Am I Entitled to a Transition Payment?
Dutch labor laws provide important protections for employees in the Netherlands, both fixed- and indefinite-term contract employees, and these protections are even stronger now, thanks to an employment law called the Labor Market in Balance Act (Wet arbeidsmarkt in balans in Dutch, or WAB), which entered into force on January 1, 2020. An important provision of the WAB relates to mandatory transition payments for Dutch employees who have been involuntary dismissed from employment for reasons other than their behavior or performance. Also known as transition pay or severance pay, a transition payment is a lump-sum payment meant to compensate employees for lost income due to the termination of their employment contract. If you have been laid off from your job in the Netherlands or you were fired because you were sick and unable to work, contact our knowledgeable legal team today for help. We can help you recover the transition payment you are legally entitled to under Dutch employment law.
What is Transition Pay?
Transition pay is an allowance that is meant to help employees who have been involuntary dismissed get through the period of transition between jobs, during which time they may require additional training or education. Under the original Dutch employment law that went into effect in July 2015 (the Dutch Work and Security Act), transition compensation (transitievergoeding in Dutch) was only available to employees in the Netherlands who had been in service at their place of work for at least two years. However, it became common practice for Dutch employers to offer employees 23-month contracts, so they could avoid paying transition compensation when the contract was terminated. In an effort to bring the labor market into balance, the Dutch Senate adopted the Labor Market in Balance Act (Wet arbeidsmarkt in balans, WAB) in 2019. Under the WAB, which went into effect on January 1, 2020, employees in the Netherlands are now entitled to transition pay from their first day of work, including during the trial period.
Determining Eligibility for Transition Pay
Employees in the Netherlands who have had their employment contract terminated at the initiative of their employer are legally entitled to transition pay, so long as the contract was not terminated for serious cause. This includes both collective dismissal (dismissal of 20 or more employees within one geographic work area during a three-month period) or individual termination of employment for a reason that is not related to the employee’s conduct. Transition pay may also be available in cases where the contract was terminated at the initiative of the employee because of seriously culpable behavior on the part of the employer. There are other circumstances under which Dutch employees may be entitled to transition pay, discussed in further detail below.
Dismissal from Employment
European labor laws have provisions in place that prohibit employees from being involuntarily dismissed from employment without proper cause. As such, employers in the Netherlands are required to pay a transition allowance any time they dismiss an employee on their initiative or fail to extend an employee’s contract. Transition pay is also available to employees who are dismissed from employment due to a long-term illness or incapacity for work. Dutch employment law generally prohibits employers from terminating the employment contracts of employees on sick leave. However, after two years of illness, employers are permitted to submit a request to terminate the employment relationship, at which point the employee is entitled to collect a transition payment. This transition pay requirement has led some employers to deliberately prolong the employment relationship in an attempt to avoid paying the required transition fee. However, as of April 2020, employers can now apply for reimbursement of any transition payments made to employees after two or more years of sick leave.
To recap, you may be entitled to transition pay in the Netherlands if any of the following circumstances apply to you:
- You and several other employees were laid off due to economic reasons (collective dismissal)
- You left your job because of your employer’s seriously culpable behavior
- You were fired for being sick
- Your employment contract has ended
- Your employment contract has not been renewed
- You have been dismissed from employment because of a reduction in workforce due to COVID-19
- You were laid off because your position within the company was eliminated
- Your employment contract was terminated during the period of probation
How to Calculate Transition Pay
The Old Law
Under the old Dutch labor law, the amount of transition pay an employee was entitled to was calculated based on the employee’s age, total duration of service and monthly salary, plus holiday allowance. For their first 10 years of service, employees were entitled to one-sixth of their gross monthly salary for every six-month period they worked. For any years beyond 10 that they worked, they were entitled to one-quarter of their gross monthly salary for every six-month period they worked. The same was true for employees over the age of 50 who worked for a minimum of 10 years, with one exception. After 10 years, these employees were entitled to half of their gross monthly salary.
The New Law
One of the main purposes of the Labor Market in Balance Act was to reduce the gap between Dutch employees with indefinite-term contracts and those with fixed-term contracts and encourage employers to offer longer-term or permanent employment contracts. To achieve this goal, the Dutch Senate implemented two important changes to transition allowance requirements.
Under the new law, employees in the Netherlands are eligible for transition compensation beginning on their first day of employment, even if they have a temporary contract. The method for calculating transition pay also changed with the WAB. Dutch employees are now entitled to one-third of their gross monthly salary for each full year of service and pro rata for each additional month or day of service, regardless of their age or total years of service. There is no longer any differentiation between the employee’s first 10 years of service and the period afterwards, nor is there any longer a special dispensation for employees 50 years of age and older. To calculate the transition payment you are owed by your employer, you will first need to calculate your gross monthly salary using the formula that applies to you:
- Indefinite-term contract: gross hourly wage x the fixed number of hours worked per month
- On-call contract: gross hourly wage x the average number of hours worked per month
- Piecework or commission: the average wage you received in the 12 months prior to the end of the contract
When applicable, your employer will also need to include holiday allowance, bonuses, profit distribution, year-end bonuses, shiftwork allowance and overtime compensation in your transition payment. Keep in mind that there is a cap on transition pay in the Netherlands. According to the law, you can receive up to €83,000 in transition compensation, or one year’s salary, whichever amount is higher.
Pursuing the Transition Pay You are Entitled To
Any time the court is asked to terminate an employment contract on the Netherlands, the court will also decide whether the employee is eligible to receive transition pay and if so, what amount of compensation the employee is entitled to. Some employers will try to avoid making transition payments, so it is important that you understand the provisions of the Labor Market in Balance Act, so you know whether you are entitled to a transition payment upon dismissal from employment and how much the law says you should receive. Many employment contracts in the Netherlands are terminated by means of a settlement agreement, in which the employer and employee come to an agreement on the conditions of termination of employment, known as mutual consent. If this applies to you, our attorneys can counsel you on what we consider a fair settlement or negotiate on your behalf, if necessary. Regardless of the specific details of your case, we always recommend retaining the services of an experienced employment law attorney when pursuing transition pay in the Netherlands.
Contact an Experienced Transition Payment Lawyer for Legal Help
Laws governing the termination of employment contracts and transition payments in the Netherlands have been around for several years now, but they remain controversial, and conflicts about transition payments and other employer responsibilities may arise upon termination of an employment relationship. If you have been dismissed from your job in the Netherlands, or if you have any other questions regarding employment termination under Dutch law, do not hesitate to contact our transition payment attorneys to discuss your legal rights. Employees in the Netherlands are better protected than employees in many other countries, and you may be legally entitled to collect a transition payment upon being dismissed from employment to help you get through the period of transition between jobs. Our experienced employment law attorneys understand the intricacies of Dutch employment law and we can help you calculate how much transition pay you are entitled to and negotiate on your behalf to ensure that you receive the compensation you deserve. Contact our knowledgeable transition pay lawyers today to find out what we can do for you.