Transition compensation and fair compensation upon dismissal: everything you need to know

On dismissal an employee is often entitled to a compensation. The best known is the transition payment, which the employer must pay in almost all dismissal cases. In some situations an additional fair compensation can be awarded on top, for example where the employer acted in a seriously culpable way.

Anyone who confuses the two often leaves money on the table or asks the court for the wrong thing. For the calculation and the deadline in your own case, see our page on the transition payment.

This article explains what both are, how they are calculated and how to make sure you receive what you are entitled to.

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What is the transition payment?

The transition payment is the statutory severance payment.

• Intended as compensation and to ease the move to other work.

• You are entitled to it on:

  • Dismissal through the UWV or the court.

  • Note: under a settlement agreement (VSO) the contract ends by mutual consent, so this statutory entitlement does not arise automatically — the amount is negotiated, and in practice at least the statutory level is usually agreed.

  • Non-renewal of a fixed-term contract.

Fixed-term contracts also carry an entitlement, even where you have worked only a short time. On termination of a fixed-term contract, the question is whether early termination is possible. If your contract or the collective agreement allows it, the same calculation applies as for a permanent contract. If early termination is not allowed, the compensation can even equal the salary for the remaining term. For example: a one-year contract ended after three months without an early-termination option can produce compensation of up to nine months’ salary.

In this way the law prevents early termination of a fixed-term contract from becoming the cheaper option for employers.

👉 Only on summary dismissal or your own resignation does this right lapse, unless the employer acted in a seriously culpable way.

What compensation can an employee receive if a fixed-term contract ends early?

Sometimes a fixed-term contract ends before the agreed end date, which raises questions about your right to compensation. What can you expect if your employer ends the employment too early?

Main rule: compensation for the lost pay period

If your fixed-term contract is stopped early while the contract does not provide for early termination, you are usually entitled to compensation equal to the gross pay you would have received up to the agreed end date.

An example from practice:
Suppose you have a one-year contract that started on 1 July. Your employer ends the employment on 1 February — five months before the agreed end date. You can then claim compensation equal to five months’ pay.

Special situations

• Sometimes the employer turns to the subdistrict court to dissolve the employment, even where early termination was not agreed. The court can then decide that you receive compensation, often equal to the pay you missed.
• Did the employer behave in a seriously culpable way? The court can then increase the award.
• Did you act in a seriously culpable way yourself? The subdistrict court can reduce the award or even award it to the employer.

Note:
If notice is nevertheless given early without consent, the employer must in principle compensate the loss you suffer. You then receive not only the ordinary pay but possibly an additional sum if your situation warrants it. The court can always decide to moderate the amount, depending on the circumstances.

So you are protected if your fixed-term employment ends unexpectedly early, and you know what you are entitled to.

Can the statutory transition payment be departed from?

Yes. A collective agreement or an employment contract can contain arrangements more favourable than the statutory transition payment. In other words, the statutory rule is a floor. Employers and employees may always agree that a higher sum is paid on dismissal, and once recorded the employer is contractually bound by it.

Note that departure is only allowed in the employee’s favour: a lower sum than the statutory transition payment is not permitted.

When can a collective agreement provide a different arrangement instead?

In some cases a collective agreement leaves room for a different arrangement. That applies particularly to dismissal for economic grounds. The collective agreement can then contain a different sum, possibly higher or lower, replacing the statutory transition payment.

Important points here:

• The replacement arrangement need not equal the ordinary transition payment.
• The alternative payment or provision must be aimed at limiting unemployment, for example through retraining, help finding a new job, or continued pay.
• Departure is not simply permitted: the law allows it only for dismissal on economic grounds (Article 7:673b of the Dutch Civil Code).

Unsure whether your collective agreement applies here? Always check the text of the collective agreement or ask your trade union, so you know where you stand.

Can an employment contract or collective agreement provide for a higher sum than the statutory transition payment?

Yes. Your employment contract or collective agreement can provide for a higher sum than the statutory transition payment, for example an extra amount on top of it, provided it is clear in which situations that extra amount applies.

Note, however:

• It is often agreed that the higher sum applies only to dismissal on the employer’s initiative, and not to summary dismissal or your own resignation.
• The employment contract or collective agreement must state that it is an additional payment — not a replacement for the statutory transition payment, unless specifically agreed otherwise.

