Upon dismissal, an employee is often entitled to a compensation. The best-known is the transition compensation, which in almost all cases of dismissal must be paid by the employer. In some situations, on top of that, an fair compensation may be awarded, for example if the employer has acted in a seriously culpable manner.

In this article, we explain what both types of compensation are, how they are calculated, and how you can make sure you get what you are entitled to.

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What is the transition compensation?

The transition compensation is the statutory severance pay.

• Intended as compensation and to make the transition to other work easier.

• You are entitled to it in the following cases:

  • Dismissal via the UWV or the court.

  • Dismissal via a settlement agreement (VSO).

  • Non-renewal of a fixed-term contract.

Even with temporary contracts, you are entitled to a transition payment, even if you have worked only a short time. When terminating a fixed-term employment contract, it is examined whether early termination is possible. If your contract or the collective labor agreement states that early termination is permitted, the same calculation applies as for a permanent contract. If early termination is not permitted, the compensation can even be equal to the salary over the remaining term of the contract. For example: with a one-year contract that is terminated after three months without an early termination option, the compensation can amount to nine months of salary (the remaining duration of the contract).This way, the law prevents it from becoming more advantageous for employers to terminate a fixed-term contract early.

👉 Only for summary dismissal or the employee’s own resignation, this right lapses, unless the employer has acted in a seriously culpable manner.

What compensation can an employee receive for early termination of a fixed-term contract?

Sometimes a fixed-term contract ends before the agreed end date, and that can raise questions about your rights to compensation. What can you expect if your employer terminates the employment too early?Main rule: compensation for the missed pay periodIs your fixed-term contract terminated early, while the contract does not stipulate that early termination is possible? Then you generally have the right to compensation equal to the gross salary you would have received up to the agreed end date of the contract.Practical example:Suppose you have a one-year contract that started on 1 July. Your employer terminates your employment on 1 February—five months before the agreed end date. In this case you can claim compensation equal to five months’ pay.Special situations

• Sometimes the employer engages the subdistrict court judge for termination of the employment contract, even if early termination was not agreed. The judge can then decide that you receive compensation, often equal to the lost wages.
• Has the employer behaved in a seriously culpable manner? Then the judge can increase the compensation.
• Have you yourself acted in a seriously culpable manner? Then can the subdistrict court judge reduce the damages or even award them to the employer.

Note:If there was early termination without consent, the employer is in principle obliged to compensate the damage you suffer as a result. In that case, you will not only receive the ‘normal’ wages, but possibly also additional compensation if your situation warrants it. The judge can always decide to reduce the amount, depending on the circumstances.This way, you are protected if your temporary employment contract ends unexpectedly early, and you know what you are entitled to.

Can the statutory transition payment be deviated from?

Yes, that is possible. In a collective labor agreement or employment contract, arrangements can be made that are more favorable than the statutory transition payment. In other words: the statutory scheme is a minimum. Employers and employees may therefore always agree that a higher compensation will be paid upon dismissal. If such arrangements have been laid down, the employer is contractually bound to them.Note: deviations are only permitted in favor of the employee—a lower compensation than the statutory transition payment is not allowed.

When can a different arrangement apply in a collective labor agreement instead of the transition payment?

In some cases, a CAO (collective labor agreement) scope for a different arrangement. This can occur particularly in case of dismissal for business-economic reasons.The CAO can then contain a different, possibly higher or lower, compensation that replaces the statutory transition payment.

• Important points to note:
• The replacement scheme does not have to be the same as the regular transition compensation.
• The alternative compensation or provision must be aimed at reducing unemployment, for example through retraining, assistance in finding a new job, or continued wage payment.

It is not permitted to deviate at will: this is only allowed in the case of dismissal for business-economic reasons under the law (Art. 7:673b Dutch Civil Code).Are you unsure whether your collective labour agreement is applicable to this? Then always check the text of the collective labour agreement

or ask your trade union, so you know where you stand.

May an employment contract or collective labour agreement stipulate a higher compensation than the statutory transition compensation?Yes, it is possible in your employment contract or collective labour agreement to make agreements about a higher payment than the statutory transition payment. This can, for example, involve an additional payment on top of the transition payment, provided it is clear in which situations this additional payment applies.

• Note:
• It is often agreed that the higher payment only applies when the dismissal is at the employer’s initiative and not in the case of summary dismissal or if you resign yourself.In the employment contract or collective labour agreement

it must state that it is an additional payment—so not in place of the statutory transition payment, unless specifically agreed otherwise.Also within a collective labour agreement

•  exceptions may be agreed upon:
• A higher compensation may be granted upon dismissal.It is possible that the collective labor agreement (CLA) provides for an arrangement that (in some situations) fully or partially replaces the transition payment, particularly in cases of dismissal for business-related economic reasons

. Note: such a replacement arrangement is usually intended to prevent or reduce unemployment.In short: in addition to the statutory transition payment there is room for supplementary or alternative agreements, but these must be clearly recorded in writing. Are you unsure about your rights? Always check the text of your contract or collective labor agreement (CLA)

 and seek advice if needed.

