After a lengthy 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 situation, and a settlement agreement does not always automatically include the correct figure.
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 have taken the initiative to terminate the contract.
Following the 2020 legislative amendment, you are entitled to a transition payment from your very first day of employment. There is no longer a minimum number of years of service required. The longer you have been employed, the higher the payment will generally 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 proportional 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 the case of illness, the calculation runs 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 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 room to negotiate more than just the statutory transition payment. At the same time, it does happen that employers – deliberately or inadvertently – include too low an amount, or leave the transition payment out of the proposal altogether.
Always check the following before you sign:
- Is the transition payment explicitly included in the agreement?
- Is the basis for 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 is not jeopardised?
- Is a fourteen-day cooling-off period included?
- Have 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 pounds.
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Plan a conversationCan you receive more than the transition payment?
Certainly. The transition payment is the statutory minimum, but through negotiation you may in some cases agree a higher payment. Consider a situation in which the employer has fallen short in their reintegration obligations, or where there are exceptional circumstances that worsen your position on the labour market.
In such cases, it is wise not to accept your employer’s first proposal. An employment lawyer can quickly assess whether there is scope for a better settlement.
What if the employer refuses to pay the transition payment?
An employer cannot simply refuse to pay the transition payment when the termination is at their initiative. If they do so, or offer a lower payment than you are entitled to, you have several options:
- Refuse the settlement agreement and request an amendment.
- Engage an employment lawyer to negotiate on your behalf.
- Take the matter to the cantonal court to claim the transition payment.
Do not wait too long: there are statutory limitation periods for claiming the transition payment.
Transition payment and benefits: how do they interact?
A question that concerns many people is: does the transition payment affect my unemployment benefit or sickness benefit? In most cases, the transition payment itself has no direct effect on unemployment benefit. It is, however, important that the end date of the employment in the settlement agreement is correctly worded, so that no notional notice period is deducted.
Would you like to know more about how a settlement agreement during illness works as a whole? Also read Settlement agreement during illness: everything you need to know for a complete overview of your rights and points to consider.
Why Labour Lawyer Eindhoven
At Arbeidsjurist Eindhoven, we help employees and employers in the Eindhoven and Brabant region with clear, practical advice on settlement agreements and redundancy payments. Together with you, we assess whether the proposed settlement is fair, verify that 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 in a settlement agreement after illness?
Yes, if the employer takes the initiative to terminate the employment and you agree by means of a settlement agreement, you are in principle entitled to the statutory transition payment. Do check, however, 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 period 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 the employer has breached their reintegration obligations – there is sometimes scope for a higher payment.
What if the transition payment is not included in the settlement agreement?
Do not sign without careful consideration. You can refuse the agreement or have it amended. An employment lawyer can quickly determine whether you are entitled to a payment and how you can enforce this.
We're happy to help you brainstorm ideas. For advice tailored to your specific situation, we'd be happy to sit down with you. No rights can be derived from the content of this page and it may contain inaccuracies.