Within a collective agreement departures can also be agreed:

• A higher sum can be awarded on dismissal.
• The collective agreement may provide an arrangement that in some situations replaces the transition payment wholly or in part, particularly on dismissal for economic grounds. Note: such a replacement arrangement is usually intended to prevent or limit unemployment.

In short: alongside the statutory transition payment there is room for additional or alternative arrangements, but they must be recorded clearly and in writing. Unsure about your rights? Always check the text of your contract or collective agreement and take advice if needed.

Must the employer cooperate in ending a dormant employment after two years of illness?

Yes. The employer is obliged to cooperate in ending a so-called ‘dormant employment’ if the employee asks for it and, after more than two years of illness, can no longer work. The Hoge Raad has ruled clearly on this: good employership means that an employer may not artificially keep the employment alive without paying wages, merely to postpone paying the transition payment.

In concrete terms: if, after two years of illness and full incapacity, you ask for your employment to be ended, the employer must grant that request. That includes paying the transition payment as it would have been owed after exactly 24 months of illness. It makes no difference whether your employer is reimbursed (in part) through the UWV; what matters is your own right to this statutory compensation.

Note: this obligation applies only where you can no longer work at all, either in your own role or in suitable, adapted work with your employer.

In which cases can the subdistrict court dissolve a fixed-term contract?

Even where your fixed-term contract states that early termination is not possible, the subdistrict court can still decide to end it early. That may be so where there are far-reaching circumstances, such as economic grounds or long-term incapacity. In such cases your employer may go straight to the subdistrict court, without first going through the UWV-route.

The court then assesses whether the termination is well founded. So it makes no difference that your contract contains a ban on early termination; the subdistrict court can still cut through it if the situation warrants.

How does ending a fixed-term contract work when early termination is not allowed?

Sometimes a fixed-term contract states that early termination is not possible. What does that mean exactly? Neither employer nor employee may then simply end the contract before the agreed end date. The contract therefore runs automatically until the agreed moment, for example from 1 July to 1 July the following year.

Even so, an employer may want to end the contract earlier. There are a few scenarios for that:

• Notice as at the end date: Without an early-termination option, notice must always take effect on the agreed end date.
• Wanting to stop earlier anyway: Does the employer want to stop earlier without this being agreed in the contract? He must then go to the subdistrict court and ask permission to dissolve the employment. The court assesses the request and may – depending on the situation – rule that the employee is entitled to compensation. Often that is the pay lost for the remaining contract period.
• Exceptions: In some special situations, such as summary dismissal or economic grounds, the subdistrict court can still dissolve the contract even though no right of early termination appears in it.

Note: Sometimes the employer tries to end the contract early, for example with permission from the UWV, while the contract makes no provision for it. Here too: the employee is in principle entitled to compensation equal to the pay over the period the contract should still have run. In some cases the court can moderate that sum.

In short: with a fixed-term contract without an early-termination option, ending it early is difficult and often costly for the employer. The employee can count on protection and on compensation if the agreements are not honoured.

Compensation on closing a business due to illness or infirmity

Many employers wonder whether they too can claim reimbursement of the transition payment if they have to close their business because of illness or infirmity. At present the existing schemes apply only where the business stops because of the employer’s retirement or death.

The rules for closing a business because of illness or permanent infirmity are still under development. A scheme is being worked on, but it first has to be established that the employer is structurally unable to work for medical reasons. That process has not been completed, so as at March 2024 it is uncertain whether and when this option will actually become available.

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

What is the most common way to end employment in case of long-term incapacity?

In practice, long-term incapacity usually leads to a settlement agreement (VSO). In it, employer and employee jointly record arrangements for ending the employment, with long-term illness recorded as the reason. Making clear arrangements in good time tells both parties where they stand and often brings calm and clarity.

Matters such as the notice period, payment of outstanding holiday days and the transition payment are often included. Note: it is wise to have an expert, for example from the UWV or a legal adviser, check the agreement before you sign. That way you can be sure your rights and obligations are properly arranged.

Which grounds for dismissal does the small-employer scheme cover?

Small employers — businesses with fewer than 25 staff — qualify for a special reimbursement scheme. But it does not apply to every dismissal. There are a few specific situations in which the government steps in:

• On the employer’s retirement: Does a small business owner close the business because of retirement? He can then apply for reimbursement of the transition payments made to his staff from the UWV.
• On the employer’s death: If the owner of a small business dies and the business ceases to exist as a result, the scheme likewise covers the transition payments due to the staff.

Note: the condition is that at least one employee’s dismissal was approved by the UWV (economic grounds). In addition, the full transition payment must have been paid after 1 January 2021. The application is made digitally through the UWV.

