Guidelines for Fair Payment of Transition Compensation

When it comes to protecting the rights of workers, labor and employment laws in the Netherlands set the bar rather high. These laws regulate the employment relationship between employers and their employees and related matters, such as transition pay, sick leave and dismissal rules and procedures. For instance, in the event of an involuntary dismissal from employment due to reasons that do not include the employee’s seriously culpable behavior, Dutch labor law states that the employee is entitled to transition pay. Transition pay is an allowance meant to compensate dismissed employees for lost income and also improve their position in the labor market through education or retraining. Unfortunately, there are some employers in the Netherlands who may try to avoid paying dismissed employees the transition pay they are legally entitled to after having their employment contract terminated. If your employer has dismissed you or is threatening to terminate your employment contract, you can use this guideline to ensure that you obtain fair compensation in terms of transition pay.

Understand Your Right to Transition Pay

Understanding your rights as an employee and knowing what legal protections you are entitled to under Dutch labor laws is the first step in receiving a fair transition payment. If your fixed-term employment contract has not been renewed or if your permanent contract has been terminated for reasons other than your own culpable acts, you need to know that you may be eligible for transition pay. Effective January 1, 2020, Dutch employees are entitled to transition pay beginning on their first day of work, including the probationary period. So, whether you have a fixed-term or indefinite-term employment contract, if your contract is not renewed or is terminated on the initiative of your employer, your employer may be required to pay you transition compensation equal to one-third of your gross monthly salary for each year you worked. If your contract lasted less than one year, the amount of transition compensation you receive will be proportionate to that period. Regardless of how many years you worked, the maximum amount of transition pay you can receive in the Netherlands is €83,000. However, if your annual salary is higher than €83,000, you are entitled to a transition payment that is equal to one year’s salary.

Know Your Obligations While on Long-Term Sick Leave

When you have an illness or disability that renders you unfit for work, whether partially or fully, you may be entitled to sick leave benefits in accordance with Dutch law. Sick leave in the Netherlands is strictly regulated and there are specific rules that the employer and employee must follow in handling a sick-leave situation. For one, employers are prohibited from dismissing employees who are on sick leave unless the dismissal occurs during the probation period or because the company has declared bankruptcy or is closing down altogether. During sick leave, the employer is required to make every reasonable effort to reduce the employee’s absence from work due to sickness and ensure that the employee returns to work as quickly as possible. Employer obligations during sick leave may include coordinating with the company doctor to track the employee’s recovery and developing a plan for reintegration.

Employees, too, have certain legal obligations that they must abide by during the sick-leave period. For instance, as an employee in the Netherlands, you are required to cooperate with your employer in his or her reintegration efforts. This may include being ready to:

• Discuss your health condition with the company doctor,
• Routinely update your employer on the progression of your sickness and recovery,
• Work closely with your employer to draw up a reintegration plan and approve this plan, and
• Adjust to any changes at work (i.e. new tasks, modified workstation, etc.) that your employer considers suitable for you.

It is important to note that failing to cooperate sufficiently with your employer’s efforts to help you resume work can have serious consequences, possibly including a loss of your right to benefits during sick leave. If, after two years, you are still not in a position to return to work due to long-term illness or disability, and all legal obligations have been met with regard to reintegration, your employer may choose to terminate your employment contract. At this time, you are entitled to collect transition pay for the total duration of your employment contract.  

Make Sure You Know the Basics

The process of obtaining transition pay following a layoff or job loss may seem complicated, but the good news is that you only really have to know the basics. The rest you can leave in the hands of a qualified employment law attorney who has experience handling cases involving Dutch dismissal law and transition pay. Here are the two main things you need to know:

1. In most cases, employees in the Netherlands who become involuntarily unemployed for reasons other than their own culpable behavior – including permanent employees whose indefinite-term contracts are terminated and temporary employees whose fixed-term contracts are not renewed on the employer’s initiative – are entitled to transition pay upon dismissal.
2. Any dismissed employee who qualifies for transition pay should receive the amount due as quickly as possible after dismissal, as the payment is meant to compensate the employee for income loss resulting from the dismissal and to reduce the period of unemployment.

Know Whether You are Entitled to Additional Compensation

Dutch labor laws prohibit the dismissal of employees unless there is a valid ground, or reason, for dismissal. With the implementation of the new Labor Market in Balance Act (Wet arbeidsmarkt in balans, WAB), the grounds for dismissal in the Netherlands have changed. Under this law, employees can now be dismissed on the basis of a combination of grounds including, but not limited to, poor performance, conscientious objections or damaged working relationship, even if these individual grounds would not be sufficient enough to justify a dismissal on their own. At first glance, this may seem like a provision that only benefits employers, making it easier for them to dismiss employees. However, there is another side to this new “cumulative” ground. If your dismissal is based on the cumulative ground (also known as the “i-ground”), you may be entitled to extra compensation in addition to the statutory transition pay. Depending on your situation, you can receive up to 50% of the statutory transition payment on top of the transition pay you receive upon dismissal.

Exercise Your Right to Contest the Dismissal or Recover Compensation

If your Dutch employment contract has been terminated, you can bring a claim in the sub-district court for the purpose of either contesting the dismissal and seeking reinstatement, or seeking payment of fair compensation by the employer, on the grounds that you were dismissed from employment by the employer:

• Without your consent and without authorization from the Employee Insurance Agency (Uitvoeringsinstituut Werknemersverzekeringen, UWV) or the sub-district court,
• In breach of the special protection from dismissal that the Netherlands has in place for certain employees and in certain situations,
• In breach of laws prohibiting discrimination on the basis of protected characteristics,
• On the grounds of redundancy or workforce reduction, without being given the opportunity to be re-employed, or
• On the grounds of redundancy or workforce reduction and then the employer hired someone else to do the same work.

Even if the UWV has authorized the dismissal, you can still bring a claim in the sub-district court seeking:

• Reinstatement on the grounds that the employer could have placed you in a suitable alternative position, or that the requisite reasonable grounds for dismissal were not present, or
• Fair compensation on the grounds that the long-term illness or incapacity for work that resulted in the dismissal was caused by seriously culpable acts or omissions on the employer’s part.

If you have been dismissed from employment with immediate effect on the basis of some urgent reason (summary dismissal), you can bring a claim in court on the basis that no urgent reason existed, seeking reinstatement, compensation, renumeration for the applicable notice period and transition payment.

Get Help from an Experienced Employment Law Attorney

Although Dutch labor and employment laws are many and strictly enforced, not everyone abides by the law and it is not uncommon for employers to wrongfully terminate employees’ employment contracts or refuse to pay dismissed employees the transition pay they deserve. Whether you are dealing with an unlawful dismissal or a transition pay dispute in the Netherlands, retaining the services of an experienced attorney who specializes in Dutch labor law can significantly improve your chances of securing a favorable outcome in your case. Our lawyers know the ins and outs of Dutch labor law and can give you trustworthy legal advice based on your specific situation. If we determine that you are owed a transition payment following a layoff or job loss, we can contact your employer on your behalf to help you recover what you are owed. Our team of labor law experts is experienced in all matters related to Dutch employment contracts, dismissal law and transition payments. Contact our firm today to find out how we can help.