Is the employer required to cooperate in terminating a dormant employment contract after two years of illness?Yes, the employer is required to cooperate in terminating a so-called ‘dormant employment contract’ if the employee requests this and, after more than two years of illness, can no longer work. The Supreme Court of the Netherlands has ruled clearly on this: good employer practice means that an employer may not artificially allow the employment contract to continue without paying wages, solely to postpone payment of the transition allowance.In concrete terms, this means that if you, as an employee, after two years of illness and full incapacity for work, request the termination of your employment contract, the employer must grant that request. This also includes paying the transition allowance as it would be due after exactly 24 months of illness. It does not matter whether your employer receives (partial) reimbursement of the allowance through the UWV; it concerns your right to this statutory compensation.

Note: this obligation only applies if you are no longer able to work at all in your own position or in suitable, adjusted work with your employer.

In which cases can the cantonal judge terminate a fixed-term employment contract?Even if in your fixed-term employment contract states that early termination is not possible, the cantonal judge can still decide to terminate the contract earlier. This may be the case, for example, when there are compelling circumstances, such as business-economic reasons or long-term incapacity for work. In such cases, your employer may go directly to the cantonal judge , without first going through the UWV-procedure.The judge then assesses whether the termination is justified. So it does not matter that your contract includes a prohibition on termination during the term; the cantonal judge

 can still override that if the situation warrants it.

How does the termination of a temporary contract work if interim termination is not allowed?Sometimes a temporary contract states that terminating during the term is not possible. What exactly does that mean? In that case, neither the employer nor the employee may simply end the employment contract before the agreed end date. The agreement therefore automatically continues until the agreed time, for example from 1 July to 1 July the following year.

• Still, it can happen that an employer wants to terminate the contract earlier. There are a few scenarios for this:Notice at the end date:
•  Without the option of interim termination, notice must always take place on the agreed end date.Want to stop earlier anyway:
•  Does the employer want to stop earlier without this being agreed in the contract? Then he must go to the subdistrict court judge and ask for permission to dissolve the employment. The judge will then assess the request and may—depending on the situation—determine that the employee is entitled to compensation. Often that is the lost wages for the remaining contract period.Exceptions:

 In some (special) situations, such as summary dismissal or business-economic reasons, the subdistrict court judge can still dissolve the contract even if the right to interim termination is not included in the contract.Note: Sometimes the employer tries to terminate the contract early, for example with permission from the UWV, even though this is not provided for in the contract. Even then, the employee is in principle entitled to compensation equal to the wages for the period the contract should still have run. In some cases, the court may reduce this compensation.

In short: with a temporary contract without an interim termination option, early termination is difficult and often costly for the employer. The employee can count on protection and compensation if the agreements are not honored.

Compensation upon business closure due to illness or infirmityMany employers wonder whether they can also claim compensation for the transition payment if they have to close their business due to illness or infirmity. At present, the existing compensation schemes only apply if the business stops because of the employer’s retirement or death.The rules for business closure due to illness or permanent infirmity are still under development. A scheme is being worked on, but first it must be established that the employer is permanently unable to work due to medical circumstances. This process has not yet been completed—so as of March 2024 it is uncertain if and when this compensation option will actually become available.

As soon as there is more clarity on this, the conditions and the application process will be announced.

What is the most common process for terminating an employment contract in the case of long-term incapacity for work?In practice, in cases of long-term incapacity for work, a settlement agreement (VSO) is usually chosen. In it, the employer and employee make arrangements together about terminating the employment contract, with long-term illness recorded as the reason. By making clear agreements in time, both parties know where they stand, and it often creates more calm and clarity.Often, matters such as the notice period, payment of outstanding vacation days, and the transition payment are included in this agreement. Note: it is wise to have an expert, for example from the UWV

 or a legal advisor, review the agreement before you sign. This way you can be sure that your rights and obligations are properly arranged.

For which grounds for dismissal does the compensation scheme for small employers apply?

• Small employers—meaning employers with fewer than 25 employees—are eligible for a special compensation scheme. But this scheme does not apply to just any dismissal. There are a few specific situations in which the government steps in:Upon the employer’s retirement: Is a small business owner closing his business because he is retiring? Then he can apply for compensation for the transition payments paid to his staff from the UWV
• .In the event of the employer’s death:

 If the owner of a small business dies and the company therefore ceases to exist, the compensation scheme also applies to the transition compensation payments that must be paid to the employees.Note: the condition is that at least the dismissal of one employee via the UWV has been approved (on business-economic grounds). In addition, the full transition compensation must have been paid after 1 January 2021. Applying for compensation is done digitally via the UWV.

