Transition Compensation in Case of Termination: Everything You Need to Know

In the event of termination of an employment contract by the subdistrict court, the employee is often entitled to transition compensation. This compensation offsets the loss of employment and assists in the transition to new work. The regulation is set out in Article 7:673 of the Dutch Civil Code (BW).

How is the transition compensation calculated?

The amount is one-third of a month's salary per year of service, with a maximum of €89,000 (2024) or one annual salary for higher incomes. Partial years are counted pro rata. Exceptions apply in cases of seriously culpable conduct.

When does the entitlement lapse?

No compensation is due in cases of summary dismissal for urgent cause, or if the employee requests termination without reasonable grounds. In cases of mutual consent, parties may deviate from this rule through a settlement agreement.

Practical tips

Request a settlement agreement in a timely manner to facilitate negotiations. Employees: verify the calculation using the UWV tool. Employers: set aside a budget. In case of dispute, the subdistrict court may moderate or increase the compensation. Always consult a lawyer for personal advice.