Accounting
Payroll
BV Formation
Transitievergoeding: The Dutch Severance Payment Every Employer Needs to Understand
Transitievergoeding is the Dutch severance every employer owes from day one. See the formula, the sick leave trap, and how to plan for it.
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17 mins
Intro
Most Dutch employers first think seriously about the transitievergoeding once a dismissal is already underway. The better moment to understand it is before signing the very first employment contract, because the obligation starts accumulating from that first day, not after some grace period that no longer exists.
What follows is written entirely from the employer's side of this: what actually triggers the obligation, how to calculate it correctly, the two situations that regularly cost more than employers expect, the negotiated alternative most dismissals actually use, and how to treat this as a plannable liability rather than a surprise that arrives with each departure.
When the Obligation Arises
The transitievergoeding is owed whenever the employer terminates an employment contract, regardless of whether the reason is economic, performance-related, a breakdown in the working relationship, or two years of sick leave running out. A temporary contract that is not renewed on the employer's own initiative triggers it too. Even a dismissal during the proefperiode, the probationary period, triggers it, though the amount owed is naturally small given how little time has accrued.
The rule that catches out the most employers, particularly international founders newer to Dutch employment law, dates to 1 January 2020. Before that date, the transitievergoeding only applied after two years of continuous employment. The Wet arbeidsmarkt in balans, the WAB, abolished that waiting period entirely. Since 2020, the obligation applies from the very first day of employment. A Dutch BV that hires someone in January and dismisses them in April owes a transitievergoeding for those four months, calculated exactly the same way as it would be for four years. Most established Dutch employers know this by now; a striking number of newer BV founders, especially those running Dutch entities from abroad, do not.
There are specific situations where no transitievergoeding is owed at all. The employee resigns voluntarily with no serious fault on the employer's part. The employment ends by mutual consent through a vaststellingsovereenkomst in which the employee explicitly waives the transitievergoeding, though this waiver is only valid where the employer offers a higher total amount in exchange. The dismissal follows the employee's own seriously culpable conduct. The employee has reached AOW age. Or the employer is legally bankrupt.
Key takeaway: The transitievergoeding applies from day one of employment, with no minimum tenure requirement since 2020. Any Dutch employer terminating any employee, for any reason, after any length of service, should assume a transitievergoeding is owed unless one of the specific exceptions listed above genuinely applies.
Understanding this obligation matters most in the earliest weeks of hiring someone, well before dismissal is ever on the table; hiring staff as a sole proprietor covers the broader set of employer obligations that kick in the moment you take on staff at all.
The Formula and the Maximum
The calculation itself has exactly one moving part per year of service and one cap sitting on top of it, and understanding both takes considerably less time than getting either one wrong in a live negotiation.
The core rule is one-third of gross monthly salary for every full year of service. For whatever remains at the end of employment, less than a full year, the calculation runs pro-rata: one thirty-sixth of gross monthly salary per additional full month, and a further pro-rata figure for any remaining days. Gross monthly salary for this purpose includes basic salary, fixed allowances, holiday pay, and any structural fixed thirteenth-month payment; it does not include variable bonuses, sales commissions, or expense reimbursements that are not guaranteed as a structural part of the pay package.
The maximum for 2026 sits at 102,000 euros gross, or one full gross annual salary for anyone whose annual salary already exceeds that figure, whichever turns out higher. This cap is indexed annually against contract wage development by the Ministry of Social Affairs and Employment; it stood at 98,000 euros in 2025. For a senior hire or a DGA earning 150,000 euros a year, the relevant ceiling is one year's salary, 150,000 euros, not the flat 102,000-euro figure that applies to everyone else.
Service | Monthly salary | Calculation | Transitievergoeding |
|---|---|---|---|
3 years, 0 months | €2,800 | 3 × (1/3 × €2,800) | €2,800 |
8 years, 7 months, 15 days | €3,500 | (8 × €1,167) + (7 × €97.22) + (15 × €3.20) | €10,064 |
25 years, 3 months | €6,000 | 25 × €2,000 + 3 × €166.67, capped | €102,000 (cap applies) |
Payment timing carries its own practical weight beyond the calculation itself. The transitievergoeding falls due at the moment employment actually ends, and in practice this means paying it alongside the final salary run or, at the latest, within one month of the contract ending. Missing that window triggers wettelijke rente, statutory interest, on the outstanding balance, which is an entirely avoidable cost if the payment is simply scheduled correctly from the start. Since gross salary components sit at the centre of this whole calculation, how much tax you pay covers how gross figures translate into an employer's broader tax and payroll obligations.
The Two Situations That Cost More Than Expected
The standard dismissal calculation above is genuinely straightforward once you have run it a couple of times. Two specific situations, though, regularly produce costs that catch out employers who thought they had already understood the rules completely.
