The transition payment maximum under Dutch law is the higher of two figures: a statutory ceiling that the Minister of Social Affairs and Employment indexes every year and publishes in the Government Gazette (Staatscourant), or one gross annual salary. That ceiling is not the most a dismissed employee can receive. Where the dismissal is the result of seriously culpable conduct by the employer (ernstig verwijtbaar handelen), the court can award a fair compensation (billijke vergoeding) on top of the transition payment, and that award has no statutory ceiling at all.
For most dismissals the transition payment is the whole financial settlement, calculated from a fixed formula that leaves the court no discretion. Fair compensation is the exception, and it is a genuine exception: the threshold is high, the burden of proof lies with the employee, and the amount is fixed case by case rather than from a table. This article explains how the transition payment is built up, where its ceiling sits, when that ceiling is broken, and which deadlines decide whether a claim can be brought at all.
Who is entitled to a transition payment
Under Article 7:673(1) of the Dutch Civil Code (Burgerlijk Wetboek, BW) an employee is entitled to a transition payment where the employer terminates the contract, does not renew a fixed-term contract, or where the employee terminates or does not renew because of seriously culpable conduct by the employer. The entitlement accrues from the first day of employment, which means it exists during the probationary period as well; the old requirement of two years’ service disappeared with the Balanced Labour Market Act.
There are limits. No transition payment is due where the employment ends because of conduct on the employee’s part that is itself seriously culpable, although the court may still award all or part of it where the refusal would be unacceptable by standards of reasonableness and fairness. Nor is it due where the employee has reached state pension age, or where the contract ends by mutual agreement in a settlement agreement, in which case the payment is a matter for negotiation rather than a statutory right. Where the employer is declared bankrupt, Article 7:673c BW removes the entitlement altogether, and the UWV wage guarantee scheme does not make good the shortfall, a point set out in our article on employee rights when the employer goes bankrupt.
How the transition payment is calculated
The formula is one third of a gross monthly salary for each year of service, applied pro rata to part years down to the day. What counts as monthly salary is not left to the parties: the Decree on the pay concept for the notification period and transition payment (Besluit loonbegrip vergoeding aanzegtermijn en transitievergoeding) prescribes that the holiday allowance, a fixed thirteenth month, structural overtime pay, shift allowances and comparable fixed components are included. Bonuses and profit shares are averaged over the three calendar years preceding the year of termination.
Article 7:673(2) BW then applies the ceiling. The payment is capped at the statutory maximum or, where the employee earns more than that in a year, at one gross annual salary. The maximum amount itself is indexed annually and published in the Government Gazette, so any figure quoted in an article dates quickly; the reliable check is the amount in force in the year the employment ends. The cap only bites in the narrow case where the calculated amount exceeds it and the annual salary is lower than it, which in practice means long service on a moderate salary.
Fair compensation: the award without a ceiling
Fair compensation is a different instrument with a different purpose. The transition payment is a flat-rate contribution towards the transition to new work, owed almost automatically; fair compensation responds to the way the employment was ended and is owed only where the employer is seriously to blame for it. It appears at several points in the Civil Code: Article 7:681(1) BW where the employer terminated without the employee’s written consent or in breach of a prohibition on termination, Article 7:671b(9)(c) BW where the court dissolves the contract at the employer’s request and the dissolution is attributable to the employer’s seriously culpable conduct, Article 7:671c(2)(b) BW where the employee asks for dissolution for the same reason, and Articles 7:682 and 7:683(3) BW in restoration and appeal proceedings.
The Supreme Court set the framework in the New Hairstyle judgment of 30 June 2017 (ECLI:NL:HR:2017:1187). Fair compensation is not a punitive award and is not calculated from a formula, but the court may take the consequences of the dismissal into account, including the income the employee loses because the employment ended in the way it did. There is no fixed multiplier and no reliable range: awards run from a few thousand euros to well into six figures, and the published figures say more about the facts of each case than about any tariff.
What counts as seriously culpable conduct
The threshold is deliberately high. A dismissal that is merely ill-judged, a file that is thin, or a reorganisation carried out clumsily will not clear it. What does clear it is conduct that a reasonable employer could not have engaged in: discrimination or harassment that the employer failed to act on, a file constructed after the decision to dismiss had already been taken, a reorganisation invented to remove one individual, deliberate non-payment of wages to force a resignation, and persistent disregard of the company doctor’s advice or of reintegration obligations during illness. Our article on what happens when reintegration fails shows how quickly that last category turns into a compensation claim.
