Every employer-initiated termination in the Netherlands carries a statutory transition payment from the first day of employment. Foreign employers who budget it late pay it with interest. Official references: business.gov.nl on the transition payment, Rijksoverheid on the calculation and 2026 maximum, business.gov.nl on dismissal after long-term illness and business.gov.nl on dismissal procedures.
When is the transition payment owed?
Dutch law grants the transition payment whenever the employer ends employment: dismissal with permission, termination through the court, and also non-renewal of a fixed-term contract. Entitlement starts from the first working day, and it covers permanent, fixed-term and on-call contracts alike. That means even a six-month contract that simply is not renewed produces a payment, which surprises many foreign employers.
How is the amount calculated?
The statutory formula is one third of the gross monthly salary per full year of service, with partial years counted pro rata down to the day. As an arithmetic illustration, four full years on a 4,000-euro gross monthly salary produce about 5,333 euros gross. There is no minimum service period and no rounding to whole years, so the calculation follows the exact employment dates.
What counts as gross monthly salary?
More than base pay. The calculation base includes holiday allowance, shift allowances, structural overtime and, as a monthly slice, one twelfth of fixed year-end or thirteenth-month entitlements, plus averages of bonuses and profit-dependent payments over the recent period. A budget built on base salary alone will come in short on every termination.
What is the 2026 maximum?
The government sets the cap each 1 January. For 2026 the transition payment is capped at 102,000 euros gross, or at one gross annual salary if the employee earns more than that a year. The cap is indexed annually, so multi-year workforce plans should assume the number moves.
When is the payment not due?
No transition payment is owed when the employment ends by mutual consent through a settlement agreement, when the employee resigns, or when the dismissal follows the employee’s seriously culpable conduct. In a settlement the parties negotiate a severance amount instead, and the employee keeps a statutory reconsideration period after signing, so the agreed package tends to shadow the statutory figure rather than ignore it.
What are the payment deadline and cash-flow rules?
The transition payment is due within one month after the employment ends; after that, statutory interest starts running. Payment can be spread over instalments within six months only when immediate payment would harm the business. The clean approach for a foreign employer is to accrue the liability monthly per employee, so a termination never hits one quarter’s cash unplanned.
Which routes and compensations frame the budget?
Economic dismissals and long-term incapacity go through the UWV permission route, while performance and conflict cases go to the subdistrict court, which can add a separate fair compensation on top when the employer acted seriously culpably. After two years of illness the employer still owes the transition payment over the whole employment, but can claim compensation for it from the UWV, with an application window of six months after paying. The payment itself is taxed as wages from former employment.
FAQ
Does a fixed-term contract that simply ends trigger the payment?
Yes. If the employer chooses not to renew, the transition payment is due over the actual contract period.
Is the 2026 cap always 102,000 euros?
The cap is 102,000 euros gross, or one gross annual salary if the employee earns more than that; it is re-indexed every 1 January.
Is the payment due in a mutual-consent settlement?
Not automatically. The parties negotiate the severance, and in practice the statutory formula anchors the negotiation.
Can Corpenza run the process?
Corpenza can structure Dutch payroll, accruals and the termination file with local counsel; the legal decision routes stay with UWV and the courts.
For payroll setup, termination accruals and compliant offboarding in the Netherlands, speak with Corpenza hiring and payroll services and contact Corpenza.
This is general information, not legal or tax advice. Dutch amounts and caps are indexed annually and individual cases turn on the contract and collective agreement; confirm current official figures before budgeting a termination.