The first is the two-year sick leave dismissal. Once an employee has been sick for two years and the loondoorbetaling bij ziekte obligation period has run its course, the employer gains the legal right to dismiss that employee via the UWV. That dismissal still triggers a transitievergoeding, calculated on the employee's full period of employment, including both sick years, exactly as though those years had been worked normally. An employer who has already spent two years paying sick pay, often close to full salary in year one and at least 70% in year two under many CAO terms, now owes the complete transitievergoeding on top of everything already paid out. For an employee with ten years of service earning 3,500 euros a month, that adds a further 11,667 euros in transitievergoeding on top of two years of sick pay already spent.
The Wet compensatie transitievergoeding, the WCT, exists specifically to soften this blow. After paying the transitievergoeding, the employer can apply to the UWV for reimbursement, and the UWV repays the statutory amount from the WW fund rather than leaving the full cost sitting with the individual employer. The process takes time and requires proper documentation, but the underlying cost is ultimately absorbed collectively rather than falling entirely on one business.
Watch out: WCT compensation is calculated as of the day the two-year sick period was actually completed, not the date of the eventual dismissal. An employer who waits six months after that two-year mark before finalising the dismissal continues to accrue transitievergoeding during those six months, but the WCT does not reimburse that additional accrual at all. Dismissing promptly once the two-year sick period ends maximises what actually gets reimbursed.
The second situation is the billijke vergoeding, an additional and genuinely uncapped compensation a kantonrechter can award on top of the statutory transitievergoeding where the employer has acted in a seriously culpable manner. This is not a routine feature of ordinary dismissals; it applies specifically where the employer's conduct was particularly egregious, fabricating performance grounds that were never real, discrimination, ignoring basic procedural obligations, or making working conditions deliberately unbearable to force someone out. The highest award recorded in the Netherlands exceeded 700,000 euros, and awards in the 20,000 to 50,000 euro range are common enough in contentious dismissal proceedings that this cannot be treated as a remote theoretical risk. An employer who follows correct procedure, documents grounds carefully as they arise, and gives a genuinely fair chance to improve before any dismissal reduces this exposure substantially, largely by removing the grounds a court would need to find seriously culpable conduct in the first place.
The Negotiated Route
Most Dutch dismissals never actually reach the UWV or a kantonrechter at all. They end instead with a vaststellingsovereenkomst, a mutual termination agreement signed by both employer and employee. For an employer, this route is often genuinely preferable, since it avoids a lengthy formal procedure, provides real certainty about the eventual outcome, and gives both sides flexibility to negotiate terms that go beyond what the statutory rules alone would dictate.
The statutory transitievergoeding is not automatically required inside a VSO; the parties are free to negotiate the actual severance amount between themselves. In practice, the statutory figure typically functions as the floor an employee will not go below, with the final negotiated amount often including the statutory transitievergoeding plus something extra reflecting notice period, accrued vacation days, outplacement support, or other negotiated benefits layered on top.
The herroepingsrecht is a fixed, non-negotiable feature of every VSO: the employee has two weeks after signing to reconsider and withdraw entirely. The employer must explicitly reference this right inside the agreement itself and must genuinely allow the full two-week window to run; an agreement that omits this reference, or that artificially shortens the period, is simply invalid regardless of what else it says. This right cannot be waived by the employee under any circumstances, however eager they may be to move on quickly.
The WW consequence is worth being upfront about in any negotiation. A VSO that is clearly driven by the employer's own initiative, where the employer wanted the termination and the employee essentially agreed to it, typically still leaves the employee entitled to WW, unemployment benefit, from the UWV. The UWV looks past the "mutual agreement" framing to assess whether the employee was, in substance, actually dismissed; a VSO built around a genuine economic or performance rationale on the employer's side generally does not block that entitlement. Employers negotiating a VSO should expect this and factor it into the conversation rather than treating WW eligibility as an open question to be avoided.
The practical decision tree for most employers is simple enough: wherever there is any realistic chance the employee will cooperate with a mutually agreed termination, the VSO route is faster, cheaper in legal fees, and considerably less damaging to both sides than a contested UWV procedure or court case. The statutory transitievergoeding remains the financial starting point regardless of which route a dismissal ultimately takes. Since the financial side of a VSO negotiation, notice periods, holiday pay, tax withholding on the settlement, benefits from proper professional input, accountant or bookkeeper covers where that kind of support fits into getting the numbers right.
Building the Liability Into the Business
A Dutch employer who wants to avoid financial surprises treats the transitievergoeding as a known, calculable future liability rather than an unexpected cost that only appears at the moment of dismissal. What would be owed to any given employee today is entirely calculable at any point using the standard formula, which makes it a genuinely plannable number rather than a mystery.