At this moment (March 2024), dismissals due to the employer’s long-term illness or incapacity for work are not yet covered by this scheme. This may change in the future, but there is no clarity on that yet.

When is a small employer eligible for reimbursement of transition compensation payments?For small employers (fewer than 25 employees), since 1 January 2021 there has been a scheme that provides a solution in the event of business termination due to retirement or death. In these situations, it can be financially burdensome for the employer or their surviving relatives to pay transition compensation to the staff. Therefore, there is a possibility to have these costs compensated by the UWV.

• When is a small employer eligible?
• There must be a business closure due to the owner’s retirement or death.At least one dismissal must have been approved by the UWV
•  for business-economic reasons.
• The full transition payments must have actually been paid to the employees after 1 January 2021.The application for compensation is submitted digitally to the UWV

.Note: For business closure due to the owner’s long-term illness, this compensation scheme does not (yet) exist. The government is working on rules for this, but at the moment it is uncertain when and whether that expansion will happen.

This way, small employers or their surviving relatives get a helping hand when they inevitably have to part with their staff due to circumstances beyond their control.

Is there compensation for partial dismissal due to incapacity for work?Sometimes there is no full dismissal, but the contract is partially terminated because the employee can permanently work fewer hours due to incapacity for work. This is called partial dismissal. Whether, as an employer, you are also eligible for reimbursement of the transition payment (as with full dismissal after long-term illness) in such a partial termination is not yet entirely clear at this time. The UWV must still take a definitive position on this.In short: for complete clarity about compensation in the case of partial dismissal due to incapacity for work, it is wise to await the decision of the UWV

and, if in doubt, seek legal advice.

Reimbursement of the transition allowance in case of long-term incapacity for workSuppose your employee has been unfit for work for more than two years and the employment contract is terminated. In that case, as an employer you must pay a transition allowance. Fortunately, in many cases you can get this allowance back via the UWV.

• To be eligible for this, the following conditions apply:
• The employment contract has been terminated due to long-term incapacity for work, after two years of illness.This can happen through dismissal with permission from the UWV
• , via a settlement agreement or (in some cases) via termination by the court.

Only if the employee is no longer able to work due to illness (so not in the case of resignation by the employee or other grounds).

What steps and documents are needed?To apply for compensation, you must submit an application within 6 months after paying the full transition compensation to the UWV

• . You will need, among other things:
• The employment contract and proof of wages paid during sickness;Proof that the employment was terminated due to long-term incapacity for work (such as a dismissal letter, approval UWV
• , or the termination agreement);
• If applicable: a statement that your employee had been sick for more than two years at the time of termination, including the occupational physician’s name;

The calculation and proof of payment of the transition compensation.

Note: this scheme applies retroactively to July 1, 2015, but there are plans to discontinue the compensation from mid-2026 for larger employers (25 employees or more). Acting quickly remains important if you wish to qualify for this.

Compensation for the transition payment in case of long-term incapacity for workHas an employee been ill for more than two years and can he no longer do his work? Then the employment contract may be terminated and the employee is entitled to a transition payment. But what if the employer has to pay this compensation—while the employee has been unable to work for years? Fortunately, there is a special scheme.In this situation, employers can apply for compensation from the UWV. This means that the amount they must pay as a transition payment upon dismissal after long-term incapacity for work will later be reimbursed (partly or entirely). This applies to employment contracts that have been terminated via the UWV, a settlement agreement or dissolution by the court, as long as it is related to long-term illness.

• Important points to note:
• The scheme applies retroactively from 1 July 2015.
• The application for compensation must be submitted no later than six months after payment of the full transition compensation.
• The application must include, among other things, the employment contract, pay slips during the period of illness, supporting documents for the dismissal due to long-term incapacity for work, and proof of payment of the transition compensation.

Note: There are plans to terminate this scheme in the future for larger employers (25 employees or more).The most common practice in this situation is to conclude a settlement agreement with the employee, clearly stating that long-term illness is the reason for the dismissal. According to the Supreme Court an employer is even obliged, at the employee’s request, to cooperate in ending the employment relationship, and therefore to grant the transition compensation.In summary: upon termination of the employment after long-term incapacity for work, the employer is responsible for paying the transition compensation, but can (for the time being) via the UWV

 recover these costs afterwards.

When can an employer receive compensation for the transition allowance?In certain situations, employers can be partially compensated for the transition allowance they pay. This applies, for example, when an employee is dismissed after two years of illness, or when a small employer ceases the business due to retirement or death.In short, under these circumstances the government

 can contribute to the costs of the transition allowance. Note: specific conditions apply and the application must be submitted on time.

