Many employees with a temporary contract believe that they are not entitled to severance pay if their contract ends prematurely. However, in that case you may also be entitled to the transition compensation – and sometimes even more, especially if a settlement agreement (VSO) is concluded.
In this article we explain how the rules work for temporary contracts, what your rights are and what you should pay attention to with a VSO.
Are you entitled to transition compensation for a temporary contract?
Yes, employees with a temporary contract are also entitled to the transition payment if their employment contract:
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is not extended by the employer, or
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terminates prematurely through a VSO or dismissal procedure.
The transition payment applies even if your contract only lasted a short time: from 1 day of employment you are entitled to a (pro rata) compensation.
What is the transition payment for a temporary contract?
The compensation is:
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1/3 gross monthly salary per year worked.
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For shorter periods this will be calculated pro rata.
👉 Example: An employee with a salary of € 2,400 and a 6-month contract is entitled to approximately € 400 transition compensation in the event of early termination.
How is the transition payment calculated after multiple temporary contracts?
If you have had multiple temporary contracts with the same employer, all these periods are added to determine the total transition compensation. The main rule remains:
- You will receive1/3 gross monthly salary per completed year worked.
Here too, the compensation is calculated pro rata for parts of years.
👉 Example: Suppose you have had three consecutive annual contracts and your gross monthly salary was € 2,500. At the end of these three years, you are entitled to a total of 1 gross monthly salary as a transition payment (3 x 1/3 = 1).
Note: Things such as holiday pay and fixed allowances count when calculating your monthly salary. Suppose your salary is € 2,500 per month and you receive 8% holiday pay (€ 200), then the compensation is calculated over € 2,700 per month.
You can see that all temporary periods count and – in the event of non-renewal after several temporary contracts – you are entitled to appropriate compensation.
How can you calculate your transition compensation yourself?
Fortunately, calculating your transition compensation is easy to do with a calculator or an online tool from, for example, theCentral Government. You need a few details for this:
- Your gross monthly salary (including fixed allowances)
- The number of years worked (plus the number of months or days in an incomplete year of service)
Step 1: Determine gross monthly salary
Take your fixed gross monthly salary as a starting point. If necessary, add:
- 8% holiday pay (standard for almost every employee)
- Fixed allowances, such as shift allowance, structural overtime allowance, end-of-year bonus or bonus, but only if you are structurally entitled to it
Step 2: Counting years of service (and months/days)
Each fully worked year counts for 1/3 monthly salary in transition compensation. Have you not worked a full year? Then calculate the part pro rata (i.e.: 1/12 per month and 1/365 per day).
Example calculation
Suppose your gross monthly salary (including holiday pay and fixed allowances) is € 2,700 and you have been employed for 2 years and 6 months been.
- 2.5 years x 1/3 = 0.83 monthly salary
- € 2,700 x 0.83 ≈ € 2,241 transition compensation
Helpful tip:
You will find various calculation tools online, such as the calculatorUWV or the FNV. Enter your details there for a quick and accurate calculation.
What counts towards the transition compensation?
The transition payment is calculated based on your gross monthly salary. But did you know that this can include more than just your fixed salary? Various allowances and benefits count, as long as you are entitled to them.
Remember:
- 8% holiday allowance: This is mandatory for every employee and is always included.
- Shift allowance: Do you work in shifts and do you receive an allowance for this? This will then be included in the calculation.
- Overtime compensation: If structural overtime is part of your job and you receive compensation for it, this part also counts.
- Bonuses and profit distribution: Do you regularly receive bonuses, for example based on achieved targets, or a profit distribution? These amounts can also be part of the monthly salary for the transition payment.
- End-of-year bonus: If a fixed end-of-year bonus is paid out within your organization, this also falls under the salary concept.
This creates a more complete picture of your 'monthly salary' on which your transition payment is based. As a result, the final amount can often be more favorable than you would expect based on your basic salary alone.
What information do you need to calculate the transition compensation?
To determine your transition payment for a temporary contract, you need some basic information:
- Start date and end date of employment – this determines the length of your employment relationship, down to the day.
- Gross monthly salary – including fixed extras such as holiday pay and structural allowances.
The compensation can be easily calculated based on this data: the longer the employment and the higher the gross monthly income, the higher the transition compensation. Have everything at hand when you do the math!
Which parts of the salary count towards the transition payment?
The transition payment is based on thegross monthly salary. In addition, a number of fixed salary components are included, so that your compensation gives a complete picture of your usual income.
Remember:
- 8% holiday pay – This percentage is added to your monthly salary as standard.
- Shift allowance – Only if you work in shifts on a structural basis.
- Overtime compensation – If you receive it regularly.
- Bonuses or profit distributions – For example, if you work in a commercial position with targets for which bonuses are paid out.
