Transition payment and settlement agreement according to Dutch Law
Our Dutch lawyer Labour and Employment Law in Amsterdam, The Netherlands, is specialist employment solicitor advising foreign employees and expats on settlement agreements and transition payment (severance pay, transition fee, redundancy payment or compensation). We specialize in international and Dutch Labour & Employment law since 1997.
According to Dutch Labour Law, transition payment is an important provision of a Compromise Agreement (Employment Exit Agreement, Employment Separation Agreement or Termination Agreement). The Amsterdam team of specialist Dutch Employment Law Solicitors have a vast amount of experience in advising expats on all Dutch (redundancy) situations.
In many cases a mutual agreement to end the employment relationship with a termination agreement (exit package or compromise agreement, often including a severance payment) or court settlement is reached in or out of court.
Settlement agreement in The Netherlands
The settlement agreement outlines the terms of the deal and can contain the following information:
- Transition payment (transition fee, redundancy compensation)
- Post-contractual items
- Final discharge
- Date of termination
- Continued payment of remuneration up to the end of the employment relationship
- Release from work duties.
Transition compensation: severance payment in The Netherlands
An important provision in the Dutch settlement agreement relates to the ‘transition compensation’ or transition payment (statutory severance payment, redundancy compensation or dismissal compensation). The transition payment should compensate employees for their loss of earnings and costs such as costs for scholing or outplacement. This is available to all employees who have an employment contract that lasted for two years ore more. The amount of a transition compensation is calculated using a formula based on:
- how long the employee has worked for the employer (length of service);
- monthly pay (gross monthly salary) including holiday allowance.
Maximum severance payment (transition payment)
Effective 1 January, a transition payment is mandatory whenever an employer terminates or fail to renew a temporary employment contract. The duration of the employment contract makes no difference. The transition payment is capped at € 77,000, unless the employee’s salary exceeds that amount. Our Dutch attorney in Amsterdam can calculate your transition compensation (financial package). If our legal expert advises that the money offered is insufficient, we will negotiate on your behalf to ensure a fair compensation is paid.
The transition compensation is subject to wage tax/national insurance contributions and the income-related healthcare insurance contribution.
Negotiations and legal advice on Dutch termination agreement
Some employers will be prepared to pay more than just the statutory severance fee in case of a settlement agreement. This may vary depending on the individual circumstances of the case. Outplacement costs may be deducted from the transition compensation.
Legal expenses and termination agreement
You are entitled to legal consultation regarding your settlement agreement or transition payment in order to prevent subsequent discussions and legal proceedings.
The employee may at a later stage claim that he did not fully appreciate the legal consequences of the settlement agreement. To avoid later discussion about the mutual consent of the termination, most employers offer an allowance for legal expenses. Our Amsterdam lawyers always try to cover our fees by seeking payment from your employer rather than from you.
Other provisions in settlement agreement
A settlement agreement will be considered as the final arrangement of all the issues between the parties in relation to the employment, since the contract prevents or limits future disputes. The agreement will ensure finality in the ending of the relationship and will avoid a future employment dispute in court. It is a legally binding contract enforceable in a court of law.
Legal advice for employees and expats in Amsterdam
You can have your termination agreement checked by our experienced Dutch solicitor (lawyer) Employment and Labour Law in Amsterdam. Our Amsterdam lawyers will advise you fully on all the implications of the severance payment (transition payment) and signing the Settlement Agreement.
Please contact our lawyer Dutch Labour and Employment Law in Amsterdam, The Netherlands, mr. P.Chr. Snijders for further information about severance payment (transition fee), settlement agreements and termination agreements: 0031 20 5221999.