For a BV with several employees, the total transitievergoeding exposure across the whole workforce can be calculated annually and tracked as a management information figure alongside everything else. An employee with eight years of service earning 4,000 euros a month already represents 10,667 euros in potential transitievergoeding today; if that same employee stays another five years, the figure grows to 18,333 euros. This is not typically a formal balance sheet provision under Dutch GAAP, since a provision is only recognised once an actual dismissal decision has been made and communicated, but it remains a real, meaningful contingent liability that quietly affects how the business is actually valued.
This matters directly at the point of a sale. A buyer conducting due diligence on a Dutch BV routinely assesses the workforce's accumulated transitievergoeding as part of the liabilities review. A company with twelve employees averaging ten years of service at 3,500 euros a month carries roughly 140,000 euros in accumulated transitievergoeding exposure across that workforce, and this figure regularly shows up as a price adjustment inside the purchase agreement rather than being ignored. A DGA planning to sell their business within the next five years has good reason to manage employee tenure and compensation with this specific liability in mind well ahead of any sale process.
The DGA's own position deserves a separate, careful mention. A DGA employing themselves through their own BV and drawing salary via payroll sits in a genuinely particular spot regarding the transitievergoeding, since the standard employee rules do not always translate cleanly to a DGA-aandeelhouder. Whether a DGA drawing an ordinary salary from their own BV actually holds transitievergoeding rights depends on the specific nature of that employment relationship and their aanmerkelijk belang position, and this is precisely the kind of question that deserves specific professional advice rather than a general assumption either way. Since a DGA's salary structure connects directly to this question, DGA salary vs dividend covers that broader relationship in more depth, and annual accounts Netherlands covers how contingent liabilities like this one show up in a BV's wider financial reporting.
Get Your Employer Obligations Sorted Before They Become Urgent
The transitievergoeding is not a rare event reserved for large layoffs; it applies to almost every dismissal a Dutch employer will ever process, from the shortest probationary hire to a decades-long employment relationship ending in retirement age. Treating it as a routine, calculable part of running a payroll, rather than a surprise that shows up only when someone actually leaves, is the difference between a manageable cost and an unpleasant one.
If you want help understanding your current transitievergoeding exposure across your team, or setting up payroll so this kind of liability is visible before it becomes urgent, book a demo and we will walk through your specific situation. Our team can also help you incorporate your BV or get bookkeeping and payroll running correctly from your very first hire.
FAQs
What is the transitievergoeding in the Netherlands?
The transitievergoeding is the statutory severance payment a Dutch employer must pay when they terminate an employment contract, governed by the Burgerlijk Wetboek and mandatory rather than something an employer can simply decide to skip.
Does the transitievergoeding apply from day one of employment?
Yes. Since the Wet arbeidsmarkt in balans took effect on 1 January 2020, the two-year minimum tenure requirement was abolished, and the obligation now applies from the very first day of employment, including during a probationary period.
How is the transitievergoeding calculated in 2026?
The formula is one-third of gross monthly salary per full year of service, with the remaining months and days calculated pro-rata, up to the applicable statutory maximum.
What is the maximum transitievergoeding in 2026?
The maximum is 102,000 euros gross, up from 98,000 euros in 2025, or one full gross annual salary for employees earning more than 102,000 euros a year, whichever figure is higher.
What counts as gross monthly salary for the transitievergoeding calculation?
Basic salary, fixed allowances, holiday pay, and structural fixed thirteenth-month payments all count. Variable bonuses, commissions, and non-structural expense reimbursements do not.
Does the employer owe a transitievergoeding after 2 years of sick leave?
Yes. Dismissing an employee via the UWV after the two-year loondoorbetaling bij ziekte period ends still triggers the full transitievergoeding, calculated on the employee's entire period of employment including both sick years.
What is the WCT and how does it help employers?
The Wet compensatie transitievergoeding lets an employer apply to the UWV for reimbursement of the transitievergoeding paid after a two-year sick leave dismissal, though the reimbursement is calculated as of the day the sick period ended, not any later dismissal date.
What is a vaststellingsovereenkomst and how does it affect the transitievergoeding?
A vaststellingsovereenkomst is a mutual termination agreement in which the transitievergoeding is not automatically required but is typically negotiated as the floor, often with additional compensation layered on top depending on the specific circumstances.
What is the billijke vergoeding?
The billijke vergoeding is an additional, uncapped compensation a court can award on top of the statutory transitievergoeding when an employer has acted in a seriously culpable manner, with the highest recorded award in the Netherlands exceeding 700,000 euros.
Does a DGA owe a transitievergoeding to themselves?
This depends on the specific nature of the DGA's employment relationship with their own BV and their aanmerkelijk belang position, and is an area where specific professional advice is genuinely advisable rather than assuming the standard employee rules apply automatically.
Written by
Nick Knuppe
CEO & Founder
