Severance payment/ Redundancy package
Every employee whose employment service has lasted at least two years and whose employment contract is terminated by the employer, not due to certain reproachable behavior of the employee, has the right to receive a severance pay called “transitievergoeding”. This compensation should compensate employees for their loss of earnings and costs for schooling or outplacement. This is available to all employees who have an employment contract that lasted for two years more.
When should you receive a severance pay (transitievergoeding) ?
• The employment lasted two years or longer, and
• The employment (indefinite term or temporary) is terminated at the initiative of the employer, and
• The termination is not for a serious case, like theft
• You have not reached the age of retirement (AOW).
• Before the end date of your current contract, your contract is not extend by the employer with a new end date.
Calculation of severance pay
The amount of severance pay is calculated by the court using the following formula: S × C.
The S-factor takes the service years into consideration and the C-factor takes the compensation into consideration.
Calculation of the S-factor – Service years
• 1/6 for every half-year of service for the first 10 years of the employment.
• 1/4 for every half-year of service after 10 years of employment.
Calculation of the C-factor – Compensation
• Monthly base pay
• 8% holiday allowance
• Year-end pay
• Overtime allowance
• Average bonus last 3 years
• Profit sharing
The amount of the transition compensation is capped at € 81.000 gross, or at one annual salary if this is higher. Costs incurred by an employer to improve the employee’s position on the labour market (such as training and outplacement) may, under strict conditions, be deducted from the transition compensation.
Certain exceptions exists, such as a limitation on the severance pay for small employers ( less than 25 employees) and a higher severance pay for employees aged 50+
Can I negotiate the Terms of my Severance Pay?
Often times, companies will state the way the severance pay is determined. These policies will generally include wen an employee is entitled to severance pay, how it is calculated and what the package will include. However, the employee may have an opportunity to negotiate your severance package. There are many (personal) factors that also come into play when determining the amount of severance pay someone is entitled to. For example, if the company brought the employee to the Netherlands as an Expat for a certain assignment or fixed date.
The employee (Expat) is entitled to legal consultation regarding his/ her redundancy packer or settlement agreement in order to prevent subsequent discussions and legal proceedings. To avoid later discussion on the mutual consent of the termination, most employers offer an legal allowance in the settlement offer for legal expenses. We always try to cover our fee by seeking payment from the employer rather than from you.