Written by Onur Arslan, employment lawyer at Arslan Advocaten. Registered in the legal practice areas register of the Netherlands Bar for employment law and personal injury. Last updated: 31 August 2026.
Am I entitled to a transition payment?
In principle every employee is entitled to a transition payment as soon as the employer ends the employment or does not continue it — however long you have been employed. The entitlement arises on notice given by the employer, on rescission by the subdistrict court and on the non-renewal of a fixed-term contract on the employer’s initiative. Since the Labour Market in Balance Act came into force the entitlement in principle applies from the first working day; the former threshold of two years’ service has lapsed. The entitlement itself is set out in article 7:673(1) of the Dutch Civil Code; the extension to the first working day applies to dismissals and non-renewals from 1 January 2020.
Source: art. 7:673(1) of the Dutch Civil Code (wetten.overheid.nl); Dutch government, "Labour Market in Balance Act (WAB): what has changed since 1 January 2020".
So what is decisive is who takes the initiative, not whether the dismissal went "nicely". If you give notice yourself, there is in principle no entitlement. If the employer ends it, in principle there is.
When the entitlement in principle does exist:
| Situation | Entitlement to a transition payment |
|---|---|
| The employer gives notice with UWV’s permission | in principle yes |
| The subdistrict court rescinds at the employer’s request | in principle yes |
| A fixed-term contract expires, the employer does not renew | in principle yes |
| The employer does not let the probationary period start / gives notice during it | in principle yes, pro rata to the duration |
| You give notice yourself | in principle no |
| You give notice yourself because of seriously culpable conduct by the employer | in principle yes |
| Termination by mutual consent | not by operation of law — see the separate question below |
| Summary dismissal for seriously culpable conduct on your part | in principle no |
| Ending on reaching state pension or pension age | in principle no |
| Ending before your eighteenth birthday, with an average of at most twelve hours’ work a week | in principle no |
Source: Dutch government, information on the transition payment on dismissal; art. 7:673(1) and (7) of the Dutch Civil Code.
The exceptions at the bottom of this table are narrow and are applied cautiously by the courts. "Seriously culpable conduct" is considerably heavier than a disturbed relationship or underperformance; an employer refusing the payment on that ground in principle needs a firmly substantiated file for it. Even where seriously culpable conduct is established, the court can still award the payment in whole or in part where withholding it would be unacceptable by standards of reasonableness and fairness. That equitable correction is in article 7:673(8) of the Dutch Civil Code: the subdistrict court can then award the payment in whole or in part after all.
How do I calculate my transition payment?
The transition payment amounts to one third of a month’s salary for each year the employment contract has lasted, with a proportionate part for the remaining period, and is subject to a statutory maximum. Since 2020 the law has worked with one fixed fraction over the whole period of service; the old scale with a higher accrual after ten years of service and the separate arrangement for those over 50 have lapsed. Article 7:673(2) of the Dutch Civil Code puts it as: "for each year that the employment contract has lasted, equal to one third of the wage per month and a proportionate part thereof for a period during which the employment contract has lasted less than a year". What counts as "wage" is set out in the Decree on the wage concept for the notification period payment and the transition payment.
The calculation consists of three steps that each have their own pitfall.
Step 1 — determine the correct monthly salary. This is not the amount at the top of your payslip. It is the gross monthly wage plus a number of fixed wage components. It is precisely here that things often go wrong, to the employee’s disadvantage.
| In principle counts | In principle does not count |
|---|---|
| Gross monthly salary | Expense allowances |
| Holiday allowance | Employer’s share of pension contributions |
| Fixed year-end bonus or thirteenth month | Company car — not designated as a wage component |
| Fixed shift allowance | Incidental, non-structural bonuses |
| Overtime payment | One-off gratuities |
| Bonuses, profit distributions and year-end payments over the three calendar years before the year of termination, divided by 36 |
The basic wage is the gross hourly wage times the agreed working hours per month, measured over the twelve months before the end of the employment contract. Added to that are: the holiday allowance and the fixed year-end payment you would be entitled to within twelve months, divided by twelve; the agreed fixed wage components over the last twelve months, divided by twelve; and the variable wage components over the three calendar years before the year in which the employment ends, divided by thirty-six. Only overtime payments and shift allowances are designated as fixed wage components; as variable components, bonuses, profit distributions and year-end payments. Components that are not designated — such as a company car or an expense allowance — therefore do not count.
Source: Decree on the wage concept for the notification period payment and the transition payment, art. 2 and 3; Regulation on wage components and working hours, art. 4 and 5 (wetten.overheid.nl).
