Transition payment (severance pay)

If you dismiss an employee or not extend their contract, you are obliged to pay them compensation for dismissal. This is called a transition payment (transitievergoeding). You do not have to pay the transition payment if your employee agrees with the dismissal (dismissal by mutual consent).

When do you have to pay a transition payment?

You have to pay your employee a transition payment if:

• you have a valid ground to dismiss an employee
• you do not extend the permanent or fixed-term contract of an employee
• an employee resigns following seriously culpable conduct or negligence on your part (discrimination, for example)

Your employee is entitled to a transition payment from the first day of the employment contract. This applies to permanent contracts as well as fixed-term contracts. It also applies to on-call contracts.

In some cases you do not have to pay a transition payment, for example if:

• your employee agrees to the dismissal (mutual consent)
• you dismiss your employee following seriously culpable conduct or negligence on their part
• a different arrangement has been made in your collective labour agreement (CAO)

What is the amount of a transition payment?

The amount of the transition payment depends on the employee's monthly salary and number of years of employment. Read on how to calculate a transition payment, or use the online calculation tool of the Ministry of Social Affairs and Employment (in Dutch).

Compensation for transition payment

You can apply for compensation of the transition payment you have paid to your employee from the Employee Insurance Agency (UWV) if:

• the employee you dismiss has been sick for more than 2 years
• the reason for dismissal is that your small business is closing due to your pension or death