You are owed a transition payment (transitievergoeding) when your employer ends your employment contract or does not renew it, and the right applies from your first day of work. The main exceptions are resignation, dismissal for your own seriously culpable conduct and termination by mutual consent, where the statutory right does not arise.
The payment is one third of a month’s salary for each year of service, with parts of a year calculated pro rata. It is capped at a statutory maximum that is indexed every year (€102,000 gross in 2026), or one year’s salary if your annual salary is higher. The rules are in article 7:673 of the Dutch Civil Code (BW).
Our general guide to severance pay in the Netherlands covers the basic entitlement. This article deals with the situations in which the ordinary rule does not apply. That is where most disputes about the payment arise.
When is no transition payment due?
No payment is due if you resign, if you are dismissed for seriously culpable conduct, or if the contract ends at state pension age or on your death. A settlement agreement is also outside the statutory rule.
If you resign, your employer owes nothing. The exception is a resignation caused by seriously culpable conduct of the employer. In that case you can claim the transition payment and, on top of it, fair compensation (billijke vergoeding) from the court.
If you are dismissed because of your own seriously culpable conduct, the right to the payment lapses. The threshold is high: considerably higher than the reasonable ground needed for a dismissal. A court can still award the payment in whole or in part if withholding it entirely would be unacceptable.
No payment is due when the contract ends because you reach state pension age (AOW-leeftijd), or when it ends on your death.
What if we end the contract by mutual consent?
Then the statutory right does not arise at all, and the amount is a matter of negotiation. In practice the transition payment is the floor from which that negotiation starts.
A termination by mutual consent is usually recorded in a settlement agreement (vaststellingsovereenkomst). Read it carefully before you sign: what is not in the agreement, you cannot claim later.
Is a payment due when a fixed-term contract expires?
Yes. A fixed-term contract that expires and is not renewed at the employer’s initiative counts as an ending by the employer, and the transition payment is due.
Employers regularly overlook this. They assume that no payment can arise because nobody was dismissed. The law does not require a dismissal; it is enough that the employer chose not to continue the contract.
What happens after two years of illness?
An employee whose contract ends after two years of illness is entitled to the transition payment like any other employee. The employer can then apply to the UWV for compensation of the payment, but only if it applies in time.
The reason for the scheme is that the employer has already paid wages during the two years of illness. The application must be made no later than six months after the full transition payment was paid. Employers usually lose the compensation by applying late, not by failing to qualify.
There is a separate scheme for small employers, with an average of no more than 25 employees, who close their business because the owner retires or dies. The UWV sets its own conditions and deadlines for that scheme.
Will the compensation schemes remain?
Not necessarily. The government has proposed to abolish both compensation schemes for all employers, with 1 January 2027 as the intended date. The bill was still before parliament in September 2026.
Until the law changes, the current schemes apply. If you are an employer with a long-term sick employee, check the status of the bill and the transitional rules before you decide when to end the contract.
What about a dormant employment contract?
An employer must in principle cooperate with an employee’s request to end a dormant employment contract (slapend dienstverband) and pay the transition payment. The Supreme Court decided this in the Xella judgment of 8 November 2019 (ECLI:NL:HR:2019:1734).
Some employers used to keep an employment contract alive after two years of illness: no work, no pay, no termination. They did so precisely to avoid the transition payment. Under Xella, that is in principle contrary to good employment practice, unless the employer has a legitimate interest in keeping the contract, such as a realistic prospect of the employee returning to work.
If you are in this position as an employee, raise it with your employer rather than wait. Make the proposal in writing so that you can show later what you asked for and when.
Frequently asked questions
Does the transition payment apply during the probationary period?
Yes. The right applies from the first day of employment. A dismissal during the probationary period at the employer’s initiative therefore gives rise to a payment, small though it will be.
Can we agree a lower amount in a settlement agreement?
Yes, you can agree a different amount, because the statutory right does not arise when the contract ends by mutual consent. Whether it is sensible for the employee to accept less is a different question, and usually the answer is no.
How long do I have to claim it?
A claim for the transition payment lapses three months after the employment ends (article 7:686a BW). That is a forfeiture period, not a limitation period. Once it has passed, the claim is gone, and it cannot be interrupted by a letter.
In summary
- The transition payment is due when the employer ends or does not renew the contract, from the first day of employment.
- No statutory payment is due on resignation, on dismissal for seriously culpable conduct, at state pension age or on a termination by mutual consent.
- After two years of illness the payment is due; the employer can apply to the UWV for compensation within six months of paying it, as long as the scheme exists.
- An employer must in principle cooperate in ending a dormant employment contract (Xella, 2019).
- A claim must be made within three months after the employment ends.
Unsure where you stand? Tell us about your situation. We will let you know your options within one working day.
How Law & More can help you with this is explained on our employment lawyer page.
