Transition payment and fair compensation: when the cap is not the limit

The transition payment (transitievergoeding) is capped at €102,000 in 2026, or at one gross annual salary if you earn more than that. That cap is not the maximum you can receive: if your dismissal results from seriously culpable conduct by your employer (ernstig verwijtbaar handelen), the subdistrict court (kantonrechter) can award fair compensation (billijke vergoeding) on top, and that award has no statutory ceiling.

For most dismissals the transition payment is the whole statutory entitlement. It follows from a fixed formula in Article 7:673 of the Dutch Civil Code (BW). Fair compensation is the exception: the threshold is high, you carry the burden of proof, and the court fixes the amount case by case. The deadlines are short: two or three months after the employment ends.

Who is entitled to a transition payment?

You are entitled if your employer terminates or dissolves your contract, or does not renew a fixed-term contract. Under Article 7:673(1) BW you are also entitled if you resign or do not renew because of seriously culpable conduct by your employer.

The right exists from the first day of employment, including the probationary period (proeftijd). The old two-year service requirement was abolished on 1 January 2020 by the Balanced Labour Market Act (Wet arbeidsmarkt in balans).

Article 7:673(7) BW lists the exceptions. No transition payment is due if the employment ends because of seriously culpable conduct by you, when you reach state pension (AOW) age or the agreed pension age, or for employees under 18 working 12 hours a week or less. Under Article 7:673(8) BW the court can still award all or part of it if refusing it would be unacceptable by standards of reasonableness and fairness.

If the contract ends by mutual consent in a settlement agreement (vaststellingsovereenkomst), there is no statutory right; the amount is negotiated. If your employer is declared bankrupt or granted a suspension of payments, Article 7:673c(1) BW removes the entitlement altogether, and the UWV wage guarantee scheme does not cover it. See our article on employee rights when the employer goes bankrupt.

How is the transition payment calculated?

The payment is one third of a gross monthly salary for each year of service, with a pro rata amount for any part year. Article 7:673(2) BW sets this formula; the court has no discretion over it.

What counts as monthly salary is prescribed by the Decree on the pay concept for the notification period and transition payment (Besluit loonbegrip vergoeding aanzegtermijn en transitievergoeding). Article 3 of that decree adds holiday allowance, a fixed year-end payment and other fixed pay components over the last 12 months. Variable pay, such as bonuses and profit shares, is averaged over the three calendar years before the year in which the employment ends.

Under Article 7:673(4) BW successive contracts with gaps of six months or less are added together. A transition payment already received on an earlier termination is deducted, under Article 7:673(5) BW.

Where does the €102,000 cap apply?

The cap is €102,000 for employment ending in 2026, or one gross annual salary if that is higher. Article 7:673(3) BW requires the Minister of Social Affairs and Employment to index the amount every 1 January.

The cap only bites if the calculated amount exceeds €102,000 and your annual salary is lower than €102,000. In practice that means long service on a moderate salary. The amount that applies is the one in force on the date your contract ends, not the date of the dismissal letter.

When can you get fair compensation on top?

Fair compensation is available where the employer is seriously to blame for the way the employment ended. It is not a flat-rate contribution like the transition payment, but an award that repairs the consequences of that conduct.

The Civil Code provides for it in several places: Article 7:681(1) BW where the employer gave notice in breach of a prohibition on termination or without the required consent; Article 7:671b(9)(c) BW where the court dissolves the contract at the employer’s request and the dissolution results from seriously culpable conduct; Article 7:671c(2)(b) BW where you ask for dissolution for that reason; and Articles 7:682 and 7:683(3) BW in restoration and appeal proceedings.

What counts as seriously culpable conduct?

The threshold is high: a clumsy reorganisation or a thin dismissal file is not enough. Examples that courts accept include ignored harassment or discrimination, a file built after the decision to dismiss was taken, a reorganisation invented to remove one person, and stopping wages to force a resignation.

Disregarding the company doctor’s advice during illness can also qualify. In a decision of 31 July 2025 (ECLI:NL:RBZWB:2025:5717) the subdistrict court in Bergen op Zoom awarded €75,000 gross in fair compensation, separate from the transition payment. The employer had transferred a sick employee without consultation, pressed for meetings against the company doctor’s advice and stopped her wages. Our article on what happens when reintegration fails explains these obligations.

