In the world of alimony cases, the concept of earning capacity plays a major role. When determining child and spousal support, one looks not only at what someone actually earns, but also at what that person could reasonably earn. This article dives deeper into the meaning of the concept of earning capacity and how it is applied in child support proceedings.

What is earning capacity?

Earning capacity refers to a person's ability to generate income. When calculating alimony, one considers both the actual income and the potential income a person can earn, given his or her education, experience, and the labour market. This means that not only current income but also a notional income based on earning capacity can play a role in determining alimony.

Earning capacity in child maintenance

In child maintenance, both parents are responsible for the financial care of their children. This means that they should contribute to the maximum extent possible within their capabilities. If a parent works less than can reasonably be expected of him or her, the court can decide to award a notional income based on earning capacity. This prevents parents from deliberately working less to reduce alimony.

Earning capacity for partner alimony

A similar principle applies to partner alimony. Both the alimony obligor and the alimony recipient are expected to use their earning capacity. For example, if a maintenance recipient decides to work less without a valid reason, the court can adjust the income on which alimony is based to what that person should be able to earn.

Assessment of earning capacity

Determining earning capacity can be complex. Unlike social insurance, where specialised protocols and officers are involved in assessing earning capacity, parties in alimony cases often have to prove their earning capacity themselves. If they fail to do so, it is up to the judge to determine this, where he or she has broad discretion and is not bound by rulings of other bodies, such as the UWV.

Self-created drop in income

If a maintenance obligor is himself or herself the cause of a drop in income, for example by resigning or applying for less, the judge will assess whether the person can reasonably recover his or her former income and whether this can be expected of him or her. If the drop in income is culpable and recoverable, the old income is often used as the basis for determining alimony.

Special situations

In special situations, such as with a director-major shareholder (DGA) who can determine his or her own salary, the court may also look at the company's profits and the possibility of paying dividends. In the case of the custodial parent, however, a more cautious approach is taken to awarding a notional income, as this may be at the expense of the child.

Jurisdiction and earning capacity

There are numerous examples from jurisdiction where earning capacity was a decisive factor. For instance, there are cases where the court ruled that someone did not apply sufficiently or had deliberately created a lower income, with the result that the old, higher income was taken as the basis for maintenance. At the same time, there are also rulings where the court took into account special personal circumstances, such as additional care duties or the health of a new partner.

Conclusion

Earning capacity is an essential element in determining child and partner maintenance. It provides a means of preventing parties from shirking their financial responsibilities by working less or artificially reducing their income. Here, the court has wide discretion and can provide tailor-made solutions, which has both advantages and disadvantages. Despite the complexity and sometimes unpredictable outcomes, earning capacity remains an important tool to use in order to obtain a fair maintenance decision. In doing so, it is vital that all facts and circumstances are weighed for relevance and then brought to the attention of the proceedings.

Do you have questions about how earning capacity may affect your alimony obligations or your claim to alimony? Please contact SPEE lawyers & mediation for expert legal advice and guidance. Our family law attorneys Mr Marion van Acker and Mr Angelique van den Eshoff are at your service.