When you receive a settlement agreement (VSO), the severance payment plays a crucial role. Often it includes the transition payment listed: the statutory compensation to which every employee is entitled upon dismissal.
Severance payment vs. transition payment: what is the difference?
The transition payment is a form of severance payment. But note: not every severance payment is automatically the transition payment. The distinction lies in the rules. The transition allowance and its calculation are laid down by law. The law states exactly when, as an employee, you are entitled to this.However, if you conclude a VSO with your employer, you are both free to agree on what severance pay you will receive. That does not have to be exactly the statutory transition allowance. Sometimes the compensation is higher, sometimes lower, or it may, for example, consist of a period of exemption from work with continued salary. In the case of a settlement agreement there are therefore no fixed rules: everything is negotiable, as long as both parties agree.
Yet this often goes wrong. Employers sometimes offer too low an amount, or forget to include certain components.
In this article we explain what the transition allowance is, how to calculate it, which mistakes are common, and how you can get more out of it through negotiations.
What is the transition allowance?
The transition allowance is the statutory severance pay that you receive when your employer terminates the employment contract – even if that happens via a settlement agreement. This compensation is intended to facilitate the transition (“transition”) to another job.
Every employee who has been employed for at least 1 day is entitled to a transition allowance upon dismissal.
How do you calculate the transition allowance?
The basic rule is:
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1/3 monthly salary per year worked
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For remaining months, a pro rata calculation
The calculation is based on the gross monthly salary, including:
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Holiday allowance
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Fixed allowances (shift work, thirteenth month, structural bonus)
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Average overtime compensation (if structural)
- Any bonuses or profit distributions
- Irregular hours allowance and/or shift allowance
- Year-end bonus
👉 Example:
An employee with a monthly salary of € 3.000 including allowances and 6 years of service is entitled to:
6 x (1/3 x € 3.000) = € 6.000 transition compensation.
What determines the amount of your compensation?
The amount of the transition compensation depends entirely on your personal situation. If you are suddenly dismissed without prior warnings, have always performed well, and have had a long period of service, the minimum transition compensation may sometimes not be proportionate to your efforts. In such cases, it is wise to negotiate a higher compensation.It is different when the employer has built a strong case or when you yourself have initiated a settlement agreement. Your negotiating position is then usually different.Do you have doubts about your situation or want to know what a reasonable compensation is?Feel free to present your situation to a legal expert for no-obligation advice. This way you’ll know exactly where you stand and can approach the conversation with your employer more confidently.
Common mistakes in the calculation
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Forgetting holiday pay – this should always be included.
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Not including fixed allowances – such as shift allowance or thirteenth month.
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Incorrect duration of employment – periods of extension often count.
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No pro rata calculation for partial months – even 1 day counts.
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Do not include subsequent contracts – subsequent temporary contracts with the same employer must be added up.
Examples from practice
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Example 1: An employee received a VSO with € 4.500 compensation. After review, it turned out that his shift allowance of € 300 had not been included. The correct compensation was € 6.000.
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Example 2: An employee worked 9 years and 10 months. The employer counted 9 years. The lawyer also claimed the 10 months, which resulted in an extra € 800.
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Example 3: An employee had 3 consecutive temporary contracts with a short break. The employer did not count this. The court ruled it had to be counted, which doubled the transition payment.
Can you get more than the transition payment?
Yes, the transition payment is the minimum. There is often room for negotiation. For example:
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Extra monthly salaries as compensation
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Training budget or outplacement
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Exemption from work while retaining salary
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Termination of the non-compete clause or compensation for that
👉 Example: An employee initially received only the transition payment (€ 5.000). After negotiations he received € 7.500 plus a training budget of € 2.000.
When is more possible?
The amount of your severance pay depends on your personal situation. Does the dismissal come as a surprise, without prior meetings or warnings, and was your employer always satisfied? Do you also have a long period of employment? Then the minimum transition payment is often not proportionate to your years of service and effort. In such a case you can usually demand more, and it is wise to negotiate firmly.Note: it is different if your employer has built an ironclad file or if you yourself took the initiative to leave. Then the room for negotiation is often smaller, but even then, tailored arrangements are possible.In short: don’t settle for only the statutory transition payment. Always start the conversation and negotiate your terms.
Checklist: transition payment in your VSO
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📊 Calculate yourself (or have it calculated) what you are entitled to
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📑 Check whether holiday pay and allowances are included
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📅 Check that all years and months of service count
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💶 Negotiate for more than the transition payment
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⚖️ Have your VSO legally reviewed
Note: an offer from your employer may seem attractive, but appearances can be deceiving. Employers can exert some pressure to reach an agreement quickly. Know that the transition payment is only the minimum – feel free to negotiate for extra months of salary, training budgets, or other terms that are important to you. So never just agree to a settlement agreement, especially if it does not include a severance payment or transition payment.Always seek advice before you sign, even if the offer looks good at first glance. That way you can be sure that you are not leaving any rights on the table and that all terms are arranged in your favor.
Frequently asked questions (FAQ)
1. Am I always entitled to a transition payment in a VSO?
Yes, unless you resign voluntarily without good reason.
2. How much is the transition compensation?
1/3 monthly salary per year worked, including fixed allowances and holiday pay.
3. Do I also receive compensation for short employment periods?
Yes, even after 1 day of employment you are entitled to a pro rata transition compensation.
4. Can I receive more than the transition compensation?
Yes, it is often possible to negotiate for extra months of salary or other benefits.
5. Must my employer reimburse my attorney’s fees?
That is customary and can be included in the settlement agreement.
Why Arslan Advocaten?
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Specialists in employment law and dismissal
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Carefully recalculate your severance pay
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Negotiating for higher compensation and better terms
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Costs often recovered from the employer
