What is severance pay?

A severance payment, referred to as a transition payment, is the amount your employer must pay you if you are dismissed from your job, regardless of whether you had a permanent or temporary contract.

The money you receive is meant to help you get by temporarily without a fixed income. Of course, you can also use the severance payment to receive training which will increase your chances of finding a job. How much you get depends on how long you worked for the employer and the amount of your salary. Normally, you will receive a third of your monthly salary for each year you were employed.

Unfortunately, you do not automatically receive a severance payment. Employers often fail to give their employee severance pay, even though they are required to do so. That is why it is important to know what you are entitled to and how you can claim it from your employer. We can help you with that.

Severance pay or transition payment?

What we call severance pay is referred to officially as transition payment. The popular term however is severance pay. Transition payment is mostly used in official documents.

To keep it as easy as possible for everyone to understand, we are talking about severance pay. 

What is the difference between severance pay and a transition payment?

Often we talk about a severance payment when we mean a transition payment but what exactly is the difference?

In most cases, the correct term is a transition payment, which refers to the statutory amount that you can claim in the event of losing your job.

You officially receive severance payments only in the event of dismissal by mutual consent; it is the official amount that your employer offers you when negotiating your dismissal. That is why a severance payment must always be negotiated rather than accepted. Usually, the severance payment is higher than the transition payment.

You can therefore consider the transition payment the legally established 'basic amount' to which you may be entitled in the event of dismissal. The severance payment is an additional amount that can be added to this during dismissal negotiations.

No entitlement to severance pay

There are a number of cases in which you are not entitled to severance pay. So keep this in mind when you want to claim your severance payment.

Dismissal due to own behavior

If your behavior led directly to your dismissal, you cannot count on a severance payment. This must be seriously culpable behavior, for which you can be fired on the spot; offenses such as theft, fraud or embezzlement eliminate the chances of you receiving a severance.

Dismissal upon reaching the state pension age

When you have reached the state pension age, your employer may terminate your contract without owing you any severance payment. On the other hand, you will receive an AOW state pension benefit with a possible supplementary pension from your employer.

Dismissal in bankruptcy

If your employer goes bankrupt, has a deferred payment or is in debt restructuring, you are not entitled to severance pay. After your contract has been canceled as a result of this, your salary will be paid by the Employee Insurance Agency (UWV) for the duration of the notice period, or a maximum of six weeks. You will also receive payment in arrears for wages, holiday pay, vacation days and pension premiums from before the cancellation.

In case of dismissal for business reasons, you are entitled to severance pay. However, this does not apply if compensation has already been agreed in the contributor license agreement (CLA) for such cases.

Employees under eighteen

Are you less than 18 years old when you were fired and did you work less than 12 hours a week on average? Then you are unfortunately not entitled to severance pay.

Right to severance pay during probation

Almost every new job starts with a probationary period to test the fit between you, the employer and the organization so the collaboration can be stopped if necessary.

You can therefore be fired by your employer immediately during your probationary period, without notice. This also applies the other way around, so you can resign without notice.

This does matter for your right to severance pay. If you are fired during your probationary period, you are almost always entitled to a severance payment and unemployment benefit. But do you owe the dismissal to your own behavior, for example by always being late? Then your severance payment can be questioned.

If you resign yourself during your probationary period, you are normally not entitled to severance pay. You can only be entitled to severance pay if your employer is seriously culpable, such as harassment in the workplace.

Keep in mind that you should not count on a very high compensation since you have not been employed for that long. Read more about the amount of your severance payment here.

Your probationary period should not exceed one month if you have a temporary contract between six months and two years. A permanent contract or a temporary contract of more than two years includes a maximum of two months of probation. Do you have a contract of less than six months? Then your employer may not consider a probationary period with you.

Right to severance pay with a temporary contract 

Many employees have a temporary contract which states the date until which you are employed. Your employer can extend the contract before that date.

When your temporary contract ends, you are entitled to severance pay. It may be a bit confusing, but this is also seen as dismissal since the employer is choosing not to extend your contract. The duration of your contract does not matter for eligibility but it is an important factor for the amount you receive.

