Transition allowance

(NL: Transitie vergoeding)
By F. Jager, 31-04-2022, HR4Expats

 

Hearing that your contract will not be extended is never fun. Even though there is a month’s notice, you are feeling the pressure of uncertainty. You are not sure when you will be able to find a new job. Then when you start thinking of the financial impact this might have, it becomes overwhelming. But that is precisely why we have a transition allowance (NL: Transitie vergoeding) in the Netherlands.

I am always amazed by the small number of people aware of the transition allowance. Most Dutchies have never heard of it since it’s not taught in school. You might never hear about the transition allowance if you do not have anyone in your circle aware of it.

What is transition allowance?
A transition allowance is an allowance an employee can claim from his employer when his contract is not extended cause of the employer. From day one, you have built up this right of transition allowance. This allowance is meant to help the employee transition from one job to the next.

NOTE! You can only claim the transition allowance if your employer decides to terminate or not extend your contract. If you resign yourself, you have no right to a transition allowance. Since you ‘choose’ voluntarily to transition from one job to the next. Moreover, minors who work less than 12 hours per week cannot claim the allowance. Also, if you got fired on the spot for behaving irrationally (stealing, getting drunk on the job, harassment, etc.), you have no right to claim a transition allowance.

As you might have noticed, I used the word ‘claim’. As incredible as the transition allowance is, it is a right you must claim. According to the law, your employer does not have to inform you about the existence of a transition allowance. Also, the employer does not have to pay the transition allowance if the employee did not claim it. You can claim the transition allowance by emailing the HR department or your employer. It does not have to be complicated or lengthy. An example could be:

‘Dear XX,
Based on the conversation regarding the termination of my contract. I want to claim the transition allowance. (You can always make it a bit more personal; this is just an example).
I look forward to your confirmation.
Kind regards,
XX ‘


Most companies I worked for who showed ‘good employership’ (NL: goedwerkgeverschap) pay the transition allowance, no matter if it’s claimed or not. But I have seen many companies who behave mysteriously regarding the transition allowance—not informing their employees about the existence of the transition allowance. Hoping their employees are not aware of this right.

Okay, nice; an employee can claim a transition allowance, but how much is it?

The amount of transition allowance is based on how long you have been in the company. To put it in easy words: If you have worked for 1 year for the company, you can claim 1/3 of your monthly salary as a transition allowance. With salary, we mean your monthly wage, vacation allowance, 13th month, fixed bonuses, etc.

Imagine John earns € 2.000,00 before tax (excl. vacation allowance), and he has worked for 1,5 years at the X-Store. Unfortunately, John has received the news that his contract was not extended. The calculation of his transition allowance (before taxes) would be the following:

 

 

Little side note: The taxes that are deducted from the transition allowance are high. Please consider this. How high the taxes are, depends on your yearly income. But in most cases, it is around 37,07%. 

If you worked for a long time at a company, the transition allowance could be high when your contract gets terminated. 

Some costs the employer has made can be subtracted from the amount of transition allowance. Since the transition allowance is to help the employee to transition to another job, the cost that would benefit this transition can be deducted from the transition allowance. These costs the employer made should be to strengthen the employee’s chances in the job market. Examples are:

  • A non-work-related language workshop
  • A management education for an employee without a managerial position
  • Training on personal development
  • Workshop on how to write the best CV
  • Etc.


Your contract not being extended is never pleasant. If you are in this situation, always claim your transition allowance. It does not matter how much you like your employer or how long you have worked for the company. It is your right!

Sources:

  • G.A. Diebels, De Kleine Gids voor het Nederlandse arbeidsrecht, Deventer: Wolters Kluwer 2020.
  • Burgerlijk Wetboek Boek 7, artikel 673 (2021)