What exactly is the transitional compensation? And when is an employee entitled to it?

In 2015 vIn 2015, the transition payment replaced the existing severance payment. Since 1 July 2015, an employee receives financial compensation upon dismissal or termination of the employment contract. This compensation serves as compensation for the employee’s job loss and for his/her “transition” to another employer.

In 2020, the WAB (‘Wet arbeidsmarkt in balans’) was launched. As a result, some aspects of the transitional compensation have also changed. For example, the employee already accrues entitlement to the transitional compensation from the first day of work. Previously, this was only after two years.

Given the early changes in the legislation, for many people it is not clear when the transitional compensation is applicable and how it is calculated.

When is an employee entitled to it?

The employer owes the employee a transition payment if:

  1. the employment contract:
    1. has been terminated by the employer
    2. has been dissolved at the request of the employer; or
    3. has not been continued after an end by operation of law at the initiative of the employer and before the termination of the employment contract no successive employment contract has been entered into, which can be terminated prematurely and which starts after an interval of no more than six months;
  2. the employment contract has been terminated as a result of serious culpable acts or omissions on the part of the employer.

Under point 2, the employee may therefore resign himself and still retain the right to receive transitional compensation. In the event of dismissal after two years of illness, the employee is also still entitled to the compensation. However, an employee must submit an application to the subdistrict court within three months of the end of the employment to claim the transitional allowance. After this, his or her entitlement will lapse.

How do you calculate the transitional compensation?

Calculating the compensation contains many snags. In most cases, the amount of the transitional compensation is simply expressed with a formula. However, there is a note in this when you put the law next to it.

In many cases, the compensation is calculated much higher than necessary. For example, you should make a distinction between fixed and variable wage components as expressed in Article 2 of the Wage Decree (Besluit loonbegrip transitievergoeding). There is a difference in the so-called reference period here, which can result in a completely different calculation than how the regular salary is calculated.

With an on-call contract, it may happen that an employee has had a change in the hourly wage several times. It is often thought that this means you have to take the average of the past 12 months. However, this is a common misconception. The last valid hourly wage should be used for the calculation.

You can go on like this for a long time with points that belong to the calculation of the transitional compensation.

Would you like to know more about this?

Take contact with our advisors, they will be happy to help you through training sessions, but they can also assist you in making a calculation.

Make sure you never pay too much!.

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