On dismissal a transition payment may be due, subject to conditions. This basic guide sets out the core rules. For current amounts and worked examples, see our guide to the transition payment 2026 and the Rijksoverheid.
Is your employment contract being ended, and are you wondering whether you are entitled to a transition payment? Since the new dismissal law came in in 2015, virtually every employee is entitled to a financial payment on dismissal. It serves as compensation for the dismissal and helps ease the move to a new job.
In this article our employment lawyers explain when you are entitled to a transition payment, how it is calculated, and in which situations the entitlement lapses.
What is the difference between a transition payment and a severance payment?
It is easy to confuse the terms, but there is an important distinction. The transition payment is the statutory minimum that every employee (absent an urgent cause for dismissal) receives when the employment is ended on the employer’s initiative. It is laid down in law and applies in almost every case of involuntary dismissal.
A severance payment, by contrast, is a broader term covering any payment that can be awarded on dismissal — including extras on top of the transition payment, after negotiation or under a settlement agreement, for instance. In short: every transition payment is a severance payment, but not every severance payment is automatically the statutory transition payment.
Note: if you resign yourself, the entitlement lapses, unless there are special circumstances such as seriously culpable conduct conduct by your employer.
When are you entitled to a transition payment?
You are usually entitled to a transition payment where your employer ends the contract or does not renew a fixed-term contract. The precise conditions and exceptions depend on the dismissal route and the circumstances.
- is terminated or dissolved at the employer’s initiative, or
- is not renewed at the end of a fixed-term contract.
It makes no difference whether you had a permanent or a fixed-term contract. The payment can also be due on dismissal during reorganisation or long-term incapacity.
What conditions apply to a transition payment on partial dismissal?
You can also be entitled to a transition payment on partial dismissal, but strict conditions attach. You qualify where:
- your hours or salary have been structurally reduced by at least 20%;
- that reduction is expected to be permanent rather than temporary;
- the change is formally recorded in a new contract, an amendment to your existing contract, or another written agreement.
So this is not about a temporary reduction in hours but about a permanent, contractually recorded change to your employment. Unsure whether your situation meets these conditions? Have your contract and circumstances assessed by an employment lawyer so that you do not miss out on rights unnecessarily.
Fixed-term contracts and agency work too
The rules on the transition payment apply to permanent and fixed-term contracts alike — so also if you work as agency worker. If your fixed-term contract is not renewed, you are in principle entitled to a transition payment, whatever the number of hours worked or the type of contract. Note: in agency work it pays to be alert and to ask the agency for the payment actively, should it not be granted automatically.
Unsure about the level of your payment? An online calculator lets you work out easily what you are entitled to, so that you do not lose money. Do not wait too long to claim it; a statutory deadline applies.
The transition payment on partial dismissal
Sometimes your contract is amended and you structurally work less — you lose at least 20% of your hours, say, and this is not a temporary measure. You can then also be entitled to a transition payment for the part of the work that falls away.
Important points here are:
- you must structurally (that is, expected permanently) work fewer hours;
- the number of hours lost and the amendment to your contract must be properly recorded.
The payment is then calculated pro rata over the hours you have lost. That way you do not leave money on the table when your hours are reduced without your whole contract ending. Need help working out your entitlement? Feel free to use an online calculator, such as the one at juridischloket.nl.
When is no transition payment due?
There are situations in which you have no entitlement. For example:
- Termination by mutual consent: where you and your employer make your own arrangements and agree a severance payment.
- Seriously culpable conduct: theft, fraud or violence in the workplace, for instance.
- Reaching state pension age: where the contract ends naturally.
- Insolvency or debt restructuring of the employer: there is then no money available to pay out.
- An equivalent provision in the collective agreement: some collective agreements contain arrangements replacing the transition payment.
Unsure whether you are entitled? Always have it checked by an employment lawyer.
In which situations can an employer be reimbursed for the transition payment?
There are a few exceptions in which an employer can recover most or all of the transition payment it has made, including:
- After long-term incapacity: where an employee is dismissed after at least 2 years of illness, the employer can apply for reimbursement.
- Closure of a small business: where a small business stops because of the owner’s death or retirement, reimbursement is sometimes available. That does require that at least one employee was formally dismissed with permission from the UWV, or by dissolution through the subdistrict court.
Would you like to know whether your situation qualifies? An employment lawyer can advise you.
How is the transition payment calculated?
The level of the payment depends on:
- your gross monthly salary (including holiday allowance and fixed supplements), and
- the length of your employment.
It builds up as follows:
- Since 1 January 2020 the main rule has been one third of a gross monthly salary per full year of service. For the remaining part of the employment the payment is calculated pro rata.
- The statutory maximum is adjusted annually. So always check the current government calculator or the 2026 guide before settling on an amount.
👉 Example:
An employee with a gross monthly salary of €3,000 and 12 years’ service can be entitled to a transition payment of over €20,000.
The transition payment when working fewer hours
But what if you are not dismissed altogether yet come to work considerably fewer hours? An entitlement can arise there too.
That applies where:
- your hours have been reduced by at least 20%,
- that reduction is structural (that is, expected to be permanent),
- and the reduction is formally recorded in your contract.
In those cases the payment is calculated on the basis of the hours you have lost. If you now work 20% less, you receive a transition payment over that lost part of your employment — using the same method as for a full dismissal. In this way the law compensates the loss of income caused by working fewer hours.
Note: if you are unsure about the calculation or about 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 payment, such as:
- Transition costs: the cost of outplacement or training aimed at finding other work.
- Employability costs: costs incurred during the employment to improve your wider employability on the labour market.