At present (March 2024), dismissals because of the employer’s structural illness or incapacity do not yet fall under this scheme. That may change in future, but there is no clarity on it yet.

When does a small employer qualify for reimbursement of transition payments?

Since 1 January 2021 there has been a scheme for small employers (fewer than 25 employees) that offers relief when a business closes because of retirement or death. In those situations, paying transition payments to staff can be a heavy financial burden for the employer or the next of kin. There is therefore an option to have these costs reimbursed by the UWV.

When does a small employer qualify?

• The business must be closing because of the owner’s retirement or death.
• At least one dismissal must have been approved by the UWV on economic grounds.
• The full transition payments must actually have been paid to the employees after 1 January 2021.
• The application for reimbursement is made digitally to the UWV.

Note: for closure because of the owner’s long-term illness this scheme does not (yet) exist. The government is working on rules, but it is currently uncertain when or whether that extension will arrive.

In this way small employers or their next of kin receive a helping hand when circumstances beyond their control force them to part with their staff.

Is there reimbursement for partial dismissal due to incapacity?

Sometimes there is no full dismissal; instead the contract is partly ended because incapacity permanently reduces the hours the employee can work. This is called partial dismissal. Whether, as an employer, you also qualify for reimbursement of the transition payment on such a partial termination (as you would on full dismissal after long-term illness) is not yet entirely clear. The UWV has yet to take a definitive position on this.

In short: for full clarity on reimbursement in cases of partial dismissal due to incapacity, it is wise to await the position of the UWV and to seek legal advice if in doubt.

Reimbursement of the transition payment in cases of long-term incapacity

Suppose your employee has been incapacitated for more than two years and the employment is ended. As the employer you must then pay a transition payment. Fortunately you can in many cases recover it through the UWV.

The following conditions apply:

• The employment contract was ended because of long-term incapacity, after two years of illness.
• This can happen through dismissal with permission from the UWV, through a settlement agreement, or (in some cases) through dissolution by the court.
• Only where illness leaves the employee unable to work (so not on resignation or other grounds).

Which steps and documents are needed?

To apply for reimbursement you must submit an application within 6 months of paying the full transition payment to the UWV. You will need, among other things:

• The employment contract and proof of pay continued during illness;
• Proof that the employment ended because of long-term incapacity (such as the dismissal letter, permission from the UWV, or the termination agreement);
• If applicable: a statement that your employee had been ill for more than two years at termination, including the occupational physician’s name;
• The calculation and proof of payment of the transition payment.

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

Reimbursement of the transition payment on long-term incapacity

Has an employee been ill for more than two years and can no longer do the work? The employment may then be ended and the employee is entitled to a transition payment. But what if the employer has to pay it while the employee has been unable to work for years? Fortunately there is a special scheme.

In this situation employers can apply for reimbursement from the UWV. This means that the transition payment they must pay on dismissal after long-term incapacity is later reimbursed in whole or in part. It applies to employment ended through the UWV, a settlement agreement or dissolution by the court, as long as it relates to long-term illness.

Important points to watch:

• The scheme applies retroactively from 1 July 2015.
• The application must be submitted within six months of paying the full transition payment.
• The application must include, among other things, the employment contract, payslips during illness, evidence of the dismissal for long-term incapacity, and proof of payment of the transition payment.
• Note: there are plans to end this scheme for larger employers (25 staff or more) in future.

The most usual course here is to conclude a settlement agreement with the employee stating clearly that long-term illness is the reason for the dismissal. According to the Hoge Raad, an employer is even obliged to cooperate, at the employee’s request, in ending the employment and therefore to grant the transition payment.

In summary: on ending employment after long-term incapacity the employer sees to payment of the transition payment, but can then (for now) recover those costs through the UWV back.

When can an employer be reimbursed for the transition payment?

In some situations employers can be reimbursed (in part) for the transition payment they make. That is so, for example, where an employee is dismissed after two years of illness, or where a small employer closes the business because of retirement or death.

In short, in these circumstances the government can contribute to the cost of the transition payment. Note: specific conditions apply and the application must be made in good time.

Reimbursement of the transition payment on closing a small business

When a small employer (fewer than 25 employees) has to close the business because of retirement or death, the staff are often entitled to dismissal with a transition payment. That can be through dismissal with permission from the UWV, or through a termination agreement reached by consultation. In such a situation the transition payment can be a considerable cost for the employer or the next of kin.

