The introduction of the Work and Social Security Act entails many (extensive) changes in areas of employment. This is also the case for dismissal on the grounds of retirement.
In the present situation, termination of an employment contract due to an employee’s pension (or more specifically: state pension) age is not regulated. An employment contract can only legally end if the employee reaches the state pension age if a so-called “pension clause” is included in the employment contract. If no pension clause is inserted, the employer will have to apply to the UWV (Employee Insurance Scheme Implementing Body) for permission or to the sub-district court judge for dissolution.
As of 1 July 2015 retirement dismissal has been simplified. Briefly put, under the Work and Social Security Act reaching the state pension age is a ground for an unilateral termination of the employment contract. From that moment on the employer does not need to seek permission or dissolution. This termination ground can also be used at a later date, that is to say at a time when the state pension age is reached.
A requirement for the above is that the employment contract already existed at the time the employee reaches the state pension age.
This amendment makes retirement dismissal considerably easier. However, caution should be taken in situations where the employment contract does (still) contain a pension clause and the employee wishes to continue to work after reaching the state pension age with the consent of the employer. In this case the benefit of the amended legislation can fairly quickly be negated. The current employment contract ends by operation of law on the basis of the pension clause when the employee reaches the state pension age. The new regulation does not change this. If employment is simply continued, a new employment contract is created that has not been concluded before the state pension age is reached. Under this new employment contract, the simplified retirement dismissal is not applicable. The new regulations regarding the retirement dismissal is therefore best used in a situation where no pension clause is included in the employment contract. It is therefore recommended not to include such a clause in new employment contracts and to consider whether the pension clause can be removed from current employment contracts.
Do you have questions about the new retirement dismissal legislation or would you like to discuss a case? Please contact the section Employment & Pension.