Transition payment in a settlement agreement after long-term illness: what are you entitled to?

Transition payment in a settlement agreement following long-term illness

Even in a settlement agreement following long-term illness, you may be entitled to a transition payment. Read below for what to look out for and what you can claim.

After a prolonged period of illness, your employer may sometimes offer you a settlement agreement. A question that immediately arises is: am I entitled to a transition payment? The short answer is yes — but the amount and the conditions depend heavily on your individual situation, and the correct figure is far from automatically included in a settlement agreement.

What is a transition payment and when are you entitled to one?

The transition payment is a statutory payment you receive when your employment ends at the initiative of the employer. This also applies if you are dismissed after two years of illness or if you sign a settlement agreement by mutual consent. The condition is that you yourself must not be the party who takes the initiative to terminate the contract.

Following the 2020 legislative amendment, you are entitled to a transition payment from the very first day of your employment. There is no longer a minimum number of years of service required. Generally speaking, the longer you have been employed, the higher the payment will be.

How is the transition payment calculated?

The calculation is straightforward in principle: you receive one third of a monthly salary for each year worked. For partial years, a pro-rata calculation applies. This is based on the gross monthly salary including fixed components such as holiday pay, a fixed bonus, or a fixed expense allowance.

Please note: in cases of illness, the calculation continues over the full period of your employment, including the years during which you were ill and received reduced pay or no pay at all. The transition payment is based on your contractual salary, not on what you actually received during your period of illness.

Transition payment in a settlement agreement: what should you look out for?

A settlement agreement is the result of negotiation. This means there is scope to agree on more than just the statutory transition payment. At the same time, it does happen that employers — whether intentionally or not — include too low an amount, or leave the transition payment out of the proposal altogether.

Therefore, always check the following before you sign:

• Is the transition payment explicitly included in the agreement?
• Is the basis for the calculation correct (the right salary components and years of service)?
• Has an additional payment been negotiated on top of the transition payment?
• Does the document state a neutral reason for dismissal, so that your entitlement to unemployment benefit (WW) is not put at risk?
• Is a cooling-off period of fourteen days included?
• Have any arrangements been made regarding the termination of sickness benefit entitlements or other benefits?

These are not mere formalities. An error in the calculation or a missing amount can cost you thousands of euros.

Can you also receive more than the transition payment?

Absolutely. The transition payment is the statutory minimum, but through negotiation you may in some cases be able to agree a higher payment. Consider, for example, a situation in which the employer has fallen short in meeting their reintegration obligations, or where there are special circumstances that worsen your position on the labour market.

In such cases, it is advisable not to accept your employer's first proposal. An employment lawyer can quickly assess whether there is scope for a better arrangement.

What if the employer refuses to pay the transition payment?

An employer cannot simply refuse to pay the transition payment when terminating employment on their own initiative. If they do refuse, or offer a lower payment than you are entitled to, you have several options:

• Refuse to sign the settlement agreement and request that it be amended.
• Engage an employment lawyer to negotiate on your behalf.
• Apply to the subdistrict court to claim the transition payment.

Do not wait too long to act: statutory limitation periods apply to claiming the transition payment.

Transition payment and benefits: how do they interact?

A question that concerns many people is whether the transition payment affects their unemployment benefit (WW) or sickness benefit (ZW). In most cases, the transition payment itself has no direct effect on the unemployment benefit (WW). It is, however, important that the end date of the employment contract is correctly worded in the settlement agreement, so that no notional notice period is deducted.

Would you like to know more about how a settlement agreement in the context of illness works as a whole? Please also read Settlement agreement during illness: everything you need to know for a complete overview of your rights and points to consider.

Why Employment Lawyer Eindhoven

At Arbeidsjurist Eindhoven, we assist employees and employers in the Eindhoven and Brabant region with clear, practical advice on settlement agreements and severance payments. Together with you, we assess whether the proposed arrangement is fair, verify whether the transition payment has been calculated correctly, and negotiate where necessary to achieve a better outcome.

Contact us without obligation. We are happy to think things through with you, with no strings attached.

Frequently asked questions

Am I always entitled to a transition payment under a settlement agreement following illness?

Yes, if the employer takes the initiative to end employment and you agree by means of a settlement agreement, you are in principle entitled to the statutory transition payment. Do check that the amount has been calculated correctly.

Does the period during which I was ill count towards the calculation of the transition payment?

Yes. The entire duration of your employment counts, including the years during which you were incapacitated for work. The calculation is based on your contractual salary, not on the salary you received during your illness.

Can I negotiate more than just the transition payment?

You certainly can. The transition payment is the statutory minimum. Depending on your situation — for example, if your employer has breached its reintegration obligations — there is sometimes room to negotiate a higher payment.

What if the transition payment is not included in the settlement agreement?

Do not simply sign in that case. You can refuse the agreement or have it amended. An employment lawyer can quickly assess whether you are entitled to a payment and how you can enforce this.

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.