A relationship that both sides let deteriorate, procedural mistakes made in good faith, or a genuine difference of view on performance usually do not meet the threshold. You must prove the conduct and the loss it caused, so emails, written complaints and the employer’s replies decide most cases.

How does the court fix the amount?

There is no formula and no tariff. The Supreme Court (Hoge Raad) set the framework in New Hairstyle on 30 June 2017 (ECLI:NL:HR:2017:1187): fair compensation is not punitive, but the court may take into account the consequences of the dismissal, including the income you lose, insofar as they are attributable to the employer.

In practice the court looks at how long you are likely to remain without work, the gap between your old salary and what you can realistically earn next, lost pension accrual and the degree of blame. The transition payment you receive is part of that comparison.

Unemployment benefit counts. On 6 February 2026 (ECLI:NL:HR:2026:193) the Supreme Court held that the court may deduct possible WW benefit from the fair compensation. The court may also weigh whether you lose future WW rights because of the way the employment ended. If that applies to you, raise it expressly.

Which deadlines apply?

Article 7:686a(4) BW sets expiry periods (vervaltermijnen). A petition to annul the termination or for fair compensation under Articles 7:681 and 7:682 BW must reach the subdistrict court within two months after the day the employment ended. A petition for the transition payment has three months.

These periods cannot be interrupted by letters, complaints or negotiations, and the court applies them of its own motion. Diarise the end date of your contract the day the dismissal is announced. Statutory interest on the transition payment runs from one month after the end of the employment, under Article 7:686a(1) BW.

Can a collective agreement replace the transition payment?

Only in a narrow case. Under Article 7:673b(1) BW a collective labour agreement (cao) can exclude the transition payment for dismissals on economic grounds (Article 7:669(3)(a) BW), if the cao gives a right to a provision that limits unemployment, a reasonable financial payment, or a combination.

A cao cannot exclude fair compensation; that right follows from the statute and the employer’s conduct. A settlement agreement is different: a final discharge clause usually bars later claims, so check its wording before signing. Our comparison of a settlement agreement and a UWV dismissal sets out both routes.

What should you check as an employee?

• Note the exact end date of your contract and diarise the two-month and three-month deadlines of Article 7:686a(4) BW.
• Check the salary basis of the calculation: holiday allowance, fixed year-end payment, fixed allowances and the three-year average of variable pay.
• Add up all previous contracts with the same employer, or its successor, with gaps of six months or less.
• Collect evidence of the employer’s conduct: emails, complaints, company doctor’s reports and the replies you received.
• Check whether your cao contains a provision under Article 7:673b BW that replaces the transition payment.
• Read the discharge clause in any settlement agreement before you sign.

What should you check as an employer?

• Calculate the transition payment on the full statutory salary basis, not on base salary only.
• Check whether costs of outplacement or training may be deducted under Article 7:673(6) BW and the conditions set for that.
• Make sure the dismissal file was built before the decision, with documented warnings and improvement steps.
• Follow the company doctor’s advice and your reintegration obligations during illness.
• Pay the transition payment within one month after the end of employment to avoid statutory interest.
• Weigh the risk of fair compensation and the cost of proceedings against a negotiated settlement.

What can we do for you with the transition payment and fair compensation?

Our employment lawyers act for employees and employers before the subdistrict court and in negotiations.

• We calculate the transition payment on the statutory salary basis and check the employer’s figure.
• We assess whether the conduct surrounding the dismissal meets the threshold of seriously culpable conduct.
• We estimate the loss relevant for fair compensation, including salary gap, pension and WW position.
• We review or negotiate the settlement agreement and its discharge clause.
• We draft and file the petition with the subdistrict court within the deadline of Article 7:686a(4) BW.
• For employers, we review the dismissal file and the defence against a claim for fair compensation.

Summary

• The transition payment is one third of a monthly salary per year of service, capped at €102,000 in 2026 or one annual salary if higher.
• Fair compensation has no ceiling, but requires seriously culpable conduct by the employer, which you must prove.
• The court fixes fair compensation from the actual loss; WW benefit may be deducted (Hoge Raad, 6 February 2026).
• Petitions expire two months (fair compensation) or three months (transition payment) after the employment ends.
• A cao can replace the transition payment only for economic dismissals, and never excludes fair compensation.

Frequently asked questions