How Long Does it Take for a Transition Payment?
The Netherlands has a great number of laws in place that regulate the legal rights of employees and the obligations of employers. These include the right to a safe work environment, minimum wage requirements, benefits during sick leave and more. One of the most important and contested labor laws in the Netherlands is that which allows permanent employees whose contracts are terminated and temporary employees whose contracts are not renewed on the employer’s initiative to collect a transition payment upon dismissal. If you have been dismissed from your job in the Netherlands, you may be eligible for transition pay to make the transition between jobs more manageable, and you may be wondering when you can expect to receive this payment. Our capable Dutch employment law attorneys are knowledgeable in all matters pertaining to employment contracts, dismissal and transition pay in the Netherlands and we can help ensure that you receive the transition payment you are owed in a timely manner. Contact our firm today so we can review your case and advise you on how best to proceed.
Am I Entitled to Transition Pay?
Transition pay is an allowance that is meant to compensate dismissed employees for lost income due to involuntarily unemployment, as well as improve their employability in the future through further education or retraining. While the amount of transition pay Dutch employees can collect still depends on their years of service and monthly salary, employees are now entitled to transition pay beginning on their first day at work, thanks to the labor reforms implemented under the new Labor Market in Balance Act (Wet arbeidsmarkt in balans, or WAB). There are, of course, certain situations in which a dismissed employee may not qualify for transition compensation under Dutch law. These include, but are not limited to, the following:
- The dismissal is the result of the employee’s seriously culpable conduct,
- The employee has already reached retirement age at the time of dismissal,
- The employee is under the age of 18 and has worked for a maximum of 12 hours each week on average,
- The employer has filed for bankruptcy or is involved in a debt restructuring program,
- The employment contract ends by mutual agreement, or
- The employer offers to extend the employee’s fixed-term employment contract before the contract’s end date and the employee rejects the offer.
Calculating Your Transition Payment
Before the Labor Market in Balance Act took effect on January 1, 2020, the amount of transition pay Dutch employees could collect upon dismissal was equal to one-sixth of their gross monthly salary for every six months they worked during their first 10 years of service, and one-quarter of their salary for every six months they worked beyond 10 years. Under the WAB, the calculation of transition payments in the Netherlands has been streamlined. Dutch employees now receive one-third of their gross monthly salary for each year of service, regardless of how many years they have worked. If the duration of service is less than one full year, the amount of transition compensation will be proportionate to the number of days, weeks or months the employee worked.
What is My Gross Monthly Salary?
For the purpose of calculating the transition payment you can collect upon dismissal from employment, your gross monthly salary includes your base salary plus holiday allowance. If you have a fixed number of working hours, your salary is equal to your hourly wages multiplied by the number of working hours per month. However, this can be a little more complicated for stand-by workers or piece wage or commission work. If you have an on-call contract (stand-by worker), your gross monthly salary is calculated by multiplying your gross hourly wages by the average number of hours you worked per month. If your wages consist of piece wages or commission, you will have to average your working hours during the 12 months prior to the end of the contract. Other wage components that may come into play in calculating transition pay include bonuses, shift work allowances, overtime pay and profit distributions.
Transition Pay Deductions
In some cases, the costs that an employer incurs in improving an employee’s position in the labor market can be deducted from the transition payment the employee receives, but only under strict conditions. This may include, for instance, any costs stemming from training or outplacement. Employers may not, however, deduct any costs they incurred in improving an employee’s performance in his or her own job, nor can they deduct any costs related to reintegration obligations or relocation. For any costs to be deducted from the transition payment at all, the following conditions apply:
- The employer must have specified the costs and informed the employee about them.
- The employee must agree in writing, in advance, to have the costs deducted from the transition payment.
- The costs must have been incurred by the employer and made on behalf of the employee.
- The costs must be reasonably proportionate to the purpose for which they were incurred.
- The costs must not be claimed elsewhere by the employer.
- The costs must not be related to labor (This is different if the employer and employee agree on a longer notice period, during which time the employee is exempt from work).
- The costs must be deducted from that part of the transition payment that was accrued in the period in which the expenses were incurred or afterwards.
Maximum Transition Payment
In countries where transition pay is paid out to employees who become involuntarily unemployed, the total amount an employee can collect upon dismissal is legally capped, and this cap is typically based on either the national minimum wage or the consumer price index. As of 2020, the maximum amount of transition pay an employee can receive in the Netherlands is €83,000, unless the employee’s salary is greater than €83,000. In that case, the employee is entitled to a transition payment that is equal to his or her annual salary.
Additional Award for Dismissals Based on Cumulative Ground
Before the Labor Market in Balance Act (Wet arbeidsmarkt in balans, WAB) was introduced, there were eight individual, reasonable grounds for dismissal or termination of an employee’s employment contract, known as the “a-h grounds.” Under the new legislation, however, employers are now permitted to dismiss an employee on the basis of several grounds which are not sufficient justification for dismissal on their own. This new ground is known as the cumulative ground, or the “i-ground.” Any time an employer terminates an employee’s permanent employment contract on the basis of the cumulative ground, the employee is entitled to additional compensation of up to 50% of the statutory transition payment, on top of the transition payment.
When Will I Receive My Transition Payment?
The main focus of recent labor reforms in the Netherlands is to keep employees employed and help those who have become unemployed find new employment, whenever possible. The purpose of transition pay, then, is to help Dutch employees who have been dismissed from employment transition smoothly from their old job to a new job, and cover any costs they incur in doing so. As such, it is important that employees are able to collect the transition pay they deserve as quickly as possible after becoming unemployed. In most cases, this occurs within one month of dismissal.
In some cases, the employer may be unable to pay the transition compensation in one lump sum, often due to economic reasons, in which case, you may receive payment in installments over the course of six months, maximum. Dutch employers who pay transition payments in installments owe statutory interest on the portion of the payment that has not yet been paid beginning one month after the end of the contract. If your employment contract in the Netherlands has been terminated and you have yet to receive a transition payment, contact our knowledgeable employment law attorneys as soon as possible to find out how to recover the compensation you are owed from your employer.
Contact Our Dutch Labor Law Attorneys Today
Most termination disputes between employers and employees in the Netherlands involve claims for compensation regarding transition pay. If you are entitled to transition pay in the Netherlands and your employer fails to pay you the amount you are owed upon dismissal, it is in your best interest to consult a lawyer right away to discuss how to proceed. Dutch labor law is complex, and knowing exactly what you are entitled to following a layoff or job loss can be confusing. For instance, there are some situations in which a dismissed employee may be awarded what is known as a “fair dismissal payment” in addition to the statutory transition payment. If you have been dismissed from your job or your fixed-term contract has not been renewed, our capable and competent employment law attorneys can help you determine if you are eligible for transition pay and when you can expect to receive it. Contact our firm today if you are in need of legal assistance relating to Dutch dismissal law, transition compensation or any other matter concerning employment in the Netherlands.