Resignation of a Dormant Employment and the Claiming of Transition Compensation

Have you been at home on long-term sick leave for more than two years, are you no longer receiving your salary, but is your employment contract simply continuing? If so, you are likely dealing with a dormant employment relationship. In that situation you have the right to request termination and to demand a transition payment to demand one. How this works exactly and what you need to pay particular attention to in 2026, you can read here.

What is a dormant employment contract

A dormant employment contract arises when an employee remains formally employed after 104 weeks of illness but is no longer performing any work and is no longer receiving any salary. The employment contract continues to exist officially, yet in practice there is no longer an active employment relationship. Employers previously chose this arrangement deliberately in order to avoid paying the transition payment. However, following an important ruling by the Supreme Court, this is no longer permitted.

The Xella standard – your legal basis

On 8 November 2019, the Supreme Court ruled in the so-called Xella case (ECLI:NL:HR:2019:1734) that an employer is obliged, on the basis of good employment practice within the meaning of Article 7:611 of the Dutch Civil Code, to agree to a proposal from a long-term sick employee to terminate the employment contract, with the award of the statutory transition payment. This is also referred to as the Xella standard.

One important exception applies: if the employer has a justified interest in continuing the employment relationship – such as a realistic prospect of recovery in the short term – refusal may be justified. The fact that the employee is approaching retirement age explicitly does not fall within this exception.

Should your employer nonetheless refuse to cooperate, the court can be called upon to compel cooperation, potentially accompanied by an order to pay legal costs.

How much is the transition payment for a dormant employment contract

The amount of the payment is calculated over the entire period of employment, including the period of illness. The Supreme Court has determined that, for the purposes of the calculation, the reference point is the moment at which the obligation to continue paying salary ended: the day after the expiry of the 104 weeks of illness. Any transition payment that has continued to accrue during a subsequent dormant employment contract therefore does not count in full for compensation via the UWV.

The maximum transition payment in 2026 is €102,000 gross. If your annual earnings exceed that amount, a gross annual salary is taken as the maximum. The payment is calculated on the basis of one third of a gross monthly salary per year of service.

Holiday entitlement during a dormant employment contract – an additional risk

In 2026, there is an additional risk that should not be underestimated. On 12 August 2025, the subdistrict court in Gelderland ruled (ECLI:NL:RBGEL:2025:7054) that Article 7:634(1) of the Dutch Civil Code, which links the accrual of holiday entitlement to the payment of salary, is incompatible with European law. The court established that employees continue to accrue holiday days in the ordinary way during a dormant employment contract. Upon termination, those days must be paid out.

This ruling has not yet been confirmed by higher courts, and there are also judgments pointing in the opposite direction. A subdistrict court in Rotterdam has in the meantime announced that it intends to refer preliminary questions to the Supreme Court in order to obtain a definitive answer. For as long as this uncertainty persists, it is advisable to take this into account when terminating a dormant employment contract.

Compensation scheme for employers – what is changing

Employers can, under certain conditions, reclaim from the UWV a transition payment that has been paid upon dismissal on grounds of long-term illness. A legislative proposal is pending that would restrict this compensation scheme to small employers. At present, however, the new rules have not yet come into force: the UWV confirmed in April 2026 that the intended implementation date of 1 July 2026 will not be met and that the new rules will not take effect for the time being. The intended implementation date has since been moved to 1 January 2027 in expectation, but this has not yet been formally decided.

For you as an employee, nothing changes in any event: your right to a transition payment is independent of the question of whether your employer receives compensation for it.

How to approach it step by step

Do you suspect your employment is a dormant contract and would you like to bring it to an end? Here are the practical steps:

• Check whether your employment is indeed dormant: you are formally still employed, but have not received any salary for more than 104 weeks.
• Request your employer in writing to cooperate in terminating the employment contract by mutual consent and to pay the transition payment.
• Have the amount of your transition payment calculated on the basis of your full years of service and gross monthly salary, including fixed salary components such as holiday allowance and fixed supplements.
• In the settlement agreement, also ensure attention is given to any outstanding holiday days, in view of recent case law on this matter.
• Does your employer claim to have no reasonable interest in continuing the contract, yet still refuses to cooperate? If so, consider summary proceedings or an application procedure before the subdistrict court.
• Keep an eye on the deadline: transition payment accrued after the end of the 104-week period does not count towards compensation via UWV, which may be relevant to your employer's position.

Why Employment Lawyer Eindhoven

Ending a dormant employment contract may sound straightforward, but in practice employers sometimes withdraw or impose unreasonable conditions. At Arbeidsjurist Eindhoven we are familiar with the local labour market and the latest legal developments in this area. We can help you determine what you are entitled to, draw up the termination proposal on your behalf, and represent you should proceedings become necessary after all. Please feel free to contact us without obligation for an initial consultation, so that you know exactly where you stand.

Frequently asked questions

Can my employer refuse to cooperate in terminating a dormant employment contract?

In principle, no. Under the Xella ruling (Supreme Court, 8 November 2019, ECLI:NL:HR:2019:1734), an employer is obliged to cooperate in terminating the contract if you request this. Only if the employer has a justified interest in continuing the employment — for example, a realistic prospect of recovery in the short term — can a refusal be justified. If the employer still refuses to cooperate without a valid reason, the subdistrict court can be called upon.

How is the transition payment calculated for a dormant employment contract?

The payment is calculated over the entire period of employment, including the period of illness, but the amount is determined as at the date on which the obligation to continue paying salary ended, i.e. after 104 weeks of illness. The maximum in 2026 is €102,000 gross or one gross annual salary if that is higher. The payment amounts to one third of a gross monthly salary per year of service, with fixed salary components such as holiday allowance and fixed bonuses included in the calculation.

Do I lose my right to a transition payment if my employer can no longer obtain compensation from UWV?

No. Your right to a transition payment is entirely independent of the compensation scheme for employers. Whether your employer is reimbursed for that payment via UWV is their own responsibility and has no bearing on your entitlement.

Do I accrue holiday entitlement during a dormant employment?

Under Dutch law (Article 7:634 of the Dutch Civil Code), the accrual of holiday entitlement is linked to the right to wages, which is absent in a dormant employment. However, the subdistrict court in Gelderland ruled in August 2025 that this provision is incompatible with European law and declined to apply it. This line of reasoning has not yet been definitively confirmed by higher courts; proceedings are ongoing in which preliminary questions are being referred to the Supreme Court (Hoge Raad). It is advisable to take this into account when negotiating the termination.

What if I wish to terminate the employment contract myself but my employer imposes unfavourable conditions?

An employer may not attach additional unfavourable conditions to its cooperation in terminating a dormant employment, such as a far-reaching confidentiality clause or unreasonable waiver provisions that restrict your rights. If your employer nonetheless wishes to include such conditions, you can submit the matter to the subdistrict court, which can assess whether those conditions are justified. Always have a settlement agreement reviewed before you sign it.

We are happy to think along with you. For advice tailored to your situation, we would be glad to talk. No rights can be derived from the content of this page and it may contain inaccuracies.