Compensation for transition allowance when closing a small businessWhen a small employer (with fewer than 25 employees) has to terminate the business due to retirement or death, employees often qualify for dismissal with a transition allowance. This can be via dismissal with permission from the UWV, or through a termination agreement by mutual consent. In such a situation, the transition allowance can be a significant expense for the employer or their next of kin.To ease this financial burden, since 1 January 2021 small employers have the option to reclaim the paid transition allowances from the UWV

• . However, a few conditions are attached to this:
• The dismissal must be related to the employer’s retirement or death.For at least one employee, the dismissal must be through the UWV
•  has been processed, so that business-economic reasons have been assessed.
• The full transition payment must have been paid after 1 January 2021.The application for compensation is submitted digitally to the UWV

.Note: at this time the scheme applies only

 upon termination of the business due to retirement or death. For situations in which the entrepreneur is unable to work for a long time due to illness or a condition, the scheme may be expanded in the future. When this will happen and under what conditions is not yet clear (March 2024).When can an employer reclaim the transition payment from the UWV

?As an employer, have you paid the transition payment to an employee who was long-term incapacitated for work? Good to know: in that case, you can reclaim the transition payment you paid from the UWV

• .
• This applies if the employment was terminated because the employee could no longer work due to illness or a disability.
• The scheme applies retroactively from 1 July 2015 (Art. 7:673e BW).It does not matter whether the termination was through dismissal with permission from the UWV

, via the subdistrict court, or by means of a settlement agreement – as long as the employment relationship ended after two years of illness.Important: the application for compensation must be submitted within six months after fully paying the transition allowance to the UWV

. So do not wait too long, otherwise you risk missing out on the compensation.

For which period does the retroactive effect apply?

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The compensation scheme for the transition allowance applies retroactively from 1 July 2015. This means that employees who were dismissed on or after that date may fall under this compensation scheme. Both employees and employers can therefore claim compensation for situations that have occurred since that time.

• How is the transition allowance calculated?

• 1/3 gross monthly salary per year worked.

• For shorter periods, a pro rata calculation applies.

The salary also includes fixed pay components, such as holiday allowance, fixed allowances, and structural bonuses.
📌 Example calculation:

• An employee earns € 3.000 gross per month and works 5 years and 8 months for their employer.

• 5 × € 1.000 = € 5.000
  8/12 × € 1.000 = € 667

Total transition payment = € 5.667 gross.

Deviations from the standard formula: when is that possible?Although the standard formula is usually followed, there are situations in which deviations are permitted. This is where the so-called correction factor comes into play. This factor defaults to 1, but can be lower or higher depending on the circumstances.

• Some examples where deviations may be made:Serious culpability:
•  If the consequences of the dismissal for the employee are particularly significant, or the dismissal is largely the employer’s fault, the compensation may be higher (the factor goes up).Employee quickly finds new work:
•  When the employee immediately finds another job, the compensation may go down.Employee’s behavior:
•  In the case of culpable conduct by the employee, or when the employee has, on their own initiative, started working elsewhere, the compensation may be reduced.Labor market position:
•  Has the employee completed training at the employer’s expense and thereby gained a better position in the labor market? Then this can lead to lower compensation.Financial situation of the employer:

 Are there demonstrable financial problems at the employer (think of well-substantiated financial statements and forecasts)? In that case as well, the compensation may be lower.

The party seeking a compensation other than the standard must always provide clear arguments and evidence. It comes down to what is considered reasonable in the specific situation.

How is the amount of the transition compensation determined in the case of long-term incapacity for work?

• The same calculation formula for the transition compensation also applies in the case of long-term incapacity for work. Important to know:
• After two years of illness, if someone is completely unable to work, the employment contract may be terminated at the employee’s request.In that case, the employer must pay the regular transition compensation: 1/3 gross monthly salary per year worked
• .
• The calculation is based on the period up to the end of the employment, including the (sick) years in which no work was performed.

The wage that counts is the last-earned salary, including fixed allowances, holiday pay, and structural bonuses.Example:

• Suppose someone earns € 2.500 gross per month and was employed for 3 years and 10 months, of which the last 2 years they were unable to work.
• 3 × € 833 = € 2.499
  10/12 × € 833 = € 694

Total transition payment = € 3.193 gross.Note: the employer can often reclaim this transition payment through the UWV

, but the amount you receive does not change as a result.

What conditions apply to deducting costs from the transition payment?

• Not every expense may simply be deducted from the transition payment. The rules are quite strict and clearly set out:
  Costs must be aimed at broader employability
• This means, for example, training costs that make the employee more employable on the labor market. Think of additional training, courses, or retraining.
  Transition costs are also permitted
• Transition costs include expenses directly related to the termination of the employment contract. For example, outplacement programs or maintaining a longer notice period if this helps shorten the time without work.
  Employee’s written consent required
• Before incurring these costs, the employee must have given written consent to deduct them from the transition payment. Verbal agreements are therefore not sufficient.
  Comply with specific legal requirements

The costs and the way they are determined must fit within the framework of the law and the Transition Payment Decree.

In short: only pre-agreed, demonstrable costs related to employability or transition can—and only under strict conditions—be deducted from the transition payment.

