Is your employment contract being terminated and are you wondering whether you are entitled to a transition payment? Since the introduction of the new dismissal law in 2015, almost every employee is entitled to financial compensation upon dismissal. This compensation serves as compensation for the dismissal and helps make the transition to a new job easier.

In this article, our employment law attorneys explain when you are entitled to a transition payment, how the payment is calculated, and in which situations this right lapses.

What is the difference between a transition payment and a severance payment?

It is easy to confuse the terms transition payment and severance payment, but there is an important distinction between the two. The transition payment is the statutory minimum compensation that every employee (without an urgent reason for dismissal) receives when the employment contract is terminated at the employer’s initiative. This is laid down in law and almost always applies in cases of involuntary dismissal.

By contrast, a severance paymentThis reduction is expected to be permanent and therefore not temporary in nature;

The change is officially recorded in a new contract, an amendment to your existing contract, or in another written agreement.

So this is not a temporary reduction in hours, but a permanent and contractually agreed change to your employment. Are you unsure whether your situation meets these conditions? Have your contract and circumstances assessed by an employment lawyer so that you don’t unnecessarily miss out on rights.

Also for temporary contracts and agency work

• The rules regarding the transition payment apply to both permanent and temporary contracts—so also if you work as a temporary agency worker. Is your
• temporary employment contract

not extended, then you are in principle entitled to a transition payment, regardless of the number of hours worked or the type of agreement. Note: in agency work, it is a good idea to be proactive and actively request the payment from the employment agency if it is not granted automatically.

Unsure about the amount of your compensation? With an online calculator you can easily calculate what you are entitled to, so you don’t miss out on money. Don’t wait too long to request your transition payment; there is a statutory time limit within which you must do this.

Transition payment for partial dismissal

• Sometimes your employment contract is adjusted and you structurally work fewer hours—for example, you lose at least 20% of your working hours and this is not a temporary measure. In that case, you may also be entitled to a transition payment for the portion of the work that is eliminated.
• Important points to note are:
• You must structurally (i.e., expected to be permanent) work fewer hours.

The number of hours you lose and the adjustment to your employment contract must be properly documented.

The compensation is then calculated pro rata over the hours you have lost. This prevents you from leaving money on the table when your working hours are reduced without your entire contract ending. Do you need help calculating what you are entitled to? Feel free to use an online calculator, for example the one from juridischloket.nl.

When is no transition payment due?There are situations in which you are not entitled to a transition payment. For example:Termination by mutual consent

: when you and your employer make arrangements yourselves and agree on a severance payment.

Gross misconduct

: for example in cases of theft, fraud, or violence in the workplace.

Reaching the statutory retirement age

• : upon the natural end of the employment contract.
• Bankruptcy or debt restructuring of the employer

: there is then no money available to pay compensation.

Equivalent provision in the collective labor agreement

: some collective labor agreements contain provisions that replace the transition compensation.

• Are you unsure whether you are entitled? Always have this checked by an employment law attorney.In which situations can an employer be reimbursed for the transition compensation?
• There are a few exceptions in which an employer can recover most or all of the transition compensation paid. This applies, among others, in the following cases:After long-term incapacity for work
• : if an employee is dismissed after a period of at least 2 years of illness, the employer can apply for compensation.Termination of a small business
• : if a small business ceases due to the owner’s death or retirement, there is sometimes an entitlement to compensation. This does require that at least one employee has been formally dismissed via the UWV or dissolution by the subdistrict court.Would you like to know whether your situation qualifies for this? An employment law attorney can advise you.
• How is the transition compensation calculated?The amount of the transition compensation depends on:

your

gross monthly salary

(including holiday allowance and fixed supplements), and

• the duration of your employment
• .The accrual is as follows:

For the first 10 years of service: 1/6 monthly salary per half year of service.

For the years of service from the 10th year onward: 1/4 monthly salary per half year of service.

👉 Example:

1. An employee with a gross monthly salary of €3,000 and 12 years of service may be entitled to over €20,000 in transition payment.Transition payment when working fewer hoursBut what if you are not completely dismissed, but will work (significantly) fewer hours? Even then, you may be entitled to a transition payment.
2. This applies in situations where:your working hours have been reduced by at least 20%,this reduction is structural (therefore expected to be permanent),

and the reduction is officially recorded in your contract.

• In these cases, the transition compensation is calculated based on the number of hours you have lost. Suppose you will work 20% less from now on; then you will receive transition compensation for that lost part of your employment—using the same calculation method as for a full termination. This way, the law compensates the loss of income you incur due to fewer working hours.
• Note: if you are unsure about the calculation or your situation, it is wise to seek legal advice so that you know exactly what you are entitled to.

Transition costs and employability costs
Employers may deduct certain costs from the transition compensation, such as:

Transition costs

: costs for outplacement or training aimed at finding other work.

Employability costs

• : costs incurred during the employment relationship to increase your broader employability in the labor market.
• Important: this is only allowed if the employee has been informed of this in writing in advance and has agreed.
• Maximum amount of the transition payment

The transition payment is capped. This maximum amount is adjusted annually. Currently, the following applies:

maximum

€81.000 gross

, or

• one gross annual salary if this is higher than €81.000.Do you have to pay tax on the transition payment?
• The transition payment is regarded by the Tax and Customs Administration as wages from employment. This means that you owe wage tax and contributions on it – just like on your regular salary. As a result, you receive the net amount in your account after the employer has withheld and remitted the tax.Note: If you spend (part of) the transition allowance directly on training or an outplacement program, you may not have to pay tax on that portion. This is possible under certain conditions. Get proper advice from a specialist or the Tax Administration so you don’t face any surprises.

