Transition payment for employers

If you terminate an employees employment contract, the employee will often be entitled to the statutory transition payment (in Dutch: transitievergoeding).

Since 1 January 2020, an employee has been entitled to a transition payment from the first day of the employment contract. A right to a transition payment also exists if a fixed-term contract is not renewed at the employer’s initiative. It makes no difference to this right whether the employee has found a new job immediately afterwards.

Amount

The amount of the transition payment depends on the gross monthly salary and the number of years the employee has worked for your company. The total transition payment is equal to one third of the gross monthly salary multiplied by the number of years the employee has worked for you. In some cases, years of service with successive employers also count. This may apply, for example, if the employee came to work for you because you took over a business, or part of a business. If the employee was out of service for more than six months between two contracts, the earlier contracts do not count when calculating the transition payment.

Gross monthly salary includes all fixed and variable salary components. A bonus is also partially included in the calculation. Pension contributions and travel expense allowances are not included in the calculation of the transition payment.

Entitlement to a transition payment

An employee is entitled to a transition payment in the following cases:

• they are dismissed for a reason other than seriously culpable conduct;
• their fixed-term contract is not renewed at the employer’s initiative.;
• the employee resigns because of culpable conduct or omissions by the employer. This may be the case if, as an employer, you seriously fail to meet your reintegration obligations in the event of illness. In that case, the employee must apply to the court for a transition payment.

An employee is not entitled to a transition payment in, among other, the following circumstances:

• the employee resigns;
• the employment contract ends because pensionable age is reached;
• the employee refuses an offer to extend the contract;
• the employee is dismissed and has acted with serious culpability. Please note that in the event of dismissal for culpable conduct or summary dismissal, there may still be a right to a transition payment;
• employer and employee part ways by mutual consent, often by means of a settlement agreement. In that case, a termination payment is often agreed, but it is not mandatory.

Compensation of the transition payment after long-term incapacity for work

An employee who leaves service after two years of long-term incapacity for work is also entitled to a transition payment. Under certain circumstances, you can be compensated by the government for the transition payment paid. To qualify for compensation:

• the employee must have been dismissed because of long-term illness. You can show this by means of an UWV dismissal permit, a court dissolution order, or a settlement agreement showing that it was concluded because of long-term illness; and
• the transition payment must have been paid.

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