Which costs can be deducted from the transition payment?

• Not every employer has to pay out the full amount of the transition payment. There are a few types of costs that may be deducted—but only if strict conditions are met:Employability costs:
•  Think of costs for education or courses that make the employee more broadly employable, outside the current position. For example: an additional training that would also be useful at another company.Transition costs:

 These are expenses that are directly connected to the termination of the employment contract. Examples include costs for outplacement support, job-application training, or offering a longer notice period than legally required.

Note: the employer may deduct these amounts only if the employee has agreed to this in writing in advance. In addition, the costs must demonstrably have been incurred in the employee’s interest, under the rules of the Transition Payment Decree (Besluit transitievergoeding).

What is compensation for failure to observe notice periods?

If an employer ends a fixed-term contract earlier than agreed, without interim termination being allowed, there may be so-called compensation. This is a payment to the employee for the loss of wages due to the employment being ended too early.

• When must the employer pay compensation?Early termination date:
•  If a contract is terminated, for example, five months before the agreed end date, the employer must compensate those five months’ wages as damages.No early-termination option agreed:
•  Only if, at the start of the contract, it was stipulated that early termination is allowed may an exception be made. If that is not the case, the damages are owed.Exceptions:

 During the probationary period or in the event of summary dismissal, termination may take place immediately without a notice period. In these cases, no damages are owed.

How are the damages calculated?The damages consist of the gross pay (plus fixed allowances) over the remaining period of the contract. In the example above, where the contract ended five months earlier, this means five months of gross salary as damages.

Note: The court may decide to reduce the damages, for example if there are special circumstances. However, if the employee has been seriously at fault, the right to damages lapses.

When can the severance payment be higher or lower?

In addition to the standard calculation, there are situations in which the court can adjust the severance payment. This is done via the so-called correction factor (C-factor). Normally this factor is set at 1, but in special circumstances this may be deviated from.

• Possible reasons for adjustmentSerious consequences for the employee:
•  Is the dismissal particularly severe for the employee, for example due to limited opportunities on the labor market? The judge can then increase the compensation.Degree of culpability:
•  If the dismissal is mainly caused by the employer’s actions (think of poor employer conduct), that may result in an increase in the compensation.Employee culpability:
•  If an employee has acted culpably, this may instead lead to a lower compensation.New job found:
•  Has the employee already found other work? Then the compensation may be lower.Labor market position:
•  If someone, thanks to training paid for by the employer, has better prospects of a new job, the compensation may be adjusted.Financial situation of the employer:

 In exceptional cases, the court may also take into account the employer’s financial capacity. This does require insight into the annual figures and projections.

This corrective factor rarely leads to a doubling of the compensation. The guiding principle remains reasonableness, with all circumstances taken into account.

Which documents must you submit with a compensation application?When applying for compensation for the transition payment, it is necessary to gather a number of documents. These papers show that you meet the conditions and ensure that the UWV can assess your application.

• Consider the following:The employment contract
•  with the employee and payslips showing what wages were continued to be paid during sick leave.Proof of termination of the employment contract due to long-term incapacity for work. This can, for example, be a dismissal letter, a decision from the UWV
•  in which permission for dismissal is granted, or a termination agreement stating that the employment contract was ended by mutual consent due to long-term illness.If the employment contract was not terminated through the UWV
•  has been terminated, you must add a written statement stating that the employee was ill for more than two years at the end of the employment contract, including the name of the company doctor.Overview of the calculation of the transition compensation

 and proof that this compensation has actually been paid to the employee.

Make sure you have these documents on hand; it will make the application process much smoother.

What if age counts? (Old severance pay)In addition to the current transition allowance, severance used to consider both the number of years of service and the employee’s age. The older you were during your years of service, the more heavily those years counted toward the severance payment.

• This is how it worked:
• Years of service before age 35: each year counted as half a month’s salary.
• Years of service from 35 through 44: each year counted as a full month’s salary.
• Years of service from 45 through 54: each year counted as 1.5 months’ salary.

Years of service from 55 until retirement: each year was worth 2 months’ salary.Example:

• Suppose an employee is 56 and has 23 years of service.
• The years up to age 35 are multiplied by 0,5.
• The years between 35 and 45 count in full (×1).
• The years between 45 and 55 count extra heavily (×1,5).

Years of service from age 55 count double (×2).This meant that employees who were older during their employment often received higher compensation. However: periods of long-term illness usually did not count, and different rules applied to temporary contracts.

Note: the final compensation could never exceed the wage loss up to retirement age. This sought to balance protection of older employees and realistic compensation.

How does the calculation of weighted years of service, pay, and the correction factor work in the cantonal court formula?

