Working beyond the state pension age: the rules for retirement redundancy

Employment contract ends at state pension age

Many employment contracts still contain the provision that the employment contract “ends by operation of law” once the retirement age – the state pension age – is reached. Until 2015, this was a convenient standard clause because it saved employers from having to go to the UWV or the courts. But nowadays this clause has few advantages.

Termination upon reaching aow age

According to article 7:669 paragraph 4 of the Civil Code, an employer may terminate the employment contract without intervention of the UWV or the court:
– If the employee reaches the state pension age; or
– Has reached another agreed upon later age;
– provided the employment contract started before reaching the state pension age.

Tacit continuation: a pitfall

The last condition is often underestimated. It regularly happens that an employee who has such a provision in his contract continues to work after reaching the state pension age without clear agreements. In that case, the employment contract is tacitly continued. The old employment contract ends by operation of law and a new employment contract arises under the same conditions as the old one. Since this new contract is created after the state pension age, the free dismissal option of Article 7:669 paragraph 4 of the Civil Code can no longer be applied. The law stipulates that the dismissal then goes through the UWV (see Article 7:761a paragraph 1 BW).

Wage payment in case of illness

To accommodate employers, employees over the state pension age are subject to a reduced wage payment obligation of only 6 weeks (instead of 104 weeks). After this period, the ban on notice expires. Still, employers must remain alert:
– Termination is allowed only if there is no prospect of recovery within six weeks.
– Notice may not be given because of the illness itself.

The difference between a contract concluded before and after the state pension age also plays a major role here. For an employment contract that began before the state pension age, the employer can use the simple termination option after six weeks. Termination can then be done simply with a letter. However, if a new contract has been created (tacit or explicit), the employer must ask permission from the UWV. Or the employee himself must give permission.

Case study: Limburg District Court

In the recent ruling [https://uitspraken.rechtspraak.nl/details?id=ECLI:NL:RBLIM:2024:10114], the court clarified the rules. Employer had signed a one-year temporary employment contract in early 2024 with an employee who had already reached the state pension age. After several months, the employee fell ill and after six weeks, the employer terminated the contract on the grounds that the salary continuation obligation had stopped citing information from the government. Shortly thereafter, the employee reported better again.

The employee objected and went to court. The judge agreed with the employee. The employer had misunderstood that the rules for contracts concluded after the state pension age are different. The employer should have asked permission from the UWV. Permission was probably refused because the termination was directly related to the illness and there was a prospect of recovery within six weeks.

More flexibility with six temporary contracts

The government is offering employers more flexibility for employees over the state pension age. For example, a maximum of six temporary contracts may be offered within a four-year period. For younger employees, there is a maximum of three temporary contracts in three years.

Shorter notice period

Older employees often have long tenures. Normally, employers must provide four months’ notice for employees with more than 15 years of service. For employees over AOW age, however, a notice period of one month always applies.

No transitional compensation

Finally, employers no longer have to pay any transition compensation after the state pension age. Transition compensation is intended to provide employees with financial support when transferring to a new job. This is no longer relevant if an employee is already entitled to a pension.

Questions?

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