Step 2 — determine the period of service. What is counted is the full duration of the employment, including periods preceding it where those count as successive employership. That is one of the most underestimated points: agency years, a payroll period or employment with a business that was taken over can count, provided the successive contracts were not separated by too long a break. That limit is in article 7:673(4)(b) of the Dutch Civil Code: successive employment contracts between the same parties are added together if they followed one another with intervals of at most six months. The same rule applies with different employers who are reasonably each other’s successor as regards the work performed — and expressly regardless of whether the new employer had insight into your suitability. For anyone who joined the same client through an agency, this can mean a difference of several years of accrual.
Step 3 — calculate the remainder pro rata. After the full years of service the remaining part of the employment is counted proportionately, to the exact day. So an employment of four years and seven months yields more than four years. For that reason a later end date can be worth money in negotiations.
The statutory maximum. There is an upper limit: the payment amounts to at most a fixed sum, or — if that is higher — the wage over twelve months. For 2026 that fixed sum is € 102,000.00. It is amended each 1 January by the Minister of Social Affairs and Employment in line with the development of contractual wages, rounded to a multiple of € 1,000. The amended amount applies only if the employment contract ends or is not continued on or after the date of amendment.
Source: art. 7:673(2) and (3) of the Dutch Civil Code, wetten.overheid.nl, version in force from 1 January 2026.
Worked example, purely to illustrate the method: an employee with six years and three months of service gets the accrual over six full years, plus a proportionate part for those three months, calculated over a monthly salary in which the holiday allowance and a fixed thirteenth month are also included. Had only the bare monthly wage been used, the outcome would be noticeably lower. This example only illustrates the accrual and deliberately contains no amounts; the fraction and the maximum are set out above, with the statutory source.
Source: Dutch government, transition payment calculator.
The calculator gives a floor, not an outcome. Online calculators work with the bare monthly salary and with the period of service you enter yourself. They know nothing about successive employership, about a structural overtime payment or about variable pay. In practice the difference between the outcome of a calculator and the amount someone is really entitled to is regularly substantial — and always in the same direction.
How much tax do I pay on my transition payment?
The transition payment is taxed as wage from former employment: your employer withholds payroll tax on it and pays out the remainder net. There is no favourable tax regime and no exemption; the payment simply counts towards your taxable income for the year of payment. Since the abolition of the annuity exemption, a severance payment can in principle no longer be paid tax-free into an annuity company or annuity policy; the annuity exemption in article 11(1)(g) of the Wages and Salaries Tax Act 1964 lapsed on 1 January 2014. Transitional law applies to annuities that already existed on 31 December 2013.
Two things routinely surprise people here.
The first: the amount withheld on payment is often higher than your eventual tax burden. On a one-off payment the employer applies the special rate, which is derived from your annual income of the previous year. If your actual income over the year of payment turns out lower — for example because you received unemployment benefit for part of the year — you will in principle get the amount over-withheld back through your income tax return.
The second: the payment can have knock-on effects on income-related schemes. A higher assessment income in the year of payment can affect housing benefit, healthcare benefit, the child-related budget or a personal contribution. That effect is not fiscal, but it certainly counts in your pocket.
| Question | Answer in principle |
|---|---|
| Is the payment taxed? | Yes, as wage from former employment |
| Does the employer withhold immediately? | Yes, at the special rate |
| Can I get money back? | Possibly, through the income tax return |
| Can I spread the payment? | Only by moving the payment date, for example to January — this is negotiable |
| Does it count towards benefits? | Yes, it raises your assessment income |
| Is a tax-free deposit possible? | In principle no longer |
Source: Tax and Customs Administration, treatment of severance payments.
Moving the payment date to the next calendar year is one of the few levers left in tax terms, and that lever is in the negotiation — not in the tax return. Whether it works out favourably depends on your expected income in both years.
Do I get a transition payment on termination by mutual consent?
Not by operation of law — but in practice the transition payment does form the floor of a serious proposal. The statutory entitlement is tied to notice, rescission or the non-renewal of a contract, not to a termination by mutual consent. So what you get in a settlement agreement is not a statutory right but the result of negotiation.
That sounds less favourable than it is. With a settlement agreement your employer is buying off a procedure. If they do not take that route, they have to go to UWV or the subdistrict court, with the associated time, legal costs and the risk that the ground for dismissal does not hold. Moreover, on a successful rescission they would owe the transition payment anyway. A proposal that stays structurally below the transition payment is therefore in principle not a realistic proposal.
