What is the transition payment?
The transition payment is a statutory compensation that employees are entitled to upon dismissal or non-renewal of a temporary contract. This compensation is regulated in Article 7:673 of the Dutch Civil Code (BW) and is intended to facilitate the transition to other employment. Since 1 January 2020, every employee has been entitled to a transition payment from the first day of employment upon dismissal initiated by the employer.
How do you calculate the transition payment?
The calculation of the transition payment has been simplified since the introduction of the Balanced Labour Market Act (WAB). The compensation amounts to one-third of the monthly salary per year of service. For incomplete years of service, the compensation is calculated proportionally. The monthly salary comprises the gross monthly salary, plus fixed salary components such as holiday allowance, a thirteenth month payment, and structural overtime compensation.
A calculation example: if you have been employed for five years with a gross monthly salary of EUR 3,500, including holiday allowance, your transition payment amounts to: 5 x (EUR 3,500 / 3) = EUR 5,833.33 gross.
Maximum transition payment
The transition payment is capped. In 2024, the maximum is EUR 94,000 gross, or an annual salary if that is higher. This maximum is indexed annually. It is important to check the current maximum at the time of dismissal.
When are you entitled to a transition payment?
You are entitled to a transition payment when the employer initiates the termination of the employment relationship. This applies to termination by the employer, dissolution by the subdistrict court, and non-renewal of a temporary contract. In cases of seriously culpable conduct by the employer, you may also claim a higher compensation than the statutory transition payment.
Exceptions to the entitlement
There are situations in which you are not entitled to a transition payment. This is the case with dismissal due to seriously culpable conduct by the employee, dismissal before the age of 18 with an employment contract of fewer than 12 hours per week, and bankruptcy of the employer. Also, when you resign voluntarily, the entitlement to a transition payment generally lapses, unless there is seriously culpable conduct by the employer.
Advice from Arslan Advocaten
The calculation of the transition payment may seem straightforward, but there are many situations in which disputes can arise about the amount or the entitlement to the compensation. At Arslan Advocaten, we verify whether the calculation has been carried out correctly and whether you may be entitled to additional compensation. Contact us for a free calculation of your transition payment.