- End of year bonus – When you are entitled to a 13th month or fixed benefit at the end of the year.
Please note: only salary components that are paid to you on a structural basis count. Incidental or one-off rewards are usually not included in the calculation. This way you receive a fair transition payment that reflects your regular monthly income.
Do you have to pay tax on the transition compensation?
Yes, you are obliged to pay tax on a transition payment paid. The compensation is regarded by the Tax Authorities as wages from previous employment, which means it falls into box 1. This means that the amount is added to your income and you pay income tax on it.
Note:
- Your employer usually withholds payroll tax directly from the amount you receive.
- The net amount you ultimately receive is therefore lower than the gross amount.
- If you decide to use the transition payment for training or outplacement (such as training viaLOI or guidance by a coach), you may receive a tax benefit because it is spent directly and not as wages is paid.
So make a conscious choice in advance whether you want to have the money paid out or use it directly for your development, so that you know where you stand financially.
What can you use the transition payment for after a temporary contract?
The transition payment is intended to help you find new work, but you can decide for yourself what you want to use the amount for. Many employees use the transition payment for, for example:
- Outplacement programs (guidance to another job)
- Training or (re)training to increase your chances on the labor market
However, you are not obliged to spend the money on career guidance or studies. Would you rather receive the compensation as additional savings or would you use it for something else? That is also allowed: it is your free choice.
Please note: If you choose to have the transition payment paid out, you will pay tax on it, just like on your normal salary.
Settlement agreement for temporary contracts
If a temporary contract is terminated earlier, the employer can offer a VSO. This often happens:
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In case of dysfunction or a disturbed relationship.
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If you have to say goodbye earlier than the end date.
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When parties want to separate "in good consultation".
Points of attention for a VSO with a temporary contract:
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Notice period – check that the legal period is applied correctly.
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Unemployment benefits – the reason for dismissal must be neutral (“in good consultation”).
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Transition compensation – temporary employees are also entitled to this.
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Extra compensation – if the employer wants to terminate the contract prematurely, you can ask for more than just the transition payment.
Practical examples
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Example 1: An employee with a 1-year contract was offered a VSO after 8 months. In addition to the transition payment, he received 2 extra monthly salaries for agreeing.
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Example 2: An on-call worker with a 6-month contract did not think he was entitled to compensation. She still received the transition payment through a lawyer.
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Example 3: An employee signed a VSO without notice period. As a result, he had to wait 1 month longer for his unemployment benefit.
Higher transition compensation possible?
In many cases it appears that employees are entitled to a higher transition payment than initially thought. Our lawyers and lawyers can immediately assess whether you qualify for this. It is therefore always wise to have your situation checked, so that you know what you are entitled to and do not leave any money behind.
Checklist: VSO with temporary contract
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📑 Check whether your transition payment has been calculated correctly.
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📅 Please note the correct notice period.
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📝 Make sure the reason for dismissal is neutral.
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💶 Negotiate for additional compensation if the employer wants to terminate earlier.
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⚖️ Have your VSO checked by an employment law lawyer.
Common mistakes
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Think that temporary contracts do not entitle you to transition compensation.
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Agreeing too quickly without asking for additional compensation.
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Forgot that on-call workers and short employment contracts also count.
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Losing unemployment benefits due to wrong reason for dismissal in the VSO.
Frequently asked questions (FAQ)
1. Am I entitled to a transition payment for a temporary contract?
Yes, even in the event of non-extension or early termination.
2. How is the compensation calculated?
1/3 monthly salary per year worked, pro rata for shorter periods.
3. What if my contract simply expires?
Then you are also entitled to a transition payment, unless you resign yourself.
4. Can I get more than the transition payment?
Yes, especially with a VSO, because the employer often wants to get rid of you faster.
5. Does the employer have to reimburse my lawyer's fees?
Yes, that is common and should be included in the VSO.
What to do if your transition payment is not paid?
Is the payment delayed? Then you don't have to sit still. First put a neat, written reminder on paper and send it to your (ex) employer. If nothing happens after this, you can engage a lawyer or lawyer from Arslan Advocaten to claim the compensation on your behalf.
Please note: you have a maximum of three months after the end of your employment to take action. So don't wait too long!
Why Arslan Lawyers?
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Specialized in dismissal and settlement agreements
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Also supervise employees with temporary contracts
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Negotiate for additional compensation and secure unemployment benefits
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Costs are often recovered from the employer
Conclusion
You are also entitled to a transition payment with a temporary contract. In the event of early termination via a VSO, you can often even negotiate more. Always have your agreement checked so that you do not miss out on money or rights.
Direct advice from our lawyers
Do you have immediate questions about dismissal? You can easily submit your situation to our experienced lawyers. Feel free to send an email with your question and receive a clear answer quickly, so that you know exactly where you stand.