What influences the amount in the negotiation:
| Factor | Works in your favour when |
|---|---|
| File building | the employer has no improvement process or file |
| Ground for dismissal | the ground is legally shaky |
| Urgency | the employer wants clarity quickly, for example in a reorganisation or takeover |
| Prohibition on termination | a prohibition on termination applies, such as during illness or pregnancy |
| Employer’s culpability | there are indications of seriously culpable conduct — see fair compensation |
| Alternative route | going to the subdistrict court is expensive or uncertain for the employer |
Besides the amount itself there is more to be gained than people think: a later end date, release from work on full pay, payment of holiday days, a positive reference letter, a contribution to legal costs, the lapse of a non-competition or non-solicitation clause, and an outplacement budget.
Watch out for unemployment benefit. A settlement agreement must be drafted neutrally, otherwise UWV can refuse the benefit. The amount of the payment in principle has no effect on your entitlement to unemployment benefit: UWV expressly counts the transition payment and the severance payment among the income you do not have to report alongside an unemployment benefit, and which is therefore not deducted from the benefit. If you receive a supplement from UWV on top of your unemployment benefit, other rules apply and you do have to report the payment. The notional notice period does determine when your unemployment benefit starts.
Source: UWV, "Which income to report with an unemployment benefit" and the conditions for unemployment benefit.
Can I waive my transition payment?
Yes, you can waive the entitlement, but rarely without something in return — and in a settlement agreement that often happens unnoticed. The transition payment is not a mandatory right from which any departure is always void; article 7:673(1) of the Dutch Civil Code ties the entitlement to notice, rescission or the non-continuation of a contract, and therefore not to a termination by mutual consent. In a termination agreement the parties can therefore in principle agree a lower payment or none at all.
The risk lies in the full and final discharge clause. Almost every settlement agreement contains a provision in which the parties declare that they have no further claims against each other. If you sign that without the payment having been dealt with in it, the subject is in principle settled — even if you would have been legally entitled to it on another route to dismissal.
Waiving can be sensible where something is offered in return that is worth more to you: a considerably later end date with continued pay, the lapse of a non-competition clause that would cost you your next job, or avoiding a ground for dismissal that weighs heavily in your sector. Waiving without anything in return is almost never in your interest.
There is a cooling-off period. After signing a settlement agreement you can in principle go back on it in writing and without giving reasons within two weeks; if the agreement does not mention that cooling-off period, three weeks applies in principle. The law speaks of fourteen days from the date on which the agreement came about; if the employer does not state the right in the agreement, the period becomes three weeks. A clause excluding or limiting this right is void (art. 7:670b(2), (3) and (6) of the Dutch Civil Code). Anyone who has already signed and has doubts would be wise to seek legal advice quickly — the period runs from the day of signing.
Source: art. 7:670b of the Dutch Civil Code, wetten.overheid.nl.
Am I entitled to a transition payment if my fixed-term contract is not renewed?
In principle yes. Even where a fixed-term contract simply expires and the employer does not renew, the entitlement to a transition payment arises. That the contract ends "by itself" makes no difference: what is decisive is that continuation fails to happen on the employer’s initiative.
This is one of the most missed entitlements in Dutch employment law. The payment is not paid out automatically — you have to ask for it, and many employees do not because they assume there is nothing to be had with an expiring contract.
| What is at play with fixed-term contracts | What it turns on |
|---|---|
| Several successive contracts | they are in principle added together if the break was not too long |
| A preceding agency period | can count through successive employership |
| Payroll arrangement | can count; the payroll company is formally the employer |
| Notification payment | is separate from this and in principle comes on top |
| Forfeiture period | the power to go to the subdistrict court lapses three months after the end of the employment — do not wait |
The period is set out in article 7:686a(4)(b) of the Dutch Civil Code: an application under article 7:673 of the Dutch Civil Code must be filed with the subdistrict court within three months of the day on which the employment contract ended. That is a forfeiture period, not a limitation period.
Source: art. 7:686a(4) of the Dutch Civil Code, wetten.overheid.nl.
By way of illustration. An administrative assistant works on a one-year contract that simply expires. She assumes there is nothing to arrange with an expiring contract: after all, nobody is dismissing her. Yet in principle there is an entitlement to a transition payment where the employer does not continue the contract, and that entitlement is not paid out of its own accord — it has to be asked for. So the question is not whether the contract ended "by itself", but on whose initiative continuation failed to happen. This is an illustrative example of the rule, not a case handled by our firm.
