- Store all communication with the employee
- Build proof for potential UWV audits
3. Calculate your exposure for current sick leave cases
- Identify employees on long-term sick leave today
- Calculate when their two-year period ends
- Determine if that date falls before or after July 1, 2026
- Model the cost difference between scenarios
4. Review your insurance coverage
- Check if your policy covers transition payments
- Verify coverage continues under the new law
- Renegotiate terms if necessary
5. Strengthen your absence management system
- Invest in occupational health support
- Provide mental health resources
- Implement proactive case management
- Intervene early to reduce long-term sick leave likelihood
6. Budget for the worst case
- Assume you’ll cross the 25-employee threshold if you’re close
- Assume sick leave cases extend past July 2026
- Build transition payment costs into financial planning
Bottom line: Proactive tracking, documentation, and financial planning reduce your exposure to transition payment costs under the new law.
What Does This Reveal About European Welfare Trends?
This policy change fits a larger trend: selective cost redistribution in European welfare states.
Governments face budget pressure. Social safety nets remain politically protected. The solution shifts costs to private employers deemed capable of absorbing them.
How different countries filter employer responsibility:
- Netherlands: Uses company size (25-employee threshold)
- Other countries: Use industry sector, revenue thresholds, or regional classifications
The mechanism varies. The pattern is consistent.
The structural shift:
- Employers become the first line of financial responsibility for employee welfare costs
- Government support becomes secondary, conditional, and means-tested
- Each hire carries contingent liability for long-term health events you don’t predict or control
This changes the economics of employment. Each hire carries wage costs, benefit costs, and unpredictable long-term health liability.
Bottom line: The Dutch policy reflects a broader European trend where governments shift employee welfare costs to private employers through size-based or sector-based filters.
What Should Founders Watch?
The law awaits final approval. The timeline stays uncertain. The threshold could change during parliamentary debate.
The direction is clear.
Employer responsibility for worker health outcomes expands. The cost of long-term illness moves from shared societal burden to size-scaled corporate obligation.
Three areas this affects:
- Cash flow: Up to €102,000 per transition payment without reimbursement
- Growth strategy: Hiring decisions distorted by the 25-employee threshold
- Risk management: Documentation and classification tracking become essential
The system doesn’t measure your intentions. It measures your size, your documentation, and your ability to pay.
Actions to take now:
- Structure your controls
- Model your exposure
- Track your classification
The cost is coming. The question is whether you see it in time.
Structure is cheaper than surprise.
Bottom line: Employer responsibility for long-term illness costs expands, and preparation determines whether you absorb the impact or get surprised by it.
Frequently Asked Questions
Q: Who qualifies as a small employer under the new law?
A: Employers with fewer than 25 employees. The Dutch Tax Authority determines your classification annually based on your employee count. This classification affects whether you receive government reimbursement for transition payments.
Q: What happens if my company grows from 24 to 26 employees during an employee’s sick leave?
A: Your eligibility for reimbursement depends on your classification when the two-year sick leave period ends. If you cross the 25-employee threshold before that date, you lose reimbursement eligibility. One hire near the threshold shifts your exposure by up to €102,000.
Q: How do I calculate the transition payment amount?
A: The transition payment is calculated based on monthly salary and total employment duration, including sick leave periods. The maximum amount in 2026 is €102,000 gross. Your calculation starts when the employment relationship began, not when the sick leave started.
Q: Does my insurance cover transition payments under the new law?
A: Check your policy terms. Some employers carry insurance that covers transition payments, but you need to verify whether coverage continues under the new law. Contact your insurer to confirm coverage and renegotiate terms if necessary.
Q: What proof do I need if the UWV audits my reintegration efforts?
A: Keep records of all occupational health consultations, accommodation offers, work modification attempts, and communication with the employee. The UWV measures your proof, not your effort. Failed reintegration duties trigger an additional 52 weeks of wage payments.
Q: When does the new law take effect?
A: The expected effective date is July 1, 2026, but the law must pass through both houses of Dutch parliament. The timeline and threshold criteria could change during parliamentary debate. Monitor official government channels for updates.
Q: If my employee’s two-year period ends on June 30, 2026, do I get reimbursed?
A: Yes. If the two-year wage obligation ends before July 1, 2026, you apply for compensation under current rules. The government reimburses you regardless of company size. Cases ending on or after July 1, 2026 fall under the new system.
Q: How does the Netherlands compare to other European countries on sick leave costs?
A: The Netherlands has the highest per-case cost of work-related injuries and illnesses in Europe at €73,410, compared to Germany (€47,360) and Poland (€37,860). Work-related ill health costs the Netherlands 3.5% of GDP annually, which explains the government’s budget pressure.
Key Takeaways
- Starting July 1, 2026, employers with 25+ employees pay transition payments without government reimbursement. Small employers (under 25 employees) keep the reimbursement. The maximum payment reaches €102,000 per case in 2026.
- The timeline matters. Cases where the two-year sick leave period ends before July 1, 2026 still qualify for reimbursement. Cases ending on or after that date fall under the new system.
- Employer size classification changes annually. The Dutch Tax Authority reassesses your classification each year. Crossing the 25-employee threshold eliminates reimbursement eligibility, creating hiring distortions near the threshold.
- Documentation protects you from extended costs. Failed reintegration duties trigger an additional 52 weeks of wage payments. The UWV measures your proof, not your effort. Record every step, consultation, and accommodation.
- The €380 million government savings reveals system pressure. The Netherlands bears the highest per-case cost of work-related illness in Europe (€73,410), and work-related ill health costs 3.5% of GDP annually.
- This reflects a broader European trend. Governments shift employee welfare costs to private employers deemed financially capable. The mechanism varies by country, but the pattern is consistent across European welfare states.
- Action determines exposure. Track your classification quarterly, document reintegration efforts, calculate exposure for current sick leave cases, review insurance coverage, and budget for worst-case scenarios. Structure is cheaper than surprise.
