Transition Payment

On this page an overview of the subject of transition fee. Do you have a question about severance pay or a dismissal case you are dealing with (soon)? Then contact us directly.

What is transition pay?

The transition compensation is a statutory severance payment. The regulation transition compensation is included in Article 7:673 of the Dutch Civil Code. The purpose of the transition compensation is to financially facilitate the employee’s transition (transition) to other work. The transition compensation is also a compensation for dismissal. The employee can use the compensation for the cost of training or support to other work.

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When are you entitled to transition pay?

A right to transition compensation arises automatically when the employment contract is terminated or not extended by the employer. Even after 2 years of illness, you are automatically entitled to the transition compensation if you are fired. Even if the employment contract is terminated by the employer within the probationary period, then the right to a transition fee automatically arises. The employer will need permission from the UWV or the subdistrict court if he wants to terminate the labor contract unilaterally. You are also entitled to transition compensation in case of partial termination.

Step-by-step transition compensation plan?

This is how we work.

Calculate Transition Compensation

Our lawyers are experts in calculating the legal transitional compensation. Calculate your transition compensation easily with our calculation tool.

Negotiation

If there are enough grounds to get a higher severance payment, we can conduct the negotiation. This need not cost you anything.

Better result

With our help, you are assured of a better result. Are you or will you be facing a dismissal situation soon? Request a free dismissal check.

Transition compensation rate in 2022/ 2023

Transition compensation is a maximum of €86,000 gross or one higher gross annual salary. The amount of the transition compensation is determined by 2 components: namely, the last earned salary and the duration of employment. The employee is entitled to 1/3 monthly salary for each full year of service from the first day of employment.

– 1/3 monthly salary for all full years of service;
– 1/36 monthly salary for the remaining full months and;
– 1/1095 monthly salary for any remaining days.

What is the amount of transition compensation? You can easily calculate this with the calculation tool transition compensation. How much tax you have to pay on the transition compensation you can read in the blog transition compensation and taxes.

Calculate Transition Compensation

Calculate transitional compensation yourself

Document

Date out of service must be after/greater than date of service.

Transition fee

Employee data

Date service January 3, 1990
Date out of service Nov 19, 2021
Gross monthly income €3,456.00

Duration of employment

Duration of employment January 3, 1990

Calculation transition payment

31 years x €3,456.00 x 1/3 €35,712.00
31 months x €3,456.00 x 1/3 x 1/12 €960.00
31 days x €3,456.00 x 1/3 x 1/365 €53.65
Transition fee €36,725.65

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Calculating transition compensation

When calculating the transition fee, the total monthly salary, which consists of the gross basic monthly salary + fixed and variable components, must be used. To calculate the transition compensation, you must first determine the monthly salary. The gross monthly salary consists of the following fixed and variable salary components.

Fixed wage components transition compensation

  • Provisions
  • Vacation allowance
  • Fixed 13th month
  • Shift bonus
  • Overtime bonus

 

You add up the fixed salary components earned in the 12 months prior to the dismissal. You include these for 1/12 part when determining the average which you add to the base salary.

Variable wage components transition compensation

  • Profit sharing
  • Bonuses
  • End-of-year benefits (variable)

You add up the variable salary components earned in 36 months prior to the layoff. You include these for 1/36 part when determining the average which you add to the base salary.

Frequently asked questions transition compensation

You are entitled to a transition fee or can negotiate a severance payment. The difference between these compensations is that the transition fee is set by law. Severance pay is not regulated by law. The transition compensation is a right to which the employee is automatically entitled in certain situations. Namely, when the employer terminates or does not renew the employment contract.

The severance payment (or terminations compensation) may be based on the outcome of the statutory transition fee but it does not have to be. The severance payment agreed between the parties may be higher or even lower than the statutory transitional fee.

First, you need to determine the monthly salary, which consists of the base salary + fixed and variable salary components. Then you need to determine the working hours (date of employment and expected end date). Based on this information you can calculate the severance pay. When determining the working hours, the period that you performed work for the employer through a temporary employment agency should also be included.

In the situation where the employer may terminate the employment contract with the permission of the UWV or the subdistrict court, you cannot negotiate about the transition fee. Then the right to the transition fee calculated according to a fixed formula arises automatically.

However, you can negotiate the severance pay and other conditions in case the employer offers a settlement agreement. The settlement agreement can include a higher or lower transition compensation (= severance pay).

If the employee terminates the employment contract himself, then he is not entitled to transition compensation. There are also exceptions to the right to transition compensation.

  1. If the dismissal is the result of seriously culpable actions (summary dismissal)
  2. If the employee is younger than 18 and works a maximum of 12 hours per week
  3. If the employee reaches retirement age
  4. In case of bankruptcy or suspension of payments of the employer

In these 4 cases, the employee is not entitled to the transition compensation.

The statutory transition compensation is composed of three calculations.

1/3 monthly salary for all full years of service
1/36 monthly salary for the remaining full months of service
1/1095 monthly salary for the remaining days
After 2 years of illness, the employer may terminate the employment contract after receiving permission through the UWV or may choose to enter into a settlement agreement. In both cases, the employee can claim the statutory transitional compensation.

In the blog sick leave and transition compensation, you can read all about what rights an employee has when he leaves employment sick.

The employer does not have to pay a transition fee if the employee gives notice himself. Not even in the situation where the employee is summarily dismissed due to seriously culpable actions. If the collective bargaining agreement contains a substitute provision that replaces the statutory transitional compensation, the employer does not have to pay any transitional compensation either. You can read more about the substitute provision as an exception to the transition compensation in our blog on this topic.

An employee may also be entitled to a transition allowance in the event of partial termination of the employment contract, with or without a settlement agreement. In case the working hours are structurally reduced by at least 20%, the employee may be entitled to a proportionate partial severance payment. We provide more information on this in the blog partial termination transition compensation.

If the employee leaves employment sick then the employer can apply for compensation for the transition allowance. Even if the employer of a small business stops working because he himself retires or dies, he can ask for a compensation of transition compensation. With the compensation transition compensation scheme, the employer can get the transition compensation back from the government. Also, some costs incurred by an employer are deductible from the transition compensation.

In 90% of cases, we can achieve better terms and higher severance pay. In principle, it does not have to cost the employee anything because we will ask the employer to cover the costs. The first analysis of your case is completely free. We can then determine together whether we can be of added value.

Benefits
settlement agreement

Why choose a settlement agreement?

Speed

Speed by settling the dispute through a settlement agreement. The termination agreement can be signed one day.

Additional agreements

Only in a settlement agreement can you include additional conditions about, for example, work release or budget for training or outplacement.

Higher severance pay

Depending on the actual reason for the dismissal, we may ask for severance pay that is higher than the legal transitional compensation.

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