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If you dismiss an employee who has worked for you for 2 years or more or you do not extend their contract, you have to compensate them for expected costs with regard to their finding new employment. The payment can then be used for scholing or outplacement. This is called a transition payment. A transition payment is not obligatory in cases where Severance payment has been agreed.
When do you pay a transition payment?
- When you dismiss an employee who has been employed for 2 years or longer.
- When you do not extend the contract of an employee who has been employed for 2 years or longer.
- An employee resigns following seriously culpable conduct or neglect on your part.
Calculation of transition payment
The transition payment is calculated for each period of 6 months your employee has worked for you. The total amount depends on the number of years of their employment:
- They receive 1/6 of their gross monthly salary for each period of 6 months.
- If your employee has worked for you for more than 10 years, they will receive 1/4 of their gross monthly salary from the 10th year of employment.
- If your employee is 50 years of age or older (in Dutch) and they have worked for you for more than 10 years, until 2020 they will receive 1/2 of their gross monthly salary for each 6 month period. This only applies if your company has more than 25 employees. This temporary measure applies until 2020.
Changes to transition payments
A new law is due to come into force on 1 January 2020 to regulate flexible work, dismissal and the financing of unemployment benefit. Through the Balance Employment Market Act (Wet arbeidsmarkt in balans, WAB), the government wants to make it more attractive for employers to offer a fixed contract rather than a flexible one. At the same time flex workers must be given more stability in their job and income. The new law will effect:
- Dismissals and transitional payments
- Temporary employees and chain provision
- Payroll staff and stand-by workers