The notification payment is often confused with this. That is a separate payment the employer owes if they do not tell you in writing in good time whether the contract will be continued. The two do not exclude each other.
What is the difference between a transition payment, a severance payment and fair compensation?
"Severance payment" is everyday language; the law knows the transition payment as the standard payment and fair compensation as an additional payment where the employer has acted in a seriously culpable manner. Anyone searching for "severance payment" means the transition payment in nine cases out of ten. Fair compensation is something fundamentally different: not a fixed arithmetical entitlement, but a sanction for misconduct by the employer.
| Transition payment | Fair compensation | |
|---|---|---|
| Basis | a statutory entitlement on termination by the employer | seriously culpable acts or omissions by the employer |
| Calculation | a fixed formula based on salary and period of service | determined by the court, no formula |
| Amount | limited by a statutory maximum | in principle unlimited |
| How often | standard on dismissal by the employer | an exception |
| Where it is established | in principle payable automatically | almost always through the subdistrict court |
| Can be combined | — | yes, comes on top of the transition payment |
Fair compensation is intended for situations in which the employer has knowingly broken the rules: a dismissal without permission, a deliberately constructed false file, dismissal in response to a justified complaint, or an employer who deliberately makes the working relationship unworkable in order to force a rescission. The bar is high and the burden of proof lies with the employee. In fixing the amount the court looks at the consequences for the employee, including the expected loss of income and the degree of culpability. The Supreme Court worked out that test in the so-called New Hairstyle ruling of 30 June 2017 (ECLI:NL:HR:2017:1187), on the size of fair compensation, the consequences criterion and its relationship to the transition payment.
Do I get a transition payment on dismissal after two years of illness?
In principle yes — the entitlement to a transition payment also continues where the employment is ended after long-term incapacity for work. Illness is not a ground for exclusion. Employers who refuse the payment on this ground usually rely wrongly on the cost of two years of continued pay.
There is a compensation scheme for the employer: they can reclaim the transition payment paid from UWV where the employment has been ended because of long-term incapacity for work. For you that is above all a negotiating argument — the objection "that payment costs me too much" in principle does not hold in this situation. The basis is set out in article 7:673e of the Dutch Civil Code, which expressly also applies where the employment has been ended by agreement while the employer would have owed a transition payment on notice or rescission (subsection 3). The employer must apply to UWV for the compensation within six months of having paid the full payment to the employee.
Source: art. 7:673e of the Dutch Civil Code (wetten.overheid.nl); UWV, "Compensation for the transition payment for a long-term sick employee".
Watch out for the dormant employment. Some employers do not end the employment after two years of illness, but let it run on "dormant" so as not to have to pay the payment. The Supreme Court has ruled that an employer is in principle obliged to cooperate in a termination with the transition payment where the employee requests it. That is the Xella ruling of 8 November 2019 (ECLI:NL:HR:2019:1734). The Supreme Court put the starting point as follows: if the requirements for termination because of long-term incapacity for work are met, the employer is obliged on the basis of good employership (art. 7:611 of the Dutch Civil Code) to agree to an employee’s proposal for termination by mutual consent, with a payment at the level of the statutory transition payment. Two limits go with it: the payment need not exceed what would have been owed on termination on the day after the two years of illness expired, and there is an exception where the employer has a justified interest in maintaining the employment — for example real reintegration prospects. An approaching pension age of the employee is expressly not such an interest.
Source: Supreme Court 8 November 2019, ECLI:NL:HR:2019:1734 (rechtspraak.nl).
Do not simply sign during illness. A settlement agreement during incapacity for work can affect your position under the Sickness Benefits Act or the WIA and cost you the protection of the prohibition on termination. That risk almost always weighs more heavily than the amount of the payment offered.
Source: Dutch government, dismissal on long-term incapacity for work.
Can I get a higher payment than the statutory transition payment?
Yes — the transition payment is a floor, not a ceiling. In every situation in which the employer needs something from you, room arises to get above it. That "something" is usually your signature on a settlement agreement, by which they avoid proceedings.
Where higher payments come from in practice:
- A weak file. Dismissal for underperformance without an improvement process, or
a disturbed working relationship the employer caused themselves, often does not hold up before the subdistrict court. That risk is worth money.
- A prohibition on termination. In cases of illness, pregnancy or a position on the
works council, the employer cannot simply give notice.
- Seriously culpable conduct. Then fair compensation comes into play,
which is not bound by a maximum.
- Time pressure. A reorganisation, a takeover or a due diligence makes a
quick, clean settlement worth a great deal to the employer.