Important: this is only allowed if the employee was informed in writing in advance and agreed.
The maximum level of the transition payment
The transition payment is capped. That cap is adjusted annually. At present:
- in 2026 a maximum of €102,000 gross,
- or one gross annual salary where that exceeds €102,000.
Do you pay tax on the transition payment?
The tax authorities treat the transition payment as employment income. That means payroll tax and contributions are due on it – just as on your ordinary salary. You therefore receive the net amount in your account, after the employer has withheld and paid the tax.
Note: if you spend part of the payment directly on training or an outplacement programme, you may pay no tax on that part. That is possible subject to conditions. Get proper information from a specialist or the tax authorities so that you are not caught out.
Tax on the transition payment
A transition payment is in principle treated as pay. The tax treatment of training, outplacement or a specific payout can differ. Check with the tax authorities or seek individual advice.
A transition payment can also arise in agency work. Whether and when it is due depends on the employment contract, the route by which it ended, and the circumstances. If in doubt, ask for a calculation or a written specification.
What other benefits are possible after dismissal?
After your contract ends you may qualify for various benefits. The most common is unemployment benefit under the Unemployment Insurance Act, which gives you a temporary income while you look for a new job.
You may also be entitled to Sickness Benefits Act benefit – if you left employment while ill, for instance. Where there is partial incapacity, you may be able to apply through the UWV for benefit under the work capacity schemes.
In short, depending on your situation various schemes are possible:
- Unemployment benefit: for jobseekers without immediate new employment.
- Sickness Benefits Act benefit: if you were ill when the employment ended.
- Work capacity benefits: in cases of full or partial incapacity.
Get proper information about your options and, if in doubt, contact the UWV or a legal adviser.
Do you have to declare the transition payment as income when claiming benefit?
Many employees wonder whether they must report the transition payment as income when applying for a benefit such as unemployment, incapacity or sickness benefit. That is not necessary: the transition payment is not treated as income for those schemes. You therefore do not have to declare the amount separately to the UWV or another benefits agency. Your benefit is not reduced or assessed differently because of it.
So you can spend the payment on training or keep it as a financial buffer without affecting your entitlement to benefit. Do you have specific questions or doubts about your situation? Consult a specialist or contact the UWV for personal advice.
What you need to know about the final settlement when your employment ends
When your employment ends, your employer gives you a final settlement. It sets out exactly what you are still entitled to, such as:
- the remaining salary for your last days worked,
- the holiday allowance accrued,
- the value of untaken holiday days,
- and any year-end bonus you have accrued.
A final settlement usually contains outstanding pay components, holiday allowance and holiday days. When each amount becomes due can depend on the employment contract, the collective agreement, the pay period and the circumstances.
Do you have questions about a final settlement after dismissal? Check which pay components, holiday days and payments are included and, if necessary, ask for a written specification. The correct payment dates can depend on your contract, the collective agreement, the pay period and the circumstances.
What does a final settlement on dismissal involve?
When your employment ends you usually receive a final settlement: an overview of everything you are still financially entitled to on leaving. For example:
- the remaining monthly salary,
- the holiday allowance accrued,
- the value of untaken holiday days, and
- any year-end payments or bonuses still owed to you.
Do you have questions about a final settlement, or is a payment missing? Ask the employer in writing for a specification and, if in doubt, have it assessed in good time which next step suits your situation.
What can an employment lawyer do for you?
Employers and employees alike can benefit from expert advice. Our employment lawyers in Rotterdam, Amsterdam, Utrecht, The Hague and Eindhoven can help you with:
- calculating the correct level of the transition payment;
- checking whether your employer is right to deduct costs;
- negotiating a higher payment in a settlement agreement;
- conducting proceedings where your entitlement is disputed.
Frequently asked questions
Do I have to act myself if the transition payment is missing? The employer pays it where the conditions are met. If the payment is missing, or you think the calculation is wrong, ask in writing for a specification and have it assessed in good time which steps suit your situation.
Can I get a higher payment than the transition payment?
Yes: on termination by mutual consent a higher payment can be agreed.
What if my employer disputes the transition payment or does not pay it? Ask for a written explanation and keep the employment contract, payslips and the final settlement. Which next step and which deadline apply depends on the dismissal route and the circumstances; so seek legal advice in good time.
Get in touch
Do you have questions about the transition payment, or would you like our lawyers to assess your situation? Contact Arslan Advocaten without obligation. We assist employees and employers alike with expert, practical advice.
Read also
- Reporting sick as a part-timer: are you entitled to pay?
- Who is your employer when you work through an agency?
- Notice period and transition payment: common mistakes and how to avoid them
Frequently asked questions
When am I entitled to a transition payment on dismissal?
You are entitled to a transition payment where your contract is terminated by the employer, or a fixed-term contract is not renewed on the employer’s initiative. Since 1 January 2020 there has been no minimum period of service: the entitlement exists from the first day of employment and is calculated pro rata. It makes no difference whether you had a permanent or a fixed-term contract.
What is the difference between a transition payment and a severance payment?
A transition payment is the statutory minimum on dismissal without an urgent cause, whereas a severance payment is a broader term that can also cover extras such as negotiated amounts or payments under a settlement agreement.
Does my entitlement lapse if I resign myself?
Yes, the entitlement usually lapses if you resign yourself, unless there are special circumstances such as seriously culpable conduct by your employer.
Can I also get a transition payment on partial dismissal?
Yes: on partial dismissal a transition payment can apply where the hours or salary are structurally reduced by at least 20% and that change is permanent and recorded in writing.
Need help? Our employment lawyer is ready to help you. Contact us without obligation for a free initial consultation.
