The amount of the transition allowance is an important aspect in dismissal. This allowance can provide a financial safety net for employees who lose their jobs. The calculation of the transition allowance depends on two main factors: your gross monthly salary and the duration of the employment. As of 1 January 2024, the maximum amount for the transition allowance is set at € 94.000 gross, unless your annual salary is higher. In that case, the maximum compensation is equal to one gross annual salary.

Calculation of the transition allowance

Since 1 January 2020, the transition allowance applies from the first working day, even if you are dismissed during your probationary period. The calculation of the allowance is as follows:

• For each full year of service, you receive 1/3 of your gross monthly salary.
• For the months that are not a full year of service, you receive a proportional part: (gross salary received over the remaining months / gross monthly salary) x (1/3 gross monthly salary / 12).

Example calculation of the transition allowance

To make the calculation clear, here are some examples:

• Example 1: You have been employed for 9 years and 5 days, with a gross monthly salary of € 3.000. The calculation is as follows:

  • Compensation for 9 full years: 9 x (1/3 of € 3.000) = € 9.000.
  • Compensation for the last 5 days: Suppose you earned € 800 gross in that period. The formula is (800/3000) x (1000/12) = € 22,22.
  • Total transition compensation: € 9.000 + € 22,22 = € 9.022,22.

• Example 2: You are dismissed during your probationary period and the employment contract lasted only 5 days. If the gross salary over these 5 days is € 800, then the calculation is:

  • (€ 800 / € 800) x (1/3 of € 800 / 12) = € 22,22.

Maximum transition compensation in 2024

The maximum transition compensation is € 94.000 gross as of 1 January 2024. This amount is adjusted annually based on the development of collectively agreed wages. If your gross annual salary is higher than € 94.000, then you are entitled to a maximum of one gross annual salary as transition compensation.

What counts towards the gross monthly salary?

For the calculation of the transition compensation, it is important to make an accurate calculation of the gross monthly salary. The gross monthly salary consists not only of your base salary, but also of:

• Holiday allowance: Usually 8% of your gross annual salary.
• Fixed allowances: For example, shift allowance or overtime compensation.
• Bonuses and commissions: For piecework pay or variable remuneration, the average of the past 12 months is taken into account.
• Fixed year-end bonus: This is taken into account pro rata in the calculation of the compensation.

Transition compensation in case of illness

If you are ill at the time of dismissal, this does not affect the amount of your transition compensation. The compensation is based on the gross salary you earned before your illness. Your lower salary during sickness or leave is not used as the basis for calculating the compensation.

Deduction of costs for training and outplacement

Employers may, under certain conditions, deduct costs for training or outplacement from the transition compensation. These costs must be aimed at enhancing your employability outside the organization or in another position within the company and must be agreed with you in advance.

The conditions for this include:

• The costs must be specified and discussed with you.
• You must agree in writing to the deduction of these costs.
• The costs must have been incurred directly by the employer for the purpose of your dismissal or improving your employability.

Payment in installments

If your employer cannot pay the transition payment in a single payment without getting into financial difficulties, payment may be made in installments. This can be spread over a maximum of 6 months, but the employer will then owe statutory interest starting one month after the end of your employment.

Need help calculating your transition payment?

For many employees, the transition payment can be complex to calculate themselves. Therefore, it is advisable to engage a legal expert or lawyer if you are unsure about the amount of your payment. The attorneys at Arslan & Arslan are ready to advise you and help with your questions about dismissal and the associated compensation.