• In addition to the transition compensation, there is also the cantonal court formula, mainly used before the current scheme. This formula used three variables: years of service (A), pay (B), and a correction factor (C). How does that work exactly?
  A: Weighted years of service
• Not every year of service counts equally. This depends on the age during those years:
• For each year of service up to age 35: counts as half a month’s salary.
• For each year of service between ages 35 and 45: counts as one month’s salary.
• For each year of service between ages 45 and 55: counts as one and a half months’ salary.
  For each year of service between ages 55 and 65: counts as two months’ salary.
• For example, if you worked 10 years between ages 45 and 55, that yields 15 ‘weighted’ years of service (10 × 1.5).
  B: Salary
• The wage used includes the gross monthly salary and fixed components such as a thirteenth month or structural allowances. Variable remuneration such as commissions and bonuses only if they are structural and an average amount can be calculated. Holiday allowance is often included, but expense allowances and pension contributions are not.
  C: Correction factor
• The correction factor (C) was usually 1, but could be adjusted depending on the situation. For example:
• C < 1: in cases of negligence or misconduct by the employee.
  C > 1: in cases of particularly serious conduct by the employer, or if the financial consequences for the employee are substantial.

Factor C could further be influenced if the employee had found other work, if training had been undertaken at the employer’s expense, or by the company’s financial position.In summary:Severance payment = (weighted years of service) × (monthly salary) × (correction factor).

With this, the judge determined a reasonable amount, tailored to the personal circumstances.

The old cantonal court formula: how did the calculation work up to 1 July 2015?Before 1 July 2015, the so-called cantonal court formula was often used upon dismissal to determine the severance payment. This method differs considerably from the current transition payment.

• This is how the cantonal court formula was structured:
• The compensation was calculated based on three factors: the number of (weighted) years of service (A), the gross monthly salary (B), and a correction factor (C).The formula: A × B × C = severance pay

.

• Explanation of the factors
  A – Weighted years of service:
• Not every year of service counted equally. Years of service before the age of 35 counted as 0.5, between 35 and 45 as 1, between 45 and 55 as 1.5, and from 55 onwards even as 2. This way, older employees received a higher compensation.
  B – Salary:
• For this, the gross monthly salary was used, including fixed allowances such as a 13th-month payment, holiday allowance, and regular bonuses. Variable components were usually only included if there was a consistent pattern, such as with structural overtime allowances.
  C – Correction factor:

By default, this factor was 1, but it could be higher or lower—for example, if the dismissal was attributable to the employer (then higher), or if the employee was at fault (then lower). Only in exceptional cases could this factor exceed 2.

Practical exampleAn employee aged 56 with 23 years of service could therefore receive significantly more than a younger employee with the same number of years of service, because different years counted more heavily. A judge also determined whether there were special circumstances to adjust the compensation.Note: For temporary contracts without an interim termination clause, the number of remaining months until the end of the contract was often used as compensation.

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After July 1, 2015, this formula was replaced by the current, more standardized calculation of the transition compensation.

What is the fair compensation?The fair compensation is an additional compensation

• on top of the transition compensation, which the judge can award if the employer has acted in a seriously culpable manner. Examples include:

• Dismissal without a valid reason.

• Summary dismissal without urgent cause.

• An employment dispute that the employer deliberately allowed to escalate.

Not offering a reassignment when this was possible.👉 The amount of the fair compensation is not laid down by law and varies per case. D

• e judge considers all the circumstances of the case. This means that, among other things, the following factors may play a role:
• The reason(s) for the dismissal.
• The degree of culpability of the employer, and possibly also of the employee.
• The consequences of the dismissal for the employee, such as loss of income or difficulty finding other work.
• The duration of the employment.
• The employee’s commitment and performance during the employment.
• The financial situation of both the employer and the employee.
• The employee’s prospects of finding work elsewhere.

Any other compensation or benefits to which the employee is entitled.

There is no fixed formula for calculating the fair compensation. The judge has considerable discretion to tailor it to the situation, so the final amount can vary widely.Fair compensation after dismissal via UWV

: is that possible?Even with dismissal via the UWV an employee can, in some cases, claim fair compensation. However, this is rare, because the threshold for being awarded such compensation is very high.A fair compensation after a UWV

• -procedure is only possible if the employer has acted in a seriously culpable manner. For example, consider situations where the employer:
• Has not complied with the rules regarding the dismissal.
• Has seriously failed to treat the employee in a proper manner.

Has deliberately built a dismissal file with incorrect information.Note: in most cases in which the UWV

 has approved a dismissal on economic or long-term medical grounds, there is no culpable conduct by the employer. The employee is then entitled to the transition payment, but an additional compensation almost never comes up.

Fair compensation upon termination by operation of law: is that possible?Does an employment contract end automatically, for example because a fixed-term contract expires? Then the question sometimes arises whether the employee, in addition to the transition payment, is also entitled to a fair compensation.

• In principle, the following applies:
• The employee can receive a transition payment if he has been employed for at least 24 months.

A fair compensation is possible, but only if there is seriously culpable conduct on the part of the employer.

