Deducting the transition payment as an employer, here's how it works

Deducting the transition payment as an employer

As an employer, you may, subject to conditions, deduct the transition payment and associated costs. Read below exactly how the deduction works.

As an employer, in many cases you are required to pay a transition payment upon dismissal. What many employers do not know is that, under strict conditions, certain costs may be deducted from that amount. Read below for how to calculate the payment correctly and when a deduction is permitted.

How to calculate the transition payment as an employer

Before considering any deduction, you need to know what you owe. The statutory formula is straightforward: an employee is entitled to one third of a gross monthly salary for each full year of employment. Months and days worked beyond a complete year are counted on a pro-rata basis. Every day therefore counts.

In 2026 the statutory maximum is € 102,000 gross. If an employee earns more than € 102,000 per year, a maximum of one gross annual salary applies as the cap. This maximum is indexed annually on the basis of contractual wage growth.

Broader criteria than the basic salary alone apply when calculating the gross monthly salary. Consider also:

• Vakantietoeslag (8%)
• A fixed year-end bonus or thirteenth month (converted to a monthly amount)
• Structural allowances such as an irregular-hours supplement or a fixed overtime payment
• An average variable bonus, provided it is structural in nature

Do not be caught out: an incorrectly calculated monthly salary quickly results in a payment that is too low, and that can have legal consequences. If there is any doubt about the correct basis, it is advisable to seek advice. Further background on the composition and entitlements can be found on our page transition payment.

Two types of costs that you can deduct

The law recognises two categories of costs that an employer may, provided all conditions are met, deduct from the transition payment. This is governed by the Decree on Conditions for Deducting Costs from the Transition Payment (based on Article 7:673(6) of the Dutch Civil Code).

Transitiekosten These are costs you incur to prevent or shorten the employee's period of unemployment. Examples include outplacement support or a work-to-work programme that you as the employer fund.

Inzetbaarheidskosten These are training costs you have incurred to broaden the employee's employability. Two additional requirements apply here: the costs must be aimed at employability outside your organisation (or at a different role within your own company), and the costs must have been incurred in the five years preceding the point at which the transition payment becomes due.

Note this important distinction: costs for training that is mandatory under statute or a collective labour agreement (cao) fall outside the scope of the deduction. You are already legally obliged to provide that training free of charge. Only non-mandatory training aimed at broader employability or a different role qualifies.

The conditions for deduction are strict.

Costs cannot simply be deducted from the transition payment. Several cumulative conditions apply, including:

• The employee must give prior written consent to the set-off; preferably include this in the employment contract or terms and conditions of employment.
• The employee must be given insight into the costs incurred.
• The costs may not exceed the transition payment itself.
• The costs must be demonstrable and documented.
• In the case of employability costs: the training must not have been directed at the employee's current role.
• Where agreements have been made with trade unions or a works council under a collective labour agreement, the requirement for individual written consent lapses.

In practice, things frequently go wrong here: costs have not been specified in advance, have not been recorded in writing in time, or relate to training that benefits the employee solely in their current role. Those costs are then simply not deductible.

Payment in instalments where the payment places too great a burden

If payment of the transition payment leads to unacceptable consequences for the running of the business, the law offers a way out: subject to conditions, you may pay the payment in instalments spread over a maximum of six months. In certain situations this provides some financial breathing room, but it does not release you from the payment obligation itself.

Compensation scheme for long-term illness to be abolished from 2027

As an employer, you currently have another option to recover costs: the compensation scheme through the UWV. If you dismiss a long-term sick employee after two years of incapacity for work, you can still claim back the transition payment you made from the UWV. This scheme has existed since 1 April 2020 and was intended to put an end to dormant employment contracts.

However, this is set to change. The cabinet has submitted a legislative proposal to abolish the compensation scheme entirely for all employers from 1 January 2027. Until that date, the current scheme remains in force, but the legislative proposal still has to be considered by both Houses of Parliament. As an employer, it is advisable to map out the files of long-term sick employees in good time and, where necessary, to act before the possible reference date.

Practical points to consider for the transition:

• Identify now which employees are approaching the 104-week period.
• Calculate the potential transition payment per employee and factor this into your financial planning.
• Consult an employment lawyer about whether dismissal before 1 January 2027 is the right course of action in your particular situation.
• Keep track of the parliamentary progress of the legislative proposal; the definitive date of entry into force has not yet been confirmed.

Why Employment Lawyer Eindhoven

As an employer in Eindhoven or the Brabant region, you will want to avoid making costly mistakes in the calculation or the deduction of costs from the transition payment when carrying out a dismissal. At Arbeidsjurist Eindhoven, we offer practical guidance: from a correct calculation to the proper recording of training costs and a clear strategy regarding the compensation scheme. Contact us without obligation and we will look at your situation together.

Frequently asked questions

Which costs am I, as an employer, permitted to deduct from the transition payment?

You may deduct two types of costs: transition costs (such as outplacement or a work-to-work programme) and employability costs (training aimed at broader employability or a different role). Mandatory training required by law or a collective labour agreement is explicitly excluded. Strict conditions apply to any deduction, including the employee's prior written consent.

How do I, as an employer, calculate the transition payment in 2026?

The formula is: 1/3 of a gross monthly salary for each full year of service, with remaining months and days calculated on a pro-rata basis. The gross monthly salary also includes fixed components such as holiday allowance, thirteenth month, and structural supplements. In 2026, the maximum is €102,000 gross, or one gross annual salary if that is higher.

Am I, as an employer, permitted to pay the transition payment in instalments?

This is permitted under certain conditions. If paying the full transition payment in one go would lead to unacceptable consequences for the running of the business, you may spread the payment over a maximum of six months. This does not release you from the payment obligation itself.

Can I, as an employer, apply to UWV for compensation upon dismissal following long-term illness?

Until 1 January 2027 (subject to parliamentary approval), you can reclaim from UWV the transition payment paid upon dismissal after two years of illness. The government intends to abolish this compensation scheme entirely for all employers on that date. It is advisable to act in good time if you have employees who are approaching the 104-week period.

What happens if I, as an employer, pay the transition payment late?

If you are liable for the transition payment but fail to pay within one month of the end of the employment contract, you will owe statutory interest on the outstanding amount. In addition, the employee can submit a petition to the subdistrict court within three months of the end of the employment contract to enforce payment.

We are happy to think along with you. For advice tailored to your situation, we would be glad to talk. No rights can be derived from the content of this page and it may contain inaccuracies.