Is an employer required to pay a transition allowance?
Blog by
Mariël Ganzeboom
The question of the transition allowance often arises in cases of dismissal. For employees, it is an important right; for employers, a statutory obligation with clear rules attached. In practice, however, there is often confusion. When must an employer pay? When not? And how does the transition allowance relate to agreements about an outplacement process or other support?
In this blog, we have clearly summarized the rules. That’s in line with how MEPD works: first create clarity about rights and obligations, so that agreements regarding departure can be carefully and well substantiated.
What is the transition allowance?
The transition allowance is a statutory compensation to which an employee may be entitled when the employment contract ends. The purpose of this allowance is to support the transition to new work. Think of expenses for education, career guidance, or outplacement.
The compensation is independent of the reason for dismissal, as long as the initiative lies with the employer. Even when a temporary contract is not extended, the right to a transition allowance may arise.
When is the employer required to pay?
In most dismissal situations, the employer is required to pay a transition allowance. This applies in particular when:
- The employment contract ends at the initiative of the employer.
- A temporary contract is not renewed.
- The employment is terminated through a settlement agreement (VSO), unless other arrangements have been made about this.
- An employee is dismissed after two years of illness.
The obligation applies regardless of the length of employment. Since 2020, every employee accrues the right to a transition allowance from their first working day.
When does the employer not have to pay a transition allowance?
There are situations in which the obligation lapses. This is the case when there is a legal exception. For example:
- In the case of summary dismissal due to seriously culpable behavior by the employee.
- When the employee is younger than 18 years old and works an average of less than 12 hours per week.
- If the employee resigns voluntarily, without serious culpability on the employer’s part.
In addition, a settlement agreement may stipulate that no transition allowance will be paid. This is legally permitted, but requires careful consideration. For employees, it is important to have this point properly reviewed before signing a VSO.
How is the transition allowance calculated?
The amount of the transition allowance is laid down in law and depends on the salary earned and the duration of service. The calculation takes into account:
- The gross monthly salary.
- The number of years in service.
- Fixed salary components such as holiday pay, shift allowances, and structural overtime.
The Dutch government provides an online calculation tool to help you estimate the amount of the transition allowance.
What is the relationship between the transition allowance and outplacement?
The transition allowance is intended to facilitate the move to a new job. In practice, this compensation is therefore often (partially) used for support such as:
- Outplacement.
- Retraining or education.
- Career guidance.
- Training aimed at application skills.
Employer and employee can agree that (part of) the transition allowance is used for outplacement. Sometimes, the employer also provides an additional budget. You can read more about the use of support on the page about outplacement.
It is important that clear agreements are recorded about this, for example in the settlement agreement.
In some organizations, support is financed through a separate mobility or customized budget, such as a MUP. This is separate from the right to a transition allowance, but it can be used to specifically support employees in their next step. Learn more about this on the page about MUP and outplacement.
Does the transition allowance also apply in the case of a disrupted employment relationship?
Yes. Even in the case of a disrupted employment relationship, the employer is generally required to pay a transition allowance. Only when the employee has acted with serious culpability can this obligation lapse.
This means that even in conflict situations or deadlocked collaborations, the transition allowance is often part of the departure arrangement.
What can MEPD offer?
At MEPD, we support organizations and employees in processes where dismissal, transition compensation, and further guidance come together. We ensure that agreements on outplacement closely match what is legally established, for instance in a settlement agreement, and that all parties know exactly what their rights are.
This clarity brings peace in what is often an uncertain time, allowing focus to remain on taking careful and sustainable next steps.
Would you like to know how MEPD can support with departure arrangements or the use of outplacement? Feel free to contact us. We are happy to think along, without obligations.
Mariël Ganzeboom
Marketing and Communications
My passion is to contribute creatively to the further growth and brand recognition of MEPD. And thereby, indirectly, also to the development of people, teams, and organizations.