The bar is set high: only if it is clearly demonstrable that the employer has acted grossly improperly or has failed to extend the contract (for example due to discrimination or abuse of fixed-term contracts) will the court consider a fair compensation. This is an exception and requires strong evidence of serious culpability. It is therefore difficult to claim this additional compensation after termination by operation of law, but not impossible in cases of clearly serious misconduct by the employer.

When can an employee choose a fair compensation instead of annulment of the dismissal?

• If you have been dismissed, you can sometimes choose not to return to your former job, but instead to ask the court for an additional compensation. This applies, for example, if:
• The employment relationship has been terminated unlawfully, but you do not want to or cannot return to your employer.
• You no longer have confidence in a good working relationship after everything that has happened.

You would prefer to receive financial compensation than to be employed again by the same employer.In these situations, you can ask the subdistrict court judge to award fair compensation instead of annulling the dismissal. You must submit this request within two months after the end of the employment relationship. Note: you must be able to demonstrate that the employer has acted in a seriously culpable manner. It is therefore really intended for exceptional cases. In such proceedings, annulment of the dismissal is often requested primarily and, alternatively, a combination of transition payment and fair compensation.On appeal, the Court of Appeal, if it appears that the dismissal should not have taken place, may decide to reinstate the employment relationship or still award fair compensation. In some cases, the employer does not even need to have acted in a seriously culpable manner for that.In summary:

You choose fair compensation instead of reinstatement of the employment relationship if returning is not desired or realistic, but there is seriously culpable conduct on the part of the employer.

How do you request fair compensation (and within what deadline)?Do you think you are entitled to fair compensation? Then you must take action yourself. You submit a request to the subdistrict court judge. Note: this usually must be done within two months after the end of your employment . If you are too late, you lose your right to this additional compensation.

• In short:You apply for the fair compensation by filing a petition with the subdistrict court judge
• .

This request generally must be filed within 2 months of termination.

Prompt action is therefore essential to avoid missing your chances.

When can the cantonal judge increase or reduce the compensation?The cantonal judge can adjust compensation depending on the seriousness of the employer’s or employee’s conduct. If the judge concludes that the employer has acted in a seriously culpable manner—think gross negligence, breaching statutory duties, or frustrating a proper improvement plan—then the compensation for the employee may be increased as additional compensation.Conversely, if it is the employee who has behaved in a seriously culpable manner (for example through theft, fraud, or other reprehensible conduct), the judge may decide not to award any compensation and may even set an amount payable to the employer. This ‘traffic fine’ for the employee can be at most equal to the salary for the notice period.

Finally, if circumstances so require, the judge can decide to reduce the compensation. This occurs, for example, when punishing the employer or employee is not entirely appropriate, or if the consequences would otherwise be disproportionate. Thus, the assessment of appropriate compensation is always a case-by-case matter.

How does a request to reinstate the employment relationship work?Do you disagree with your dismissal with approval from the UWV? Then within two months after the end of your employment you can submit a request to the cantonal judge to have the employment relationship reinstated.

• Note the following steps:Submit the petition to the cantonal judge
•  within two months after the termination of the employment contract.
• The judge assesses whether the dismissal was justified and whether the employment should be reinstated.

If reinstatement is granted, you will be taken back into employment. In some cases, the judge prefers to award an additional (fair) compensation instead of reinstatement.

It is advisable to seek legal advice in a timely manner so that you do not miss important deadlines.

How much can the fair compensation amount to?

In a combined termination (“cumulatiegrond”), the judge may award an additional amount on top of the transition payment. This additional compensation can amount to a maximum of 50% of the transition payment. The exact amount depends on the circumstances, such as the seriousness of the employer’s conduct and the consequences for the employee.

How does the cantonal judge determine the amount of additional compensation in a combined termination?In a dissolution on multiple grounds (the so-called ‘cumulative ground’), the subdistrict court judge can award an additional compensation on top of the transition allowance. This compensation can be up to 50% of the transition allowance, but the final amount varies by situation.

• The judge looks at how ‘close to’ or ‘far from’ a single ground for dismissal the employer was:
• If the employer only just failed to meet a single ground for dismissal (for example, poor performance), the additional compensation tends to be on the low side.

If the case was weaker on one specific ground, but convincing enough in combination, the compensation may be higher.

• So the judge mainly looks at:
• The extent to which the employer fell short on the individual grounds for dismissal.

Whether there were relatively small shortcomings, or rather larger deficiencies.

The rule is: the larger the gap on one ground, the more likely a lower additional compensation. Everything depends on a tailored assessment and the circumstances of the case.

Additional compensation for combined grounds for dismissalSometimes an employer cannot prove a single solid ground for dismissal, such as only poor performance or only a disrupted working relationship. In that case, the employer can ask to dissolve the employment contract on the basis of a combination of multiple grounds, also known as the “cumulative ground” or “i-ground”.

