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Wage cost allowance when a business is legally transferred
The House of Representatives recently passed the proposed Amendment to the Salary Costs (Incentive Allowances). This helps to clarify a matter that employers have been grappling with for some time: what happens to the wage cost allowance (LKV) when an employee moves to another employer?
At the moment a wage cost allowance (LKV) may be lost when an employee changes job or if companies merge or are taken over. This is undesirable both for employers and for employees who need extra support to find work.
This new draft legislation will change that. From 1 January 2027 the new employer can simply continue receiving the remaining LKV benefit. Two new definitions have been introduced for this purpose:
- New employer - the employer who takes over or employs the employee.
- Target group statement on new employer status - a statement that enables the wage benefit to be utilised for the remaining term.
This prevents the loss of financial support as long as the target group employee still meets all the conditions. It also ensures greater continuity under the Salary Costs (Incentive Allowances) Act (WTL) scheme and reduces administrative uncertainty in the event of company takeovers or internal mobility.