A transition allowance is a financial compensation that employees receive upon dismissal. It applies to both permanent and temporary contracts. It is intended to make the transition to a new job easier.
Employees can use this compensation for retraining or starting their own business, for example. In this blog, we explain when you are entitled to transition compensation and how to apply for it.
How to apply for transitional allowance: when are you entitled to it?
You are entitled to a transition allowance in the following situations:
- Dismissal by the employer: If your employer decides to terminate your employment, you will be entitled to a transition allowance. This applies regardless of the length of your employment.
- Non-renewal of a temporary contract: Even if your temporary contract is not extended, you are entitled to a transitional allowance, provided the contract is terminated at the initiative of the employer.
- Serious culpable action by the employer: In cases where you resign yourself due to seriously culpable acts or omissions of the employer, you may also be entitled to a transitional allowance.
Examples
- You work at a company for three years and are told that your contract will not be renewed.
- You resign because your employer has been guilty of seriously culpable behaviour, such as harassment or mismanagement.
Situations where you are not entitled to a transitional allowance
There are also circumstances where you are not entitled to a transitional allowance:
- Termination by mutual agreement: If you and your employer agree to terminate employment, you will agree on any severance pay yourself.
- Seriously culpable conduct of the employee: For example, in the case of summary dismissal for fraud or theft.
- Workers under 18 with less than 12 hours per week: If you are under 18 and worked less than 12 hours per week on average.
- Reaching state pension or retirement age: When you reach state pension or retirement age.
- Bankruptcy or suspension of payments of the employer: In these cases, the employer is not obliged to pay a transition allowance.
- Divergent arrangement in the collective agreement: If there is another provision in the collective agreement that differs from the transitional allowance.
How to apply for the transitional allowance?
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Dismissal procedure via UWV or subdistrict court
Initiation by the employer
The employer starts the dismissal procedure through the UWV or the subdistrict court. This usually happens in the case of dismissal for business economic reasons or long-term disability.
Conducting defence
You can defend against the dismissal. It is advisable to hire an employment lawyer to do so. The lawyer can help you defend your rights and ensure that the proceedings are fair.
Decision by UWV or cantonal court
If the UWV or the cantonal court approves the dismissal, your employer must pay the transition fee. This decision is binding and the employer is obliged to pay the compensation within a month of the end of employment.
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Termination by mutual consent
Consultation with employer
When you are dismissed by mutual agreement, you make arrangements with your employer about the end of your employment. It is important to make clear agreements on the transfer fee and other terms of dismissal.
Drafting a settlement agreement
These agreements are recorded in a settlement agreement. Make sure all agreements are clearly set out in writing.
Review of the settlement agreement by an employment lawyer
Let the review settlement agreement by an employment lawyer. The lawyer can check whether the contract was drafted correctly and whether you are entitled to unemployment benefits after your employment ends.
Calculation of severance pay
The transitional allowance is calculated based on the length of your employment. The basic formula is one-third of your monthly salary per year of service. From 1 January 2024, the maximum transitional compensation is €94,000, unless you earn more than this amount per year. In that case, the maximum compensation is equal to one year's salary.
Sample calculations
- Example 1: Short tenure
You worked for 2 years with a monthly salary of €3,000:
Severance pay: 2 years x (1/3 x €3,000) = €2,000
- Example 2: Long tenure
You worked for 10 years with a monthly salary of €4,000:
Severance pay: 10 years x (1/3 x €4,000) = €13,333.33
Tips for claiming transitional compensation
- Collection of evidence documents
Make sure you have all the necessary documents to hand, such as employment contracts, pay slips, and the letter of dismissal. These documents are important to prove your right to the transitional compensation.
- Legal support
Enlisting legal support can help you get the severance pay you are entitled to. An employment lawyer can guide you through the process and make sure you don't miss any steps.
- Monitoring payout deadlines
You will lose the right to the transition compensation if you have not started proceedings at the cantonal court within 3 months of the end of employment; the obligation to give notice is even 2 months after the end of employment.
It is wise to hire an employment lawyer if you have doubts about your right to transfer compensation or are experiencing problems with your employer. A lawyer can help you protect your rights and ensure you get the compensation you are entitled to.
An employment lawyer can help you prepare your defence in case of dismissal, draft and review a settlement agreement, and enforce the transitional compensation with the employer.
"Legal support ensures that you get the severance pay you are entitled to. An employment lawyer will guide you through the process and prevent you from missing steps."
Contact us at WhatsApp, call 085 080 5482 or send a email; our employment lawyer will be happy to talk to you and provide answers to your questions, and he can quickly review your settlement agreement.
And instantly calculate your transition allowance.
The average "transition compensation" included in a settlement agreement (VSO) is 0.57 gross monthly salary per year worked. This is therefore 0.24 gross monthly salary higher than the legal calculation. The compensation is therefore higher on average when a lawyer negotiates a VSO.
In theory, there is no right to a transition fee in the case of a settlement agreement (VSO). The employer only owes a transition fee when a dismissal via the UWV or dissolution via the subdistrict court takes place. However, it is common for the VSO to include a severance payment that is as high or higher than the statutory transitional compensation.
You have no entitled to a transition allowance if you resign yourself (except if employer has acted seriously culpable), you are seriously culpable for the dismissal and if the employer has been declared bankrupt or has a suspension of payments. This also means that if you decide not to extend the fixed-term employment contract you will no entitled to a transitional payment.
You are entitled to a transition allowance when the employer takes the initiative to terminate the employment contract through the UWV or Cantonal Court. The conditions herein are that you do not serious culpable dismissal, such as in cases of theft or fraud, among others. This means that you are also entitled to a transition allowance if the employer decides not to extend your fixed-term employment contract.
Of course, tax has to be paid on the transitional compensation / severance pay you receive. How much tax you have to pay depends on your annual income. In 2023, there are two rates applied:
Annual income up to €73,031 you pay 36.93% tax
Annual income from €73,031 you pay 49.5% tax