Transition Payment for Temp Workers: Everything You Need to Know

As a temporary agency worker, just like regular employees, you may be entitled to a transition payment. This is a form of severance pay that you receive from your employer when your contract is terminated. The transition payment is intended to help you in the transition from one job to another, for example through additional training. In this article, we discuss in detail how the transition payment for temporary agency workers works, when you are entitled to it, and how the amount is calculated.

What is a transition payment?

A transition payment, also called severance pay, is an amount you receive from your employer when your contract ends. This payment is intended to facilitate the transition to a new job. You can use the money, for example, for additional training or retraining. The amount of the transition payment is established by law and amounts to one third of the gross monthly salary per year worked. The payment applies not only to permanent employees but also to temporary agency workers.

When are you entitled to a transition payment as a temporary agency worker?

As a temporary agency worker, you are entitled to a transition payment when your contract is terminated by your employer or when your contract is not renewed. This has applied since the introduction of the Balanced Labour Market Act (WAB) on January 1, 2020. Before this date, the situation was different, but since then every temporary agency worker accrues entitlement to a transition payment from day one. This means that even short-term employment relationships give entitlement to a payment.

What does the Balanced Labour Market Act say about transition payments?

The Balanced Labour Market Act (WAB) has implemented important changes for temporary agency workers. Since January 1, 2020, you are entitled to a transition payment from the first working day, regardless of the type of contract or its duration. Even if you have only worked for a few months, you immediately accrue entitlement. Previously, there was a minimum period of two years before you could claim a payment, but that requirement was eliminated with the WAB. In summary: the WAB ensures that temporary agency workers have the same rights as permanent employees when it comes to accruing transition payments. This means that as a temporary agency worker, you are no longer disadvantaged and always enjoy protection from the start of your employment. The main conditions to be eligible for a transition payment as a temporary agency worker are:

• Your contract is terminated by the employer.
• You are 18 years or older (unless you are a minor and have worked more than 12 hours per week).
• You have not yet reached retirement age.

Are you entitled to a transition payment if you work with an agency clause?

For temporary agency workers with an agency clause, the right to a transition payment may also apply. Since the introduction of the WAB, you accrue entitlement from the first working day. This right arises as soon as your employment ends at the initiative of the employer, including when your contract expires by operation of law through the agency clause. It is important that your contract actually ends through a decision by the employer or simply because it is not renewed. Note: with an agency clause, it may happen that the employment contract is immediately terminated once the assignment ends. Nevertheless, in that case, provided the statutory conditions are met, you are entitled to a transition payment — just like other temporary agency workers.

Does the phase of your agency work matter for the right to a transition payment?

No, the phase you are in as a temporary agency worker — whether Phase A, B, or C — no longer affects your right to a transition payment. Since the introduction of the WAB, you are entitled to accrue a transition payment from the first working day, regardless of which agency phase you are in. You therefore do not need to have completed a certain number of service years or a specific agency phase to be eligible.

How is the transition payment for temporary agency workers calculated?

The calculation of the transition payment for temporary agency workers is virtually the same as for regular employees. The amount of the transition payment depends on a number of factors, such as the duration of employment and the gross salary. The calculation is based on one third (1/3) of the gross monthly salary per year worked. Below are the factors that determine the calculation of the transition payment:

• Duration of employment: The number of years, months, and days you worked for the employer is included in the calculation.
• Gross monthly salary: This includes holiday pay and any supplements such as a thirteenth month or bonuses.
• Average salary calculation: As a temporary agency worker, you sometimes work without a fixed monthly salary. In that case, an average salary is calculated based on the periods in which you worked. You are paid per hour and usually receive your salary every 4 weeks. For calculating the transition payment, the average monthly wage over the last 12 months of your contract is used. If your contract lasted less than 12 months, the average over the entire duration of the contract is used.

How do you determine the average monthly wage with a short contract?

If your agency contract lasted less than 12 months, the calculation of your transition payment looks at the average wage you earned over the entire duration of the contract. Everything you received during that period — salary, holiday pay, supplements, and any bonuses — is added together and then converted to an average monthly amount. This ensures the payment is fairly aligned with what you actually earned during your employment. The maximum transition payment in 2024 is €94,000, unless your annual salary is higher. In that case, your gross annual salary serves as the maximum. This maximum amount is re-indexed annually.

What costs may the employer deduct from the transition payment?

It may happen that your employer deducts certain costs from the transition payment. According to the law, this is only permitted under strict conditions. These are costs that actually contribute to your chances on the labor market. There are broadly two types of costs that may be deducted:

• Transition costs: These are costs the employer incurs to guide you to another job. Think of paying for outplacement programs, job application training, or guidance in retraining. The employer must inform you about this in advance and request your written consent if the costs are offset against your transition payment.
• Employability costs: These are costs the employer incurred before the end of the employment to increase your employability outside their own organization, for example training costs not directly related to your current position. Your employer also needs your consent for offsetting these costs.

Other costs, such as outstanding vacation days or fines, may not be deducted from the transition payment. Has your employer withheld costs you disagree with? Then it is advisable to seek legal advice to assess whether this is justified.

What happens when a temporary agency worker joins the hiring company?

It often happens that temporary agency workers eventually join the hiring company directly. In that case, the temporary agency worker is not entitled to a transition payment from the employment agency, as the employment relationship there is terminated. However, the accrued service years at the employment agency continue to count towards the transition payment if the employee is later dismissed by the hiring company. This means that the employment history at the employment agency is included in the calculation of the transition payment at the new employer. Note: if your employment at the employment agency ends and you cannot immediately start at the hiring company, there may be no other work for you. In such a case, you depend on unemployment benefits, and the employment agency is responsible for paying the transition payment. It is therefore important to check carefully whether you are actually joining the hiring company directly or whether there is a period of unemployment in between. This way, you know for sure who is responsible for paying your transition payment and you avoid surprises.

Example calculation of transition payment for temporary agency worker

Suppose you have worked for two years as a temporary agency worker for a gross monthly salary of €2,500. Then you calculate the transition payment as follows:

• Step 1: The payment per year worked is one third of the gross monthly salary. In this case: 1/3 x €2,500 = €833.33.
• Step 2: Since you worked for two full years, you multiply this amount by two: €833.33 x 2 = €1,666.66.
• Step 3: The transition payment in this example amounts to €1,666.66.

What should you watch out for as a temporary agency worker?

Although the law has significantly improved the rights of temporary agency workers, it is important to keep a few things in mind:

1. Calculation of service years: Make sure that all years you worked (including at other employment agencies or employers) are correctly recorded.
2. Fixed or flexible salary: If you do not have a fixed monthly salary, an average must be calculated. Check whether this has been correctly calculated by your employer or employment agency.
3. Employment at the hiring company: If you join the hiring company, do not forget that your employment history at the employment agency counts towards your transition payment.

Conclusion

As a temporary agency worker, you are also entitled to a transition payment when your contract ends. The calculation of this payment is comparable to that of regular employees, and you accrue entitlement from day one. It is important to be well informed about your rights, especially if you have worked for an employer for an extended period as a temporary agency worker. Do you have questions about your specific situation or want to know what you are entitled to? Contact the employment law lawyers of Arslan Advocaten for expert advice.

Questions about the transition payment?

For more information or a personal consultation, you can contact our office. We are ready to help you with all your questions about employment law and transition payments.