To ease that financial burden, since 1 January 2021 small employers have been able to recover the transition payments they have made from the UWV. A few conditions attach to this, however:

• The dismissal must be connected to the employer’s retirement or death.
• For at least one employee the dismissal must have gone through the UWV, so that it has been tested against economic grounds.
• The full transition payment must have been paid after 1 January 2021.
• The application for reimbursement runs digitally through the UWV.

Note: at present the scheme applies only on closure of the business because of retirement or death. For situations where the owner is unable to work for a long period because of illness or a condition, the scheme may be extended in time. When and on what conditions that will happen is not yet clear (March 2024).

When can an employer reclaim the transition payment from the UWV?

Have you as an employer paid the transition payment to an employee who was incapacitated for a long period? Good to know: you can then reclaim the payment from the UWV.

• This applies where the employment ended because illness or a disability left the employee unable to work.
• The scheme applies retroactively from 1 July 2015 (Article 7:673e of the Dutch Civil Code).
• It makes no difference whether the termination came about through dismissal with permission from the UWV, through the subdistrict court, or by a settlement agreement – as long as the employment ended after two years of illness.

Important: the application for reimbursement must be submitted within six months of paying the transition payment in full to the UWV. So do not wait too long, or you risk missing out on the reimbursement.

For which period does the retroactive effect apply?

The reimbursement scheme applies retroactively from 1 July 2015. That means employees dismissed on or after that date can also fall under it. Employees and employers can therefore claim reimbursement for situations arising from that moment onwards.

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How is the transition payment calculated?

• One third of a gross monthly salary per year worked.

• Shorter periods are calculated pro rata.

• The salary also includes fixed pay components such as holiday allowance, fixed supplements and structural bonuses.

📌 Worked example:
An employee earns € 3,000 gross a month and works 5 years and 8 months for his employer.

• 5 × € 1.000 = € 5.000

• 8/12 × € 1.000 = € 667
  Total transition payment = € 5,667 gross.

Departures from the standard formula: when is that possible?

Although the standard formula is usually followed, there are situations in which departure is allowed. This is where the so-called correction factor comes in. It stands at 1 by default but can be lower or higher, depending on the circumstances.

Some examples where departure is possible:

• Serious culpability: If the consequences of the dismissal for the employee are especially far-reaching, or the dismissal is largely the employer’s fault, the sum can be higher (the factor goes up).
• Employee quickly finds new work: Where the employee has immediately found another job, the sum can go down instead.
• The employee’s conduct: Where the employee has acted culpably, or has gone to work elsewhere on his own initiative, the sum can be reduced.
• Labour market position: Has the employee taken training at the employer’s expense and thereby gained a better position on the labour market? That can lead to a lower sum.
• The employer’s financial position: Are there demonstrable financial problems at the employer (think of well-supported annual accounts and forecasts)? The sum can then be lower as well.

The party seeking a sum other than the standard must always supply clear arguments and evidence. What matters is what is considered reasonable in the specific situation.

How is the amount of the transition payment determined in cases of long-term incapacity?

The same formula applies to long-term incapacity. Important to know:

• After two years of illness, where someone can no longer work at all, the employment may be ended at the employee’s request.
• The employer must then pay the ordinary transition payment: one third of a gross monthly salary per year worked.
• The calculation runs to the end of the employment, so it includes the years of illness in which no work was done.
• The pay that counts is the last salary earned, including fixed allowances, holiday allowance and structural bonuses.

Example:
Suppose someone earns € 2,500 gross a month and was employed for 3 years and 10 months, the last 2 of them incapacitated.

• 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 that does not change the amount you receive.

What conditions apply to deducting costs from the transition payment?

Not every cost item may simply be deducted from the transition payment. The rules are strict and clearly laid down:

• Costs must be aimed at wider employability
  This means, for example, training costs that make the employee more employable on the labour market: further training, courses or retraining.
• Transition costs are also allowed
  Transition costs are costs directly connected with ending the employment: outplacement programmes, for example, or maintaining a longer notice period if that helps shorten the time without work.
• Written consent of the employee is required
  Before the costs are incurred, the employee must have agreed in writing to their deduction from the payment. Oral agreements are not enough.
• Meeting specific statutory 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 demonstrable costs relating to employability or transition, agreed in advance, can be deducted – and then only under strict conditions.

Which costs can be deducted from the transition payment?