When do you not pay tax on the transition allowance?

You do not have to pay tax on the transition allowance if you spend the full amount on education or an outplacement program. The amount you use directly for a new course of study or professional guidance is then exempt from taxation.

How can you claim the transition allowance from a temp agency?

• Temporary agency workers are also entitled to a transition allowance. However, it is often only paid out if you request it yourself. Therefore, after your employment ends, send an official request to the temp agency, for example using a sample letter. Don’t forget to do this on time, because the application must be submitted within three months after the end of the contract.Do you want to know the amount you are entitled to? Then use an online transition allowance calculator.What other benefits are possible after dismissal?
• After the end of your employment contract, you may be eligible for various benefits. The most common is the WW benefit (Unemployment Insurance Act), which provides you with temporary income while you look for a new job.

In addition, you may – for example if you left employment while ill – be entitled to a Sickness Benefits Act benefit. If there is partial incapacity for work, you may be able to apply for a WIA or WGA benefit via UWV.

In short, depending on your situation, various arrangements are possible:

WW benefit:

For job seekers without an immediate new employment contract.

Ziektewet benefit:

If you were ill at the end of your employment.
WIA or WGA:
In case of (partial) incapacity for work.

Make sure you are well informed about your options and, if in doubt, contact the UWV or a legal advisor.

Do you have to report the transition payment as income when receiving a benefit?

Many employees wonder whether they must report the transition payment as income when applying for a benefit, such as WW, IOW, WIA, WAO, Wajong or the Ziektewet. This is not necessary: the transition payment is not considered income for these schemes. You therefore do not need to report this amount separately to the UWV or another benefits agency. Your benefit will not be lower or otherwise adjusted because of this.

This way, you can spend the transition payment on, for example, training or use it as a financial buffer, without this affecting your entitlement to a benefit. Do you have specific questions about this or are you unsure about your situation? Then consult a specialist or contact the UWV for personal advice.

• What you need to know about the final settlement at the end of your employmentWhen your employment ends, you will receive a final settlement from your employer. It specifies exactly what you are still entitled to, such as:
• the remaining salary for your last days worked,the accrued vacation pay,
• the value of unused vacation days,and possibly a year-end bonus if you have accrued one.

Your employer must provide and pay this final settlement within one month after the end of your employment. If it does not arrive on time, it is wise to state in writing within that same month that you still expect the final settlement. This way you have a clear overview of your remaining entitlements and know where you stand.

What can you do if you have not received a final settlement after your termination?

If you do not receive a final settlement after the end of your employment, including, for example, your outstanding salary, vacation pay, or unused vacation days, send a written request to your employer within one month to request payment. Your employer is required to provide and pay the final settlement no later than one month after your departure. You can use a template letter for this. If your employer does not respond, you can consider further steps, such as seeking legal assistance.

What does a final settlement in the event of termination entail?

When your employment ends, you usually receive a so-called final settlement. This is an overview of all financial matters you as an employee are still entitled to upon departure. This includes:

the remaining monthly salary,

• the accrued vacation pay,
• the value of unused vacation days, and
• any year-end payments or bonuses you are still owed.
• Did you not receive your final settlement on time? Then it is advisable to contact your employer within one month after the end of the employment. Your employer is required to issue and pay the final settlement no later than one month after termination of the employment. A brief written reminder can often help in such situations.

What can an employment law attorney do for you?

Both employers and employees can benefit from expert advice. Our employment law attorneys in Rotterdam, Amsterdam, Utrecht, The Hague and Eindhoven can help you with:
calculating the correct amount of the transition compensation;

checking whether your employer is legitimately deducting costs;

negotiating a higher compensation in a settlement agreement;

• conducting legal proceedings when your right to compensation is disputed.
• Frequently Asked Questions
• Do I have to apply for the transition compensation myself?
• No, the employer is required to pay this within one month after the end of the contract.

Can I receive a higher compensation than the transition compensation?

Yes, in a dismissal by mutual consent, a higher compensation can be agreed.

What if my employer refuses to pay?

• Then you can start proceedings before the subdistrict court within three months after the end of the employment contract.
• Contact us
• Do you have questions about severance pay or would you like our lawyers to assess your situation? Feel free to contact Arslan Advocaten. We assist both employees and employers with expert and practical advice.
• het voeren van een procedure wanneer uw recht op vergoeding wordt betwist.

Veelgestelde vragen

Moet ik zelf de transitievergoeding aanvragen?
Nee, de werkgever is verplicht deze uit te keren binnen één maand na einde van het contract.

Kan ik een hogere vergoeding krijgen dan de transitievergoeding?
Ja, bij ontslag met wederzijds goedvinden kan een hogere vergoeding worden afgesproken.

Wat als mijn werkgever weigert te betalen?
Dan kunt u binnen drie maanden na het einde van de arbeidsovereenkomst een procedure starten bij de kantonrechter.

Neem contact op

Heeft u vragen over de transitievergoeding of wilt u dat onze advocaten uw situatie beoordelen? Neem vrijblijvend contact op met Arslan Advocaten. Wij staan zowel werknemers als werkgevers bij met deskundig en praktisch advies.