The transition payment is a financial compensation to which employees are entitled upon dismissal. The purpose of this compensation is to support employees during the transition to a new job. The transition payment is a statutory right that has existed since 1 July 2015. Employers are required to pay this compensation when they terminate the employment contract, unless exceptions apply.

When am I entitled to a transition payment?

You are entitled to a transition payment if you are employed and your employer terminates the employment contract. This may apply in various situations, such as:

• Termination of a temporary contract: Your employer does not renew your contract.
• Dismissal with UWV approval: Your employer terminates your contract with UWV approval.
• Termination via the subdistrict court: Your employer asks the subdistrict court to dissolve your employment contract.
• Termination during the probationary period: Your employer ends your contract during the probationary period.

Even if you resign due to seriously culpable conduct or omissions by the employer, such as in cases of sexual harassment or discrimination, you may be entitled to a transition payment.

When is there no right to a transition payment?

There are situations in which the employer does not have to pay a transition payment, such as:

• In the case of Summary dismissal: If the employee commits gross misconduct, for example theft.
• Closure of a company due to bankruptcy: If the employer is bankrupt or in debt restructuring.
• If an equivalent arrangement is included in the collective labor agreement (CLA): In some collective labor agreements, an alternative arrangement is included, such as a waiting allowance scheme.
• Termination at the AOW or retirement age: Employees who have reached their AOW age are not entitled to a transition payment.

How is the transition payment calculated?

The amount of the transition payment depends on the number of years of service and the gross monthly salary. The basic formula is as follows:

• 1/3 gross monthly salary per full year of service.
• For each month you did not work in full, you receive 1/36 of the gross monthly salary.

What counts towards the gross monthly salary?

The gross monthly salary is the amount shown on your payslip before tax deductions. For the calculation of the transition compensation, the following elements are included:

• Gross base salary.
• Holiday allowance (usually 8% of the gross annual salary).
• Structural bonuses and allowances such as shift allowance or overtime pay.

Example calculation of transition compensation

Suppose you earn € 3.000 gross per month including holiday allowance and you have been employed for 3,5 years. Your transition compensation will then be:

• For the first 3 full years of service: 3 x 1/3 x € 3.000 = € 3.000.
• For the remaining 6 months: 6 x 1/36 x € 3.000 = € 500.
• Total transition compensation: € 3.000 + € 500 = € 3.500.

Transition compensation in case of partial dismissal

Sometimes an employee is dismissed and is immediately offered a new employment contract with fewer hours. This can happen, for example, if there is less work or if the employee becomes partially unfit for work. In that case, the employee may be entitled to a partial transition payment. The condition for this is that the number of hours must be reduced by at least 20%.

The calculation of the transition payment is then based on the reduction in hours.

What to do if the employer does not pay?

If your employer does not pay the transition payment within the statutory period of one month after the end of your employment, you can take the following steps:

1. Send a written demand requesting that the transition payment be paid within 7 days.
2. Go to the subdistrict court: If the employer does not respond, you can go to the subdistrict court within 3 months after the end of your employment.

Option to pay in installments

In some cases, the employer may request to pay the transition payment in installments. This is possible if immediate payment would jeopardize the continuity of the business. However, the employer must pay the full amount within six months after termination of the employment.

Compensation in addition to severance pay

In addition to severance pay, there are other types of compensation you may be entitled to, such as:

• Notice compensation: If the employer indicates too late whether a temporary contract will be extended.
• Fair compensation: If the employer has acted in a seriously culpable manner.
• Fixed damages: In the event of failure to observe the notice period by the employer or the employee.

Conclusion

Severance pay is an important right for employees upon dismissal and can contribute to a smoother transition to other work. It is important that you are well informed about your rights and obligations regarding severance pay. If you have doubts or questions, you can always contact a specialized employment law attorney at Arslan & Arslan Attorneys.

Seek help from Arslan & Arslan Attorneys

Do you have questions about your severance pay, or is your employer not paying you on time? The attorneys at Arslan & Arslan are ready to provide legal assistance. Contact us for a free, no-obligation consultation.