The counter-examples matter just as much. A working relationship that both sides allowed to deteriorate, procedural mistakes made in good faith, and a genuine difference of view about performance are not seriously culpable conduct, even where the employee ultimately loses the job. The employee carries the burden of proving the conduct and the loss it caused, which is why contemporaneous evidence, written complaints and the employer’s answers to them decide most of these cases.
How the court fixes the amount
Because there is no formula, the court reasons from the loss. It looks at how long the employee is likely to remain without work given age, length of service, position and the state of the labour market, at the difference between the old salary and what can realistically be earned next, at pension entitlement that will not now accrue, and at the degree of blame on the employer’s side. It must set out that reasoning in the judgment, which is why fair compensation rulings are far longer than the paragraph that awards a transition payment.
Benefits received count. In a judgment of 6 February 2026 (ECLI:NL:HR:2026:193) the Supreme Court confirmed that unemployment benefit drawn in the period covered by the award is deducted from the fair compensation, while the possible loss of future entitlement to unemployment benefit is a factor the court may take into account in the employee’s favour. An employee who assumes that a benefit and an award can simply be added together will be disappointed; an employee whose future benefit position is genuinely damaged has an argument that is worth making expressly.
The deadlines that decide the claim
Article 7:686a(4) BW sets limitation periods that expire (vervaltermijnen) rather than merely prescribe. A petition seeking annulment of a termination or an award of fair compensation must reach the subdistrict court within two months of the day the employment ended. A claim for the transition payment has three months from that same day. These periods cannot be interrupted or extended by correspondence, a complaint or a pending negotiation, and the court applies them of its own motion. Missing them ends the claim regardless of its merits, so the date the contract ends should be diarised the moment a dismissal is announced.
What a collective agreement can and cannot change
Article 7:673b BW allows a collective labour agreement (cao) to replace the statutory transition payment with an equivalent provision (gelijkwaardige voorziening) in the cases the article covers. Equivalence is assessed on value rather than on form, so a training budget, a supplement to unemployment benefit or an outplacement package can qualify, provided the package is genuinely worth what the statutory payment would have been. Where it is not, the employee keeps the statutory claim and the court awards the difference.
A collective agreement cannot touch fair compensation. The right to it follows from the statute and from the employer’s own conduct, and a clause purporting to exclude further claims does not stand in the way of an award where seriously culpable conduct is established. A settlement agreement is a different matter: a final discharge clause normally does bar later claims, which is exactly why the wording deserves scrutiny before it is signed. Our comparison of a settlement agreement and a UWV dismissal sets out what each route costs and protects.
The employer facing a claim
An employer defending a claim for fair compensation is not defending the dismissal as such, but the manner of it. Three lines of defence do most of the work. The first is to show that the errors were procedural or made in good faith rather than deliberate, since negligence alone does not amount to serious culpability. The second is to show that the decision rested on a documented file built before the dispute arose, with the improvement steps and warnings that the ground relied on requires. The third goes to the amount rather than the principle: where the employee found comparable work quickly, the loss the award is meant to repair is correspondingly small.
The financial exposure is not limited to the award. Proceedings of this kind commonly run for several months to a year, court fees are set annually under the Court Fees in Civil Cases Act (Wet griffierechten burgerlijke zaken) and published by the judiciary, and a costs order follows a fixed scale that rarely covers what either side actually spends. That arithmetic is one reason many of these disputes end in a negotiated vaststellingsovereenkomst rather than in a judgment.
Frequently asked questions
1. Do I automatically get fair compensation on top of the transition payment?
No. Fair compensation is only awarded if you can prove that your employer acted with “serious culpability” (ernstig verwijtbaar handelen). This is a strict test applied by the courts. In a standard reorganization or dismissal due to underperformance, you typically only receive the transition payment. You must provide concrete evidence of the employer’s misconduct.
