The reimbursement for a dismissal could involve transitional statutory compensation, fair compensation, the result of negotiations or a golden handshake.
In principle, anyone whose employment agreement will be terminated upon the employer’s initiative has the right to a transitional compensation. The amount depends on the salary and the duration of the employment and a maximum sum applies.
In (exceptional) circumstances, the employee also has a right to an additional reimbursement upon dismissal, the so-called fair compensation. This is due, for example, if the employer has behaved in a seriously reprehensible way or has deliberately poisoned the employment relationship.
If the parties make a settlement agreement and terminate the employment agreement with mutual approval, they can agree to what they like. The right to the transitional compensation and the fair compensation lapses after the termination agreement has been concluded. Usually the employee will negotiate a reimbursement for the dismissal that is equal to or higher than the legally prescribed reimbursement for the transition.
Employment agreement & golden handshake
Finally, the parties in the employment agreement may agree on an (additional) reimbursement for redundancy. This contractual reimbursement for redundancy is also known as a golden handshake.
In agreements with members of the board of directors and top employees it is particularly common to negotiate a high sum for the compensation in a contract. In some cases however, such compensation may be capped [by the Senior Executives in the Public and Semi-Public Sector (Standards for Remuneration) Act].
If you have any questions about transitional compensation, we invite you to contact us.
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