The rules on severance pay in detail

As of 1 January 2020, a so-called transition payment is due to the employee, provided the termination was initiated by the employer. The amount of this is currently capped at EUR 81,000 gross, or a maximum of one year’s gross salary if this is higher. The calculation for the transition payment is as follows:

  • 1/3 monthly gross salary per full year of service; and
  • a pro-rated part thereof for the remaining part of the employment.

The monthly salary base includes all fixed salary elements, including the average bonus over the three years preceding the year of dismissal.

The transition payment is not payable if the employer is declared insolvent.

Employers sometimes provide contractual redundancy pay schemes that offer payments that are more generous than the statutory ones. Note that a contractual redundancy pay scheme or a pay scheme provided by a social plan should include the transition payment. If it does not, the employee may be able to claim the transition payment on top of the contractual pay scheme.

If the employer requests the court to dissolve the employment on the basis of a sum of multiple statutory grounds, the court may award an additional payment to the employee, on top of the statutory transition payment. The amount of this additional payment cannot be more than half the amount of the statutory transition payment.

If the court finds that the employer acted in a seriously culpable manner towards the employee, it may also grant a further compensation. The amount of such compensation is set by the court and cannot be calculated up front. 

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Author: Bronsgeest Deur

Date: December 2019