2. What is the highest fair compensation ever awarded in the Netherlands?
There is no register of the highest awards and no tariff to work from. In ECLI:NL:RBZWB:2025:5717, the subdistrict court awarded fair compensation on top of the transition payment because the termination during illness was attributable to the employer. What drives the amount is the loss the employee actually suffers, above all the income and pension entitlement that will not now be earned.
3. How long after my dismissal can I claim fair compensation?
You must file a petition with the subdistrict court (kantonrechter) within two months (for annulment of the termination or for fair compensation) or three months (for the transition payment) after the end of your employment contract (Art. 7:686a paragraph 4 BW). These are expiry periods: they cannot be interrupted by correspondence or negotiation, and once they have passed the claim is gone.
4. Do I have to pay tax on the fair compensation?
Yes. Both the transition payment and fair compensation are considered income from past employment (Box 1). They are taxed at the progressive rate applying in the year of payment. The averaging scheme was abolished in 2023 and the standing right (stamrecht) route disappeared long before that, so there is no general way to spread the charge. A tax adviser should look at the timing of payment in your case.
5. If my annual salary is over the statutory maximum, do I get more?
Yes. Where your gross annual salary is higher than the statutory maximum, your own annual salary becomes the ceiling for the transition payment instead. The statutory maximum is indexed every year and published in the Government Gazette, so the figure that counts is the one in force in the year your employment ends. Fair compensation can still be awarded on top of it.
6. Does fair compensation apply to dismissal during the probationary period?
A transition payment accrues from the first day of employment, so a dismissal in the probationary period (proeftijd) does give rise to one. It is simply very small, because the accrual is one third of a monthly salary per year of service. Fair compensation is possible as well where the termination in the probationary period is itself seriously culpable, a dismissal on discriminatory grounds being the clearest example, although the loss to be repaired is usually limited.
7. Can I get both fair compensation and a ‘dissolution fee’?
No. Since the introduction of the WWZ (Work and Security Act) in 2015, the old “correction factor” regarding dissolution fees was replaced by the standard transition payment. Fair compensation is the only additional statutory award available for employer misconduct. The old “C-factor” formula is no longer used, though judges look at similar damage factors.
8. What is the difference between transition payment and fair compensation?
The transition payment is a statutory, fixed amount intended to help the employee transition to a new job; it is mandatory in almost all dismissals. Fair compensation is a variable, uncapped amount intended to repair specific damage caused by the employer’s severe misconduct. The first is a right; the second is a sanction.
9. How can I prove my employer acted with serious culpability?
You need objective evidence. This includes emails containing intimidation, witness statements from colleagues, medical reports linking health issues to workplace treatment, or ignored formal complaints. Correspondence with the Labour Inspectorate or recordings (where legal) can also serve as evidence. The more concrete the documentation, the stronger your case.
10. Should I try to settle with my employer before going to court?
Legally it is not required, but practically it is highly advisable. A settlement agreement (vaststellingsovereenkomst) allows you to negotiate the terms of your departure, including a payment above the statutory minimum, and to avoid the cost and delay of proceedings. Employers often prefer paying a premium to avoid the reputational risk of a “serious culpability” judgment.
11. What if my industry CAO prescribes a lower payment?
A CAO may only deviate from the statutory transition payment if it provides an “equivalent provision” (Art. 7:673b BW). If the CAO offer is financially lower than the statutory right, you can petition the subdistrict court to check for equivalence. If it is not equivalent, the judge will award the difference. A CAO can never forbid you from claiming fair compensation.
12. What does a legal procedure for fair compensation cost?
Cost depends on the complexity of the case and on whether it settles before a hearing. Court fees (griffierechten) are fixed each year under the Court Fees in Civil Cases Act and published by the judiciary, in a lower band for individuals than for companies. If you win, the court may order the employer to contribute to your legal costs, but that order follows a fixed scale and rarely covers the actual bill, so the expected award should always be weighed against the certain cost.
The transition payment is arithmetic; fair compensation is argument. Law & More acts for employees and employers in Eindhoven and across the Netherlands on both: calculating and checking the transition payment, assessing whether the conduct surrounding a dismissal crosses the threshold of serious culpability, negotiating settlement agreements, and conducting proceedings before the subdistrict court. Because the periods in Article 7:686a BW expire quickly, it is worth having the position assessed as soon as the end date of the contract is known.