Not every employer has to pay out the full transition payment. A few types of cost may be deducted — but only if strict conditions are met:

• Employability costs: Think of the cost of training or courses that make the employee more widely employable, beyond the current role — for example extra training that is also useful at another company.
• Transition costs: These are expenses directly connected with the end of the employment: outplacement guidance, job-application training, or offering a longer notice period than the law requires.

Note: the employer may deduct these amounts only if the employee agreed to it in writing in advance. The costs must also demonstrably have been incurred in the employee’s interest, in line with the Transition Payment Decree.

What is damages for failing to observe notice periods?

If an employer ends a fixed-term contract earlier than agreed while early termination is not allowed, so-called damages may be due. This compensates the employee for the pay lost through the premature ending of the employment.

When must the employer pay damages?

• Earlier termination date: If a contract is ended five months before the agreed end date, for instance, the employer must compensate those five months’ pay as damages.
• No early-termination option agreed: Only where the contract recorded from the outset that early termination is allowed may there be a departure. If not, the damages apply.
• Exceptions: During a probationary period or on summary dismissal, notice may be given immediately without a notice period. No damages are due in those cases.

How are the damages calculated?

The damages consist of the gross pay (plus fixed supplements) over the remaining term of the contract. In the example above, where the contract stopped five months early, that means five months’ gross salary as damages.

Note: the court can decide to moderate the sum, for example where there are special circumstances. If the employee has been seriously culpable, however, the right to damages lapses.

When can the severance sum be higher or lower?

Besides the standard calculation there are situations in which the court can adjust the severance sum, through the so-called correction factor (C-factor). It normally stands at 1, but special circumstances allow a departure.

Possible grounds for adjustment

• Serious consequences for the employee: Is the dismissal particularly hard on the employee, for instance because of limited chances on the labour market? The court can then raise the sum.
• Degree of culpability: If the dismissal is mainly caused by the employer’s own doing (think of poor employership), that can produce an increase.
• Culpability of the employee: Where an employee has behaved culpably, this can lead instead to a lower sum.
• New work found: Has the employee already found other work? The sum can then be lower.
• Labour market position: If someone has better prospects of a new job thanks to training paid for by the employer, the sum can be adjusted.
• The employer’s financial position: In exceptional cases the court may also take the employer’s financial capacity into account. That does require insight into the annual figures and forecasts.

This correction factor rarely doubles the sum. Reasonableness remains the starting point, with all circumstances weighed.

Which documents must you supply with a reimbursement application?

Applying for reimbursement of the transition payment requires collecting a number of documents. They show that you meet the conditions and enable the UWV to assess your application.

Consider the following:

• The employment contract with the employee, and payslips showing what pay was continued during illness.
• Proof that the employment ended because of long-term incapacity. That can be a dismissal letter, a decision from the UWV granting permission for dismissal, or a termination agreement stating that the employment ended by mutual consent because of long-term illness.
• If the employment did not end through the UWV you must add a written statement recording that the employee had been ill for more than two years at the end of the contract, including the occupational physician’s name.
• An overview of the transition payment calculation and proof that it was actually paid to the employee.

Have these documents to hand and the application will go a good deal more smoothly.

What if age counts? (The old severance sum)

Alongside today’s transition payment, dismissal used to take account of both years of service and the employee’s age. The older you were during your years of service, the more heavily they counted towards the severance sum.

This is how it worked:

• Years of service before 35: each year counted as half a month’s pay.
• Years of service from 35 to 44: each year counted as a full month’s pay.
• Years of service from 45 to 54: each year even yielded 1.5 months’ pay.
• Years of service from 55 to retirement: each year was worth 2 months’ pay.

Example:
Suppose an employee is 56 with 23 years of service.

• The first years up to 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 55 count double (×2).

This meant that employees who were older during their employment often received a higher sum. Periods of long-term illness usually did not count, however, and different rules applied to fixed-term contracts.

Note: the final sum could never exceed the pay lost up to retirement age. In this way a balance was sought between protecting older employees and realistic compensation.

How do weighted years of service, pay and the correction factor work in the subdistrict court formula?

Besides the transition payment there is the subdistrict court formula, used mainly before the current rules. It applied three variables: years of service (A), pay (B) and a correction factor (C). How exactly does it work?