When the judge grants a dismissal in this way, an extra compensation can be awarded – in addition to the transition compensation. This extra compensation is primarily intended to compensate for the fact that the file was actually not strong enough to dismiss you on a single, separate ground.

How much is that extra compensation?

• The judge may award up to 50% of the transition compensation as extra compensation in a combined dissolution. The final amount depends on how serious the deficiencies in the file are:
• Is the file almost complete, but just not sufficient for one ground? Then the extra compensation will generally be lower.

Are there multiple weak grounds? Then the chance of a higher additional compensation is greater.

In other words: the sloppier the employer has been in substantiating one specific ground for dismissal, the stronger your position to obtain a higher extra compensation.

What does the “i-ground” entail in the termination of the employment contract?Sometimes an employer is unable to fully substantiate a single solid ground for dismissal—for example, if the file on poor performance shows some gaps or if there is just no seriously culpable conduct. This is where the so-called “i-ground” (also called the cumulation ground) from Article 7:669 comes into play.With the i-ground, the cantonal judge can consider various, partially present grounds for dismissal combine. Think of a combination of poor performance, a disrupted employment relationship and/or culpable conduct that individually may not quite carry enough weight, but together still provide sufficient grounds for dismissal.

• In short:
• The i-ground gives the judge room to allow dismissal on the basis of a combination of several “lighter” grounds.
• This gives employers a greater chance of success in court if the file falls short on one point, but the sum of circumstances is serious enough.

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Note: in a dissolution on the i-ground, the transition payment can be increased by an additional compensation of up to 50%, because the legislator regards dismissal on this ground as less weighty than a fully “well-founded” ground for dismissal.

• Examples from practiceExample 1: An employee was dismissed without performance improvement plan

• due to poor performance. In addition to the transition payment, the court awarded a fair compensation of € 15.000.Example 2:

• An employee was offered a settlement agreement (VSO) but hired a lawyer. The compensation was increased by 3 additional monthly salaries.Example 3: In a reorganization

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an employee received the statutory transition payment plus an additional compensation from the social plan.

• Checklist of compensation in case of dismissal

• 📑 Check whether you are entitled to a transition payment.

• 💶 Check whether the calculation is correct (including allowances and bonuses).⚖️ Check whether there is serious culpable conduct

• by the employer → possible entitlement to fair compensation.

• 📝 In a settlement agreement (VSO): negotiate extras on top of the transition allowance.

📞 Always have the calculation checked by an employment lawyer.Pay attention to the deadlines!If the employer does not pay the transition allowance or you do not agree with the amount, you must not wait too long: you must within three months after the end of the employment relationship start proceedings at the subdistrict court to claim (the correct amount of) transition allowance.Is there a dismissal without your consent, without permission from the UWV, or in violation of dismissal prohibitions (such as summary dismissal), then you even have only two months to ask the subdistrict court to annul the dismissal or to request reinstatement of the employment contract. Often the employee also combines such a request with a claim for transition compensation, fair compensation, or damages for irregular dismissal (for example if the notice period was not observed).

• Also note:
• Is your employment contract being terminated through a dissolution procedure before the court? Then the transition compensation is owed if the judge proceeds to dissolution. The subdistrict court judge can explicitly rule on the compensation in the decision — convenient, because this is directly enforceable.
• If the judge has not ruled on the transition compensation, or if the amount has, in your view, been calculated incorrectly (for example due to an incorrect salary or length of service), you can file an application within three months after the end of the employment relationship to have the correct amount determined.

The employer can ask the judge to determine that you are not entitled to the transition compensation due to seriously culpable conduct on your part.In short:

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Do not get caught out by short deadlines and complex rules. Always check your rights, the correct amounts, and the deadlines for taking legal action.

• Common mistakes

• Thinking that temporary contracts do not entitle you to compensation.

• Relying on the employer’s calculation.

• Not checking whether fair compensation is possible.

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Signing a VSO without asking for additional compensation.

Frequently Asked Questions (FAQ)
1. Do I always get severance pay upon dismissal?

Yes, except when you resign yourself or are summarily dismissed (unless the employer acted in a seriously culpable manner).
2. How much is the fair compensation?

The court decides that case by case. It can range from a few thousand euros to amounts that are much higher.
3. Can I also receive fair compensation in a VSO?

No, a fair compensation is only awarded by the court. But in a settlement agreement (VSO) you can often negotiate more than the transition allowance.
4. Are bonuses and allowances included in the calculation?

Yes, regular bonuses and fixed allowances count.
5. Does my employer always have to pay the transition allowance immediately?

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Yes, no later than one month after the end of the employment relationship.

• Why Arslan Advocaten?Specialized in

• severance payments and negotiations

• Check the calculation of the transition allowance

• Litigate for the award of a fair compensation in cases of culpable conduct

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Negotiating in VSOs for higher compensation

Conclusion