- A social plan. With a collective dismissal there is often a collective agreement or social
plan with a multiplier on top of the statutory payment. Always compare your individual proposal with what the social plan offers.
- What is not in money. Release from work, a longer end date, the
lapse of a non-competition clause and a contribution to legal costs together sometimes represent more value than a few thousand euros extra.
Negotiating starts with knowing what the alternative route costs the employer. That is exactly what an employment lawyer assesses in the first meeting.
My employer does not want to pay a transition payment. What now?
Claim the amount in writing and file an application with the subdistrict court within three months of the end of your employment — after that the power to do so lapses. This is a forfeiture period and not a limitation period: it cannot be interrupted by a mere letter and the court applies it of its own motion. The period is set out in article 7:686a(4)(b) of the Dutch Civil Code. Statutory interest is moreover payable on the amount of the transition payment from one month after the day on which the employment contract ended (art. 7:686a(1)).
Source: art. 7:686a of the Dutch Civil Code, wetten.overheid.nl.
By way of illustration. A warehouse worker asks for the payment by email after the end of his employment. The employer replies politely, says that the administration is looking into it, and then it goes quiet. After two months he sends a reminder and waits again, because the conversation was going well. Such an exchange of letters does not, however, keep the period alive: the power to file an application with the subdistrict court lapses three months after the day on which the employment ended, and a forfeiture period cannot be interrupted. The question is then no longer whether the calculation was correct, but whether there is still a power left to put it before the court. This is an illustrative example of the rule, not a case handled by our firm.
The route in steps:
- Give the employer written notice of default and ask for payment, with a short
period and a calculation.
- Keep proof of dispatch. With a forfeiture period the date is decisive.
- If payment does not follow, an application can be filed with the subdistrict
court. For these proceedings a lawyer is in principle not compulsory, but the calculation and the successive-employership question are rarely straightforward.
- At the same time assess whether, alongside the transition payment, there is an entitlement to
fair compensation, compensation for irregular notice or a notification payment. Those claims run in the same proceedings.
If your employer goes bankrupt, the claim is not automatically off the table, but whether and to what extent anything can still be collected depends on your situation and on the winding up of the bankruptcy. Have that assessed before you assume the payment is lost.
Checklist: check this before you agree
- Has the period of service been counted in full, including agency, payroll or
predecessor periods?
- Has the full wage concept been used — holiday allowance, fixed
year-end payment, structural overtime, fixed allowances?
- Has the remaining part of the last year been counted pro rata?
- Has the statutory maximum been applied correctly, and is your annual salary possibly higher?
- Is there a social plan or collective agreement against it, and does that offer more?
- Has the end date been negotiated — both for the accrual and for the unemployment benefit start date?
- Has the payment been expressly kept outside the full and final discharge or built into it?
- Has the payment date been chosen in a tax-efficient way?
- Are you ill? Have continued pay, the Sickness Benefits Act, unemployment benefit and the WIA assessed separately.
- Has it been assessed whether, alongside the transition payment, there are grounds for fair
compensation?
Your situation in particular
| Situation | What it turns on | Read on |
|---|---|---|
| Fixed-term contract not renewed | the entitlement does exist, but you have to ask for it | Transition payment with fixed-term contracts |
| Agency worker | agency years can count through successive employership | Transition payment for agency workers |
| Settlement agreement | no statutory entitlement, but the floor of the negotiation | Settlement agreement and the transition payment |
| Notice period | mistakes in the end date cost both accrual and unemployment benefit | Notice period and the transition payment |
| Seriously culpable employer | fair compensation on top | Fair compensation alongside the transition payment |
| Reorganisation | compare with the social plan | Dismissal in a reorganisation |
| Long-term illness | dormant employment and the compensation scheme | Transition payment after two years of illness |
| Payroll | the payroll company is formally the employer | Payroll and dismissal |
| Employer’s bankruptcy | what happens to your entitlement in a bankruptcy | Dismissal in a bankruptcy |
About this advice
Arslan Advocaten handles employment law cases from offices in The Hague, Rotterdam, Amsterdam, Utrecht, Tilburg and Eindhoven. We assess a dismissal proposal or a calculation of the transition payment free of charge and, besides Dutch, also speak Turkish and Polish.
Calculating a transition payment looks like arithmetic, but the outcome stands or falls on two questions no calculator answers: which years count, and which wage components belong in the monthly salary. Have the amount checked before you sign — after the full and final discharge that scope is in principle gone.
Call 070 450 0300 or send us your question through the contact form. We will let you know where you stand and what the next step is.