Minimum statutory severance pay depends on the reason for dismissal and / or the length of employment, and ranges from one average monthly salary for any dismissals for organisational reasons (including collective redundancies) of employees whose employment lasted less than one year, to 12 times the average monthly salary for dismissals for health reasons. The parties may negotiate a larger severance payment, or the payment of severance pay in the case of dismissal for other reasons.
When the employment agreement is terminated via the Employee Insurance Agency (UWV) or the court, a mandatory severance payment (i.e. transition payment) is due. The amount of the transition payment depends on the seniority of the employee and is equal to:
- One-third of the monthly salary for each calendar year.
In 2020, the maximum transition payment is EUR 83,000 gross and for employees who earn more than EUR 83,000 gross a year, the transition payment is maximised at one annual gross salary.
In the situation where an employment agreement is terminated on the basis of the cumulated dismissal ground, the sub-district court can grant, in addition to the transition payment, a severance of up to half of the transition payment.
The employee is entitled to additional (reasonable) compensation if the employer has acted in a seriously culpable way. In that case, the remuneration is not subject to a maximum amount and is determined by the court. Case law shows an increase in the amounts awarded to employees.
If the agreed or statutory notice period is not observed, the termination of the employment agreement is deemed ‘irregular’. An irregular termination does not affect the validity of the termination itself, but it entitles the other party to claim statutory damages or compensation for the damages actually incurred.