Chain regulation

Your temporary contract can be extended by your employer, but only a few times. With the third contract extension, or more than three years of temporary contracts with the same employer, you automatically receive a permanent contract.

There are exceptions to this, for example if there is more than six months between two contracts, you are not yet 18 years old, or if there are other agreements mentioned in your CLA.

Right to severance pay with a zero-hour contract 

With a zero-hour contract you do not have a fixed number of hours and you work on an on-call basis. But also as an on-call worker you are, in most cases, entitled to severance pay. A zero-hour contract is usually a temporary contract. That is why the same applies as for all temporary contracts: at the end of the contract you are entitled to severance pay.

With a zero-hour contract you are not entitled to severance pay if you resign yourself or are terminated by mutual consent.

So, for example, are you a seasonal worker and your contract is ending? Then apply for your severance payment, because you are entitled to it.

Right to severance pay if you resign yourself

You may resign yourself from your employer, for example if you are not satisfied with your work or have found a new job. Then you are almost never entitled to a severance payment or unemployment benefit; since you choose to quit your job, your employer does not have to compensate you.

But even if you decline an equivalent contract offer from your employer, you are not entitled to severance pay. This can be, for example, a new contract on at least the same conditions when your temporary contract expires, or an extension of your temporary contract.

There are a number of exceptions whereby you are entitled to severance pay if you resign. For this, your choice to resign must be the consequence of a mistake from your employer. This concerns seriously culpable acts or negligence, such as persistent bullying at work or non-payment of your wages.

These are the five most common cases of serious culpability:

1. Bullying
2. Serious breach of reintegration obligations
3. No salary payment
4. The employer is escalating and is pushing for dismissal
5. The employer makes insufficient effort to improve the working relationship after previous legal proceedings between the parties

If there is a seriously culpable act, the Subdistrict Court must be involved. In that case he/she can dissolve your contract, but you must have a strong case. This means that you create a file and show evidence to prove your allegations. Only if you can convince the subdistrict court that you are right, it is possible that you will receive a severance payment and possibly, unemployment benefit.

So did you resign, but did so because of seriously culpable actions by your employer? Then quickly apply for your severance payment and for an appeal with the court.

Right to severance pay in case of dismissal by mutual consent

You may agree with your employer on the termination of your contract and be dismissed by mutual consent. This can happen, for example, if you really don't like the job anymore and your employer wants to accommodate you.

In that case, you are not actually entitled to a severance payment or unemployment benefit, because you are submitting a request to your employer for dismissal. But in practice you often can receive the allowance by negotiating the terms with your employer.

All agreements you make with your employer about your dismissal should be neatly put on paper in a settlement agreement. This also includes your agreement on severance pay. Keep the following points in mind:

• Your employer takes the initiative so that you can retain your right to unemployment benefits.
• Your employer must explain to you the consequences of the dismissal for you.
• There must be financial compensation for the dismissal, so severance pay.
• The dismissal conditions must be recorded in writing.
• According to the law, you have at least 14 days to think about your dismissal.
• Both you and your employer must adhere to the notice period.
• Always thoroughly check the agreement.

So when negotiating your dismissal, make sure that it is stated clearly that you will receive a severance payment which is in line with your work, salary and contribution to the organization.

Negotiating the amount of your severance payment

The calculation of severance pay is laid down by law. That is why you can always assume it to be a third of your gross monthly salary, times the number of months you have been employed. You can read more about it in this blog post. However, the sum of the severance pay can be negotiated, especially in a mutually consented dismissal, but even in other circumstances, it is worth discussing with your employer.

Your employer will normally make you an initial proposal. Then it is up to you to come up with a counter offer. Employers often count on employees to not counter so don't be afraid to go for a higher severance payment if you think you are entitled to it.

Are you entitled to severance pay?

Have you been fired and do you think you are entitled to severance pay? Then it is time to claim what you are entitled to!

We are ready to help you with this. But you can also contact us if you have any questions about severance payments or are not entirely sure what you are entitled to.