Unemployment Insurance (Cessantia)
What is severance pay?
Severance is a payment to which the employee is entitled to, at the moment of retirement without blame. Severance pay is retirement compensation.
Which employee can apply for severance pay?
Any employee who is in service by an employer for more than one year is entitled to severance pay. If an employee entitled to severance pay dies, their immediate family is entitled to severance pay.
Public employees or employees with legal status equal to public employees are not eligible to receive severance pay.
Who is obligated to pay severance pay?
The employer is obligated to pay severance to the retiring employee.
What is the severance fund?
Lawmakers in the past have taken into account that the employer may not be able to fulfill their obligation to pay severance. To ensure that a worker can receive their severance under any circumstances, the Cessantia Law has established a Cessantia fund. The law has entrusted the SVb to administer the fund.
Who contributes to the severance fund, and how much is the contribution?
Every employer is required to contribute to the Cessantia fund each year. The annual contribution is Afl. 40,- for each employee in service on the first of January.
When is the employee entitled to severance pay?
An employee is entitled to severance pay at the time he meets the following requirements under the law:
- The employee was retired without blame for it.
- The employee has more than one year of service.
- The employee filed their severance petition within one year of their retirement.
- The employee does not receive any income through an employer pension arrangement.
- The employee receives a work pension directly after retirement, and the amount of the work pension is less than the AOV pension. Also an employee who receives a pension, which is less than twice the AOV pension, after partially or fully deducting the AOV pension amount from the pension arrangement plan, is entitled to severance pay.
When is the employee entitled to severance pay from the severance fund?
An employee becomes entitled to severance pay from the Cessantia fund when the employer cannot fulfill its severance pay duty because of bankruptcy, suspension of payment, or can no longer meet its financial obligations. In the latter case, SVb conducts an investigation to determine this.
How does an employee request severance?
The employee must come to SVb’s office, section of ZUK at Vondellaan 19E to complete the request. To process the request, the employee must present:
- A valid passport, ID card, or driver’s license.
- Their workbook or work contract.
- Their retirement letter, if possible.
- Their pay slips for the last two months; if you receive a bi-weekly paycheck, bring the last four pay slips.
How much is the amount of severance pay to which the employee is entitled?
The amount of severance pay depends on the number of years of service of the employee. The Severance Pay Act prescribes that:
- For each year of service between 1 and 10 years, the employee receives a payment equal to one week’s salary.
- For each year of service between 11 and 20 years, the employee receives a payment equal to one and one-quarter (1¼) of their one-week salary.
- For each year of service over 20 years, the employee receives a payment equal to 2 times their one week’s salary.
After the first year of service, any period longer than six months counts as a full year.
An example of how severance pay is calculated
An example: an employee gets his retirement after he worked for a company for 23 years. His weekly salary is Afl. 700, -. His severance pay is calculated as follows:
- For each year of service between 1 and 10 years, he receives a payment equal to his 1-week salary (Afl.700, -). For the first 10 years of service, the employee receives the sum of (10 x 700) Afl. 7.000, -.
- For each year of service between 11 and 20 years, he receives a payment equal to 1¼ of a week’s salary (1¼ x 700 = 875). Thus, for years of service between 11 and 20 years, he receives the sum of (10 x 875) Afl. 8.750, -.
- For each year of service over 20 years, he receives a sum equal to 2 times his weekly salary (2 x 700 = 1400). So for the remaining three years of service over 20 years, the employee receives the sum of (3 x 1400) Afl. 4.200, -.
In this example, the total amount of severance pay is (7000+8750+4200) Afl. 19.950, – (before taxes and premium payments of AOV/AWW and AZV).
Severance Calculator
Open the Severance calculator here:
https://www.svbaruba.org/trahado/cesantia/cessantia-calculator/
Maximum Wage Used for Severance Pay Fund
The law stipulates a maximum salary per week to calculate the amount of severance pay from the Cessantia fund. Currently the maximum weekly wage is Afl. 2.025,-. Each year the amount is assessed and can be changed by law. If an employee’s weekly salary is higher than the maximum salary, SVb uses the maximum wage to determine the amount of severance pay.
Withholding tax and premium
By law SVb is obliged to withhold wage tax and AOV/AWW and AZV premiums from the severance pay amount.
What can the employee do if they disagree with SVb’s decision?
If the employee disagrees with SVb’s decision, the employee has the right to appeal the decision to the College van Beroep (CvB). The appeal must be made within three weeks of the decision being made and must be send in writing. Read more about appealing to the CvB:
https://www.svbaruba.org/contact-us/svb-appeal/?lang=en
More Information
For more information, you can contact SVb by phone at 527-2700, via email at info@svbaruba.org, or by using the contact form:
contact form.
