Why the Netherlands wants to cap full sick pay for employees

Workers in the Netherlands facing long-term illness could soon lose a vital financial safety net, as the government considers capping employer-funded sick pay top-ups. These proposed restrictions would leave employees vulnerable to a much steeper drop in income during recovery.

Netherlands considers capping full sick pay for employees

Minister for Work and Participation Thierry Aartsen (VVD) has submitted an options paper to the House of Representatives (Tweede Kamer) outlining potential scenarios to reform mandatory sick pay rules for employers. Under current Dutch law, companies must pay at least 70 percent of an ill employee's salary for 104 weeks. In practice, most collective labour agreements (cao's) top this up to 100 percent during the first year of sickness.

Aartsen said full wage top-ups mean "the intended financial incentive to quickly return to work" is missing, as reported by Het Financieel Dagblad. One primary scenario outlined in the government's official scenario documents involves legally restricting extra salary additions after six months of illness. According to ministry calculations, capping top-ups at 70 percent after half a year would save employers an estimated 1,4 billion euros annually, a move the cabinet claims would boost the national labour supply by encouraging faster partial reintegration into the workforce.

While state intervention in collective agreements remains highly controversial and raises legal questions regarding international treaties, the minister argued that the public interest of curbing absenteeism and encouraging employment could justify state limits on top-up pay. However, occupational health data from ArboNed indicates that long-term absence is driven by health crises rather than a lack of worker motivation, with long-term illness accounting for only 8 percent of sick notes, but 75 percent of all lost working days in the Netherlands, predominantly due to work stress and burnout.

How sick pay rules impact permanent contracts

From an international perspective, the Netherlands has a unique system where individual employers bear private responsibility for two years of sick pay. According to a study by SEO Economisch Onderzoek commissioned by the Ministry of Social Affairs and Employment (SZW), around 60 to 70 percent of small and medium-sized businesses purchase private insurance to cover these potential costs.

Government inventory documents show that 45 percent of employers view these long-term sick pay obligations as a major barrier to offering permanent contracts (vast contract). By exploring statutory limits, the cabinet hopes to address these employer concerns and encourage permanent hiring, though trade unions maintain that reducing income protections is the wrong approach. 

Trade unions push back against sick pay cuts in Netherlands

The trade union response to Minister Aartsen’s proposals was swift and critical. Trade union CNV described the plans as "very harmful," with chairman Hans van den Heuvel stating that "the cabinet has no business at the collective bargaining table," as reported by NU.

Union representatives warned that statutory caps on salary top-ups interfere with free contract negotiations and could clash with international labour treaties protecting contractual freedom. Unions also warn that capping pay will drive presenteeism (forcing unwell employees back to work prematurely out of financial fear), ultimately risking deeper burnout and long-term productivity loss.

Alternative proposals face administrative hurdles

Beyond capping salary additions, the government's exploratory documents outline alternative scenarios, such as shortening the mandatory sick pay period from two years down to 18 or 12 months.

However, official ministry assessments reveal that shortening the duration would shift high costs to the public disability benefit system (WIA), adding between 1,9 billion and 4,6 billion euros to public expenditure.

Furthermore, the employee insurance agency (UWV) currently lacks the administrative and medical capacity to handle the resulting surge in disability evaluations, rendering a shorter timeline unfeasible in the near term.

For now, no immediate policy changes have been implemented, as the minister's brief serves solely as an inventory to guide parliamentary discussions and upcoming talks with trade unions and employer groups.

Industry analysts at Salaris van Morgen advise employees across the Netherlands to review their current collective labour agreements. Workers should check what percentage of their salary is guaranteed during both the first and second years of sickness, and whether extra top-up payments depend on active participation in workplace reintegration programmes.