As a temporary agency worker, just like regular employees, you may be eligible for a transition payment. This is a form of severance pay that you receive from your employer when your contract is terminated. The transition payment is intended to help you move from one job to another, for example through additional training. In this article, we discuss in detail how the transition payment for temporary agency workers works, when you are entitled to it, and how its amount is calculated.

What is a transition payment?

A transition payment, also called severance pay, is an amount you receive from your employer when your contract ends. This payment is intended to facilitate the transition to a new job. You can use the money, for example, for additional training or retraining. The amount of the transition payment is set by law and equals one third of the gross monthly salary per year worked. The payment applies not only to permanent employees but also to temporary agency workers.

When are you entitled to a transition payment as a temporary agency worker?

As temporary agency worker you are entitled to a transition payment when your contract is terminated by your employer, or if your contract is not renewed. This has applied since the introduction of the Balanced Labour Market Act (WAB) on 1 January 2020. Before this date, the situation was different, but since then every temporary agency worker from day one accrues entitlement to a transition payment. This means that even short-term employment contracts give rise to a payment.

What is in the Balanced Labour Market Act about transition compensation?

The Balanced Labour Market Act (WAB) has introduced important changes for temporary agency workers. Since 1 January 2020, you are entitled to transition compensation from the first working day, regardless of the type of contract or its duration. Even if you have only worked for a few months, you start accruing entitlement immediately. Previously, a minimum period of two years applied before you could claim compensation, but that requirement has been abolished by the WAB.In short: the WAB ensures that temporary agency workers have the same rights as permanent employees when it comes to the accrual of transition compensation. This means that as a temporary agency worker you are no longer disadvantaged and always enjoy protection from the start of your employment.

The main conditions for qualifying for transition compensation as a temporary agency worker are:

• Your contract is terminated by the employer.
• You are 18 years or older (unless you are a minor and have worked more than 12 hours per week).
• You have not yet reached the state pension age.

Are you entitled to a transition payment if you work under a temporary agency clause?

The right to a transition payment can also apply to temporary agency workers with a temporary agency clause. Since the introduction of the WAB you accrue entitlement from the first working day. This right arises as soon as your employment ends at the employer’s initiative, including when your contract ends by operation of law because of the temporary agency clause. It is important, however, that your contract actually ends due to a decision by the employer or because it simply is not extended.Note: with a temporary agency clause, it can sometimes happen that the employment contract is terminated immediately once the assignment ends. Even in that case, provided the statutory conditions are met, you are entitled to a transition payment—just like other temporary agency workers.

Does the phase of your temporary agency work matter for the right to a transition payment?

No, the phase you are in as a temporary agency worker—whether that is phase A, B, or C—no longer affects your right to a transition payment. Since the introduction of the WAB you are entitled from the first working day to the accrual of a transition payment, regardless of which temporary agency phase you are in. You therefore do not need to have completed a certain number of years of service or a specific temporary agency phase to qualify.

How is the transition payment for temporary agency workers calculated?

The calculation of the transition payment for temporary agency workers is almost the same as for regular employees. The amount of the transition payment depends on a number of factors, such as the duration of the employment and the gross salary. For the calculation, one third (1/3) of the gross monthly salary per year worked is used.

Below are the factors that determine the calculation of the transition payment:

• Duration of employment: The number of years, months, and days you worked for the employer is included in the calculation.
• Gross monthly salary: This includes holiday allowance and any supplements such as a thirteenth month or bonuses.
• Average salary calculation: As a temporary agency worker, you sometimes work without a fixed monthly salary. In that case, an average salary is calculated based on the periods in which you worked. In this context, you are paid per hour and usually receive your pay every 4 weeks. For calculating the transition payment, the average monthly wage over the last 12 months of your contract is used. Did your contract last less than 12 months? Then the average is taken over the entire duration of the contract.

How do you determine the average monthly wage for a short contract?

Did your agency contract last less than 12 months? Then, for calculating your transition payment, the average pay you earned over the entire term of the contract is used. Everything you received during that period—salary, holiday allowance, supplements, and any bonuses—is added together and then converted into an average monthly amount. This way, the payment is fairly aligned with what you actually earned during your employment.

The maximum transition allowance amounts to € 94,000 in 2024, unless your annual salary is higher. In that case, your gross annual salary applies as the maximum. This maximum amount is indexed annually.

Which costs may the employer deduct from the transition allowance?

It may happen that your employer deducts certain costs from the transition allowance. By law, this is only allowed under strict conditions. These are costs that actually contribute to your prospects on the labor market. Broadly speaking, there are two types of costs that may be deducted:

• Transition costs: These are costs incurred by the employer to guide you to another job. Examples include paying for outplacement programs, job application training, or guidance during retraining. The employer must inform you of this in advance and ask for your written consent if the costs are set off against your transition allowance.
• Employability costs: These are costs that the employer incurred before the end of the employment to increase your employability outside the organization, for example training costs that are not directly related to your current position. Your employer also needs your consent to set off these costs.

Other costs, such as outstanding vacation days or fines, may not be deducted from the transition allowance. Has your employer nevertheless withheld costs you do not agree with? Then it is wise to seek legal advice to assess whether this is justified.

What happens if a temporary agency worker enters into employment with the hirer?

It often happens that temporary agency workers enter into direct employment with the hirer after some time. In that case, the temporary worker is not entitled to a transition payment from the temp agency, since the employment relationship there is terminated. However, the years of service accrued at the temp agency still count toward the transition payment if the employee is later dismissed by the hirer. This means that the employment history at the temp agency is included in the calculation of the transition payment with the new employer.

Please note: if your employment with the temp agency ends and you cannot start working with the hirer immediately, there may be no other work for you. In such a case, you will be dependent on unemployment benefits (WW), and the temp agency is responsible for paying the transition payment. It is therefore important to carefully check whether you actually enter into employment with the hirer immediately, or whether there is a period of unemployment in between.

This way, you will know for sure who is responsible for paying your transition payment and you won’t be faced with surprises.

Example calculation of the transition payment for a temporary agency worker

Suppose you have worked as a temporary agency worker for two years for a gross monthly salary of € 2.500. You would calculate the transition payment as follows:

• Step 1: The compensation per year worked is one third of the gross monthly salary. In this case, that is: 1/3 x € 2.500 = € 833,33.
• Step 2: Since you have worked two full years, you multiply this amount by two: € 833,33 x 2 = € 1.666,66.
• Step 3: The transition payment in this example is € 1.666,66.

What should you pay attention to as a temporary agency worker?

Although the law has significantly improved the rights of temporary agency workers, it is important to keep a number of things in mind:

1. Calculation of the number of years of service: Make sure that all the years you have worked (also at other employment agencies or employers) are correctly included.
2. Fixed or flexible salary: If you do not have a fixed monthly salary, an average must be calculated. Check whether this has been calculated correctly by your employer or temp agency.
3. Employment with the hirer: If you enter into employment with the hirer, remember that your employment history with the temp agency counts toward your transition payment.

Conclusion

As a temporary agency worker, you are also entitled to a transition payment when your contract ends. The calculation of this compensation is similar to that for regular employees, and you accrue entitlement from day one. It is important to be well informed about your rights, especially if you have worked for a long time for an employer as a temp. Do you have questions about your specific situation or want to know what you are entitled to? Then contact the employment law attorneys of Arslan Attorneys for expert advice.

Questions about the transition payment?

For more information or a personal consultation, you can contact our office. We are ready to help you with all your questions about employment law and transition payments.