Continue working after reaching the state pension age – what should you consider?

Retiring straight away after turning 67? Some employees can’t wait for it, others can’t bear to even think about it. More and more people are choosing to continue working after reaching the state pension age. A recent report by ABN AMRO shows that the group of ‘continued workers’ has grown significantly over the past decade. Today, approximately 236,000 pensioners in the Netherlands are in paid employment. They choose this because they still enjoy working (part-time), they are asked to do so, or as a welcome extra income on their pension.

But how does this pan out? What rules apply if an employee continues working after the state pension age, and what do parties agree contractually? In this article, we address these questions.

What rules apply after the state pension age?

The legislator encourages working after reaching the state pension age. On 1 January 2016, the Working after the state pension age Act came into force. The aim of that law was to remove obstacles for employers to keep or hire employees after they reached the state pension age. In practice, employers were reluctant to do so. Partly measures had already been taken for this with the entry into force of new legislation in 2015 (“WWZ”), and new measures were thus added with the Work after the state pension age Act. This has resulted in, among other things, the following rules when an employee works after the state pension age:

  • Transition payment – The employee is no longer entitled to the transition payment.
  • Chain of contracts – Different rules apply with regard to the chain rule (“ketenregeling”): only after 6 temporary contracts or after 4 years does a contract for an indefinite period of time arise.
  • Continued wage payment and dismissal in case of illness – In case of illness, wages are only continued to be paid for 6 weeks. During this period, termination prohibition during illness also applies. If the employee has been sick for 6 weeks and recovery is not expected within a 6-week period, the employment contract can be terminated because of the long-term illness through the UWV.
  • Notice period – The notice period is one month, regardless of how long the employee has been employed and regardless of the notice period included in the employment contract.
  • Reintegration – The reintegration obligations are more limited: there is no second track obligation and no need to draw up a plan of action.
  • Social security – The employer no longer has to pay social security contributions. The employee is therefore no longer insured against unemployment or incapacity for work. However, he can still claim a sickness benefit.

What do you agree contractually?

When an employee reaches the state pension age and has indicated that he would like to continue working, the employer has several options regarding the employment contract. He can let the current contract continue, or terminate it and offer the employee a new fixed-term contract.

Let the contract continue

A first option is to let the contract continue, even if this means the employee retains an indefinite contract. Under the law, an employer has, in principle, the possibility to simply terminate the employment contract on or after reaching the state pension age without a reasonable ground. This means that the employment contract can be terminated without the employer needing permission from the court or the UWV. One condition is that the employee was already employed by the employer before reaching the state pension age, and the other condition is that this right can only be used once. To avoid confusion about whether this right can (still) be exercised after the state pension age has been reached, and to be able to offer more tailor-made solutions for each individual, it may be advisable to enter into a new contract after the employee reached the state pension age instead of letting the contract continue.

New contract

If the employment contract contains a pension termination clause stating that the employment contract ends by operation of law when the state pension age is reached, the employer will in principle have to offer a new contract to the employee. Even in the absence of such a clause, the employer can choose to terminate the current contract and offer the employee a new contract. If the option to terminate in connection with reaching the state pension age has already been used, it is not possible to invoke the simple dismissal route as described above. Any dismissal should then follow the usual dismissal rules. For this reason, we recommend offering a new fixed-term contract in that case. Firstly, there is then certainty about the end date, and secondly, there is the possibility of entering into several fixed-term contracts because of the broader chain rule.

Our tips for employers

  • Include a state pension age termination clause in the employment contract, so that the employment contract ends by operation of law at the state pension age.
  • Keep in mind the wider possibilities of entering into multiple fixed-term contracts.
  • Inform employees about the main changes in employment law when continuing to work after the state pension age.