• A: Weighted years of service
  Not every year of service counts equally. That depends on your age during those years:
• For each year of service up to 35: half a month’s pay.
• For each year of service between 35 and 45: one month’s pay.
• For each year of service between 45 and 55: one and a half months’ pay.
• For each year of service between 55 and 65: two months’ pay.
  If you worked 10 years between 45 and 55, for example, that yields 15 ‘weighted’ years of service (10 × 1.5).
• B: Pay
  The pay used covers the gross monthly salary and fixed elements such as a thirteenth month or structural supplements. Variable pay such as commission and bonuses counts only if it is structural and an average amount can be calculated. Holiday allowance often counts, but expense allowances and pension contributions do 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 wrongdoing by the employee.
• C > 1: in cases of particularly serious conduct by the employer, or where the financial consequences for the employee are severe.
  Factor C could be influenced further if the employee had found other work, if training had been taken at the employer’s expense, or by the company’s financial position.

In summary:
Severance sum = (weighted years of service) × (monthly pay) × (correction factor).

With this the court set a reasonable amount, tailored to the personal circumstances.

The old subdistrict court formula: how did the calculation work until 1 July 2015?

Before 1 July 2015 the so-called subdistrict court formula was often used to set the severance sum on dismissal. That method differs considerably from today’s transition payment.

This is how the subdistrict court formula was put together:

• The sum was calculated from 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 payment.

The factors explained

• A – Weighted years of service:
  Not every year of service counted equally. Years before 35 counted 0.5, between 35 and 45 counted 1, between 45 and 55 counted 1.5, and from 55 even 2. Older staff therefore received a higher sum.
• B – Pay:
  The gross monthly salary was used, including fixed supplements such as a thirteenth month, holiday allowance and structural bonuses. Variable elements usually counted only where there was a fixed pattern, as with structural overtime supplements.
• C – Correction factor:
  This factor was 1 by default but could be higher or lower, for instance where the dismissal was the employer’s fault (higher) or where the employee was culpable (lower). Only exceptionally could it exceed 2.

A practical example

A 56-year-old employee with 23 years of service could therefore receive considerably more than a younger employee with the same number of years, because different years counted more heavily. The court also decided whether special circumstances warranted adjusting the sum.

Note: for fixed-term contracts without an early-termination clause, the number of months remaining until the end of the contract was often taken as the sum.

After 1 July 2015 this formula gave way to today’s more standardised calculation of the transition payment.

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What is the fair compensation?

The fair compensation is a additional compensation on top of the transition payment, which the court can award where the employer has acted in a seriously culpable way. Examples are:

• Dismissal without a valid reason.

• Summary dismissal without an urgent cause.

• A workplace conflict that the employer deliberately allowed to escalate.

• Failing to offer redeployment where that was possible.

👉 The level of the fair compensation is not laid down by law and differs from case to case. The court looks at all the circumstances of the case. Among other things, the following factors can play a part:

• The reason or reasons for the dismissal.
• The degree of culpability of the employer, and possibly of the employee too.
• The consequences of the dismissal for the employee, such as loss of income or difficulty finding other work.
• The length of the employment.
• The employee’s commitment and performance during the employment.
• The financial position of both employer and employee.
• The employee’s chances of finding work elsewhere.
• Any other payments or benefits the employee is entitled to.

There is no fixed formula for calculating the fair compensation. The court has wide latitude to tailor it to the situation, so the final amount can vary widely.

Fair compensation after dismissal through the UWV: is that possible?

Even where dismissal goes through the UWV an employee can in some cases claim fair compensation. That is rare, however, because the threshold for such an award is very high.

Fair compensation after a UWV procedure is possible only where the employer acted in a seriously culpable way — for example where the employer:

• Failed to follow the rules surrounding the dismissal.
• Seriously failed to treat the employee decently.
• Deliberately built a dismissal file on false information.

Note: in most cases where 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 sum almost never arises.

Fair compensation when the contract ends by operation of law: is that possible?

Does an employment contract stop automatically, for instance because a fixed-term contract expires? The question then sometimes arises whether the employee can also be entitled to fair compensation alongside the transition payment.

In principle:

• The employee can receive a transition payment if the employment lasted at least 24 months.
• Fair compensation is possible, but only where the employer acted in a seriously culpable way.

The bar is high: only where it is clearly demonstrable that the employer acted grossly wrongly or failed to renew the contract (through discrimination or misuse of fixed-term contracts, for example) will the court consider fair compensation. This is an exception and requires firm evidence of serious culpability. Claiming this extra sum after the contract ends by operation of law is therefore difficult, but not impossible where the employer has clearly misbehaved seriously.

When can an employee choose fair compensation instead of setting the dismissal aside?

