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Transition Payment upon Termination of Employment Contract: Calculation and Conditions

Transition payment (art. 7:673 DCC) after two years of service: calculate 1/3 monthly salary per year. Conditions, exceptions, and tips for claiming upon dismissal or contract termination.

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Transition Payment upon Termination of Employment Contract: Calculation and Conditions

Since 2013, dismissed employees are entitled to a transition payment (art. 7:673 DCC), a compensation for dismissal after two years of service. This applies upon termination, dissolution, or non-extension of a fixed-term contract, except in cases of culpable conduct.

Calculation Method

  • 1/3 monthly salary per year of service.
  • Pro rata for partial year.
  • Including holiday allowance and fixed supplements.
    Maximum €89,000 (2024) or annual salary.

Conditions for Entitlement

  • Minimum two years of service.
  • Initiative of the employer (except settlement agreement).
  • No entitlement in case of bankruptcy (unemployment benefit compensates).

Exceptions and Appeal

For small employers (<25 employees), the district court scheme applies from 2020. Employee may file a claim within six months after termination.

Practical Steps

Calculate using the UWV tool. Negotiate in settlement agreement for higher fair compensation (art. 7:681 DCC).

Employers: reserve budget. Employees: claim in time. Does not accumulate with other compensations, but does with unemployment benefit. (197 words)

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