When your employer dismisses you, you are in principle entitled to the transition compensation. This is the statutory severance payment intended to facilitate the move to other work. In some cases the judge may also award you a fair compensation award. This only happens if the employer has acted in a seriously culpable manner.
In this article we explain what a fair compensation is, when you are entitled to it, how high it can be and how this interacts with a settlement agreement.
How is the transition compensation calculated?
The amount of the transition compensation depends on your monthly salary and the number of years you have been employed. Since 1 January 2020 a simple rule of thumb applies: you receive 1/3 of your gross monthly salary per year of service. In this regard, it does not matter whether you have now worked ten years for Philips have worked or were only recently employed at a café on the corner; the percentage remains the same.A few points to keep in mind:
- The compensation is calculated down to the exact day—so even for employees who have been employed for less than a year, it is calculated pro rata.
- Items such as holiday allowance, thirteenth month, fixed allowances, and bonuses count toward the calculation of your monthly salary.
- There is a maximum amount, which is adjusted annually (in 2024 this is €89.000 or, if your annual salary is higher, at most one year’s salary).
In short: the calculation is transparent and fair, but it’s worth making sure to include all pay components properly.
What is a fair compensation?
A fair compensation is an extra severance payment that the court can award on top of the transition payment. It is intended as compensation for employees who have been seriously disadvantaged by their employer’s actions.
This only arises in the case of a dismissal through the courts (cantonal judge or on appeal) and not as standard with a settlement agreement.
Additionally, the court on appeal may also award a fair compensation if it finds that the employer’s dismissal request was wrongly granted at first instance. In that situation, there does not necessarily have to be seriously culpable conduct by the employer; it can simply be a wrongful decision in the first round.
Exception: no transition payment in case of seriously culpable conduct by the employee
Note: you are not entitled to a transition payment if the dismissal is the result of your own seriously culpable conduct or omission. For example, in situations where you:
- commit serious fraud or theft;
- regularly fail to show up for work without a valid reason;
- are deliberately seriously culpable toward your employer, such as systematically ignoring reasonable instructions.
In all these cases, the court may decide that you will not receive a transition payment.
When are you entitled to fair compensation?
The court can award fair compensation if the employer has acted in a seriously culpable manner, for example, in the following situations:
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Dismissal without a valid reason.
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Dismissal due to discrimination or intimidation.
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The employer makes the work impossible through systematic bullying or an unworkable situation.
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The dismissal is a disguised summary dismissal without grounds.
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The employer does not comply with reintegration obligations in case of illness.
Only in exceptional cases
The fair compensation is only awarded in exceptional situations. The legislator calls this a “mouse hole” for good reason—it is truly intended for cases in which the employer seriously misbehaves. Examples include:
- The employment relationship has been disrupted due to reprehensible conduct by the employer, for example when an employee is penalized after rejecting unwelcome advances.
- The employer discriminates against or intimidates the employee.
- A false reason for dismissal is put forward with the aim of creating an unworkable situation and subsequently dismissing on the grounds of that disruption.
- The employer breaches its obligations during the reintegration of a sick employee.
- An employee becomes unfit for work due to insufficient care by the employer for the working conditions.
- The employer gives notice in contravention of a prohibition on termination, such as in the case of an unjustified summary dismissal.
- The re-employment condition is by the employer ignored.
Even if the employer is not aware of violating rules, for example in an unintentional breach of a dismissal ban, the court can still decide on a fair compensation. Even in cases where there is no direct malicious intent, an employee can receive compensation if the court finds that the dismissal was unjustified.This also applies to statutory directors and on appeal, where the court can still award a fair compensation if the dismissal request was wrongly granted.In short: a fair compensation only comes into play if your employer has really seriously erred—and the judge looks not only at intent, but also at the consequences and circumstances of the dismissal.
Also possible with a short length of service
Maybe you’re wondering: can you receive fair compensation if you have been employed for less than 24 months (and therefore are not entitled to a transition payment)? The answer is yes. Employees with a short length of service can also ask the court for fair compensation if the dismissal is the result of seriously culpable conduct by the employer. The length of your employment is therefore not a barrier to claiming this additional compensation.
Can a statutory director also apply for fair compensation?
Yes, as a statutory director you can also ask the court for fair compensation. This is possible if you believe your employment contract was wrongfully terminated, even if there is no seriously culpable conduct by the employer. The judge assesses on a case-by-case basis whether additional compensation is appropriate.
Examples from practice
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Example 1: An employee was dismissed after a conflict with his supervisor, without any evidence of poor performance. In addition to the transition payment, the judge awarded fair compensation of 6 months’ salary.
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Example 2: An employee was not offered suitable work during reintegration. The dismissal was therefore seriously culpable. In addition to the transition payment, the employee also received fair compensation of € 25.000.
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Example 3: An employee was summarily dismissed for a minor incident. The judge found this disproportionate and awarded a fair compensation of 12 months’ salary.
How high can the fair compensation be?
There is no fixed formula for the amount of the fair compensation. The judge looks at, among other things:
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The duration of the employment.
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The salary and employment conditions.
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The seriousness of the employer’s culpable conduct.
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The consequences of the dismissal for the employee.
The compensation can range from a few thousand euros to sometimes more than an annual salary.
Fair compensation and settlement agreement
In a VSO you usually only receive the transition payment (or a higher negotiated compensation). Still, the possibility of a fair compensation can be a strong bargaining tool be.
👉 If your employer knows that you stand a chance of being awarded a fair compensation by the court, they are often quicker to offer a better arrangement in the VSO.
Checklist: fair compensation
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📑 Check whether there is seriously culpable conduct by the employer.
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⚖️ Consider proceedings before the subdistrict court if the VSO is unreasonable.
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💶 Use the fair compensation as leverage in negotiations.
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📝 Always have your situation legally assessed.
Common mistakes
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Thinking that you always have a right to a fair compensation → this only applies in cases of seriously culpable conduct.
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Signing a VSO too quickly without checking whether a higher compensation is achievable through the court.
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Not obtaining a legal assessment of the chance of success before the cantonal judge.
Frequently asked questions (FAQ)
1. Do I always get a fair compensation upon dismissal?
No, only in cases of seriously culpable conduct by the employer.
2. How much is the fair compensation?
That is determined by the judge, depending on your situation.
3. Can I also receive fair compensation in a VSO?
Not formally, but you can negotiate a higher severance using this argument.
4. What is the difference between transition compensation and fair compensation?
The transition compensation is statutory and always owed, the fair compensation is additional and only in the case of culpable dismissal.
5. Do I need a lawyer to claim this?
Yes, a lawyer can assess whether the chance of success is high enough.
Why Arslan Advocaten?
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Experienced in proceedings in which fair compensation is sought
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Strong in negotiations for higher compensation in a VSO
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Always focused on your interests: maximum compensation and secure unemployment benefit rights
Conclusion
The fair compensation is an additional severance payment that is only awarded in cases of seriously culpable conduct by the employer. Although it is not a standard part of a settlement agreement, the possibility of it can be a powerful negotiating tool.