If you have been dismissed you can sometimes choose not to return to your old job and instead ask the court for an additional sum. That applies, for example, where:

• The employment was wrongly ended but you do not want or are unable to return to your employer.
• You no longer have confidence in good cooperation after everything that has happened.
• You would rather receive financial compensation than re-enter the same employer’s service.

In these situations you can ask the subdistrict court to award fair compensation instead of setting the dismissal aside. You must submit that request within two months of the end of the employment. Note: you must be able to show that the employer acted in a seriously culpable way, so it really is meant for exceptional cases. Such proceedings often ask primarily for the dismissal to be set aside and, in the alternative, for a combination of transition payment and fair compensation.

In appeal the court of appeal can, if it turns out the dismissal should not have taken place, order reinstatement of the employment or award fair compensation after all. In some cases the employer need not even have acted in a seriously culpable way.

In summary:
You choose fair compensation instead of reinstatement where returning is neither wanted nor realistic, but the employer has acted in a seriously culpable way.

How do you apply for fair compensation (and within what deadline)?

Do you think you are entitled to fair compensation? You must then act yourself, by submitting a request to the subdistrict court. Note: this must usually be done within two months of the end of your employment. If you are late, your right to this additional sum lapses.

In brief:

• You apply for fair compensation by petition to the subdistrict court.
• This request must normally be submitted within 2 months of the dismissal.

Acting quickly is therefore essential if you are not to miss your chance.

When can the subdistrict court raise or lower the sum?

The subdistrict court can adjust an award depending on the seriousness of the employer’s or employee’s conduct. If the court finds that the employer acted in a seriously culpable way — gross negligence, breach of statutory duties, or frustrating a proper improvement plan — the sum for the employee can be raised as additional compensation.

The reverse also applies: where it is the employee who has behaved in a seriously culpable way (theft, fraud or other reprehensible conduct), the court can decide to award nothing and even set a sum payable to the employer. That penalty on the employee can at most equal the salary over the notice period.

Finally, where the circumstances call for it, the court can decide to moderate the sum — for instance where penalising the employer or employee is not entirely appropriate, or where the consequences would otherwise be disproportionate. Judging an appropriate sum therefore always remains tailored work.

How does a request for reinstatement work?

Do you disagree with your dismissal following permission from the UWV? You can then submit a request within two months of the end of your employment to the subdistrict court to have the employment reinstated.

Note the following steps:

• Submit the petition to the subdistrict court within two months of the termination of the employment contract.
• The court assesses whether the dismissal was justified and whether the employment should be reinstated.
• If reinstatement is granted, you are taken back into employment. In some cases the court prefers an additional (fair) sum instead of reinstatement.

It is wise to seek legal advice in good time so you do not miss important deadlines.

How high can the fair compensation be?

On a combined dissolution (the “cumulation ground”) the court may award an extra amount on top of the transition payment. That additional sum can be at most 50% of the transition payment. The exact figure depends on the circumstances, such as the seriousness of the employer’s conduct and the consequences for the employee.

How does the subdistrict court set the level of an extra award on a combined dissolution?

On a dissolution on several grounds (the so-called ‘cumulation ground’) the subdistrict court can award an extra sum on top of the transition payment. It can be at most 50% of the transition payment, but the final level varies from case to case.

The court looks at how “close to” or “far from” a single ground for dismissal the employer was:

• If a single ground (poor performance, say) was only just not met, the extra sum will be on the low side.
• If the case was weaker on one specific ground but convincing enough taken together, the sum can be higher.

So the court looks chiefly at:

• The extent to which the employer fell short on the individual grounds.
• Whether the shortcomings were relatively minor or rather more substantial.

The rule here: the larger the gap on one ground, the more likely a lower extra sum. It all turns on tailoring and the circumstances of the case.

Extra compensation on combined grounds for dismissal

Sometimes an employer cannot establish one solid ground for dismissal, such as poor performance alone or a damaged working relationship alone. The employer can then ask for the contract to be dissolved on a combination of several grounds, known as the “cumulation ground” or “i-ground”.

Where the court grants a dismissal in this way, an extra sum can be awarded alongside the transition payment. It is intended above all to compensate for the fact that the file was not really strong enough to dismiss you on any single ground.

How much is that extra sum?

On a combined dissolution the court may award at most 50% of the transition payment as an extra sum. The final level depends on how weighty the shortcomings in the file are:

• Is the file almost complete but just not sufficient for one ground? The extra sum will then usually be lower.
• Are there several weak grounds? The chance of a higher additional sum is then greater.

