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Severance

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 or equal to public employees are not entitled to 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?

In the past, legislators considered the employer that could not meet the severance payment obligation. To guarantee that an employee can receive his severance pay under all circumstances, the Severance Law instituted a severance fund. The Law commissioned SVb to manage the fund.

Who contributes to the severance fund, and how much is the contribution?

Every employer is required to contribute to the severance 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 pension directly after he has retired, and the amount of the pension is less than the AOV pension. Also, the employee who receives a pension, which is less than two times the AOV pension, after a partial or complete amount of AOV pension is deducted from the pension arrangement plan and 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 severance fund when the employer cannot fulfill its severance 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?

An employee must come to SVb’s office at Vondellaan 19E to complete the request. To process the request, the employee must present:

  • Their passport, ID card, and valid 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:

  1. 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, -.
  2. 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, -.
  3. 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

Maximum Wage Used for Severance Pay Fund

The law stipulates a maximum salary per week to calculate the amount of severance pay from the severance 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.