In other words: the more careless the employer has been in substantiating one specific ground, the stronger your position for a higher extra sum.

What does the “i-ground” mean on dissolution of the employment contract?

Sometimes an employer cannot fully substantiate one hard ground for dismissal — where the poor-performance file has gaps, say, or conduct falls just short of serious culpability. This is where the so-called “i-ground” (also called the cumulation ground) of Article 7:669 comes in.

With the i-ground the subdistrict court can combine several partly present grounds for dismissal — a combination of poor performance, a damaged working relationship and/or culpable conduct, each perhaps just not weighty enough on its own but together sufficient to support a dismissal.

In brief:

• The i-ground gives the court room to allow a dismissal on a combination of several “light” grounds.
• This gives employers a better chance of success in court where the file falls short on one point but the sum of the circumstances is serious enough.
• Bear in mind: on a dissolution under the i-ground the transition payment can be increased by an extra sum of up to 50%, because the legislature regards dismissal on this ground as less weighty than on a fully “mature” ground.

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Examples from practice

• Example 1: An employee was dismissed for poor performance without a improvement plan. In such a case the court can award fair compensation of € 15,000 alongside the transition payment.

• Example 2: An employee was offered a settlement agreement but engaged a lawyer. The sum was increased by 3 extra months’ salary.

• Example 3: On a reorganisation an employee received the statutory transition payment plus an extra sum from the social plan.

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Checklist: payments on dismissal

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

• 💶 Check that the calculation is correct (including supplements and bonuses).

• ⚖️ Consider whether there is serious culpable conduct by the employer → possible entitlement to fair compensation.

• 📝 With a settlement agreement: negotiate extras on top of the transition payment.

• 📞 Always have the calculation checked by an employment lawyer.

Mind the deadlines!
If the employer does not pay the transition payment, or you disagree with the amount, you must not wait too long: within three months of the end of the employment you must start proceedings before the subdistrict court to claim the (correct amount of) transition payment after all.

Is there a dismissal without your consent, without permission from the UWV, or contrary to the bans on notice (such as summary dismissal)? You then have only two months to ask the subdistrict court to set the dismissal aside or to seek reinstatement. Employees often combine such a request with a claim for the transition payment, fair compensation, or damages for irregular dismissal (where the notice period was not observed, for example).

Also note:

• Is your contract ended through dissolution proceedings before the court? The transition payment is then due if the court dissolves it. The subdistrict court can rule expressly on the sum in its decision — useful, because that is directly enforceable.
• If the court did not rule on the transition payment, or you think the amount was wrongly calculated (through an incorrect salary or length of service, say), you can submit a request within three months of the end of the employment to have the correct amount determined.
• The employer can ask the court to rule that you have no right to the transition payment because of seriously culpable conduct on your part.

In short:
Do not be caught out by short deadlines and complex rules. Always check your rights, the correct amounts and the deadlines for taking legal steps.

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Common mistakes

• Thinking fixed-term contracts give no right to compensation.

• Relying on the employer’s calculation.

• Not investigating whether fair compensation is possible.

• Signing a settlement agreement without asking for extra compensation.

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Frequently asked questions (FAQ)

1. Do I always get a transition payment on dismissal?
Yes, except on your own resignation or summary dismissal (unless the employer acted in a seriously culpable way).

2. How high is the fair compensation?
The court decides case by case. It can range from a few thousand euros to figures that are much higher.

3. Can I also get fair compensation under a settlement agreement?
No, fair compensation is awarded only by the court. But in a settlement agreement you can often negotiate more than the transition payment.

4. Are bonuses and supplements included in the calculation?
Yes, structural bonuses and fixed supplements count.

5. Must my employer always pay the transition payment immediately?
Yes, at the latest one month after the end of the employment.

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Why Arslan Advocaten?

• Specialised in severance payments and negotiations

• We check the calculation of the transition payment

• We litigate for fair compensation in cases of culpable conduct

• We negotiate higher sums in settlement agreements

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Conclusion

The transition payment is a basic right on dismissal, but more is often possible. If the employer acted in a seriously culpable way, or if you negotiate well in a settlement agreement, the final sum can be considerably higher. Always have your situation assessed by an employment lawyer.

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Read also

• Wage attachment and the protected earnings rate: what you need to know
• Summary dismissal during illness – a guide for employers
• When must an employer apply for a dismissal permit?

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