Severance Pay under Dutch Employment Law: A Legal Overview

Learn how mutual termination agreements work under Dutch law and what they mean for employers and employees.

As a Dutch employment lawyer, I understand that navigating severance pay under Dutch employment law can be a complex process for both employees and employers. At Fennek Advocaten, we provide a comprehensive guide to understanding the intricacies of severance compensation in the Netherlands from the perspectives of both parties involved.

Eligibility for Severance Pay under Dutch Employment Law

Severance pay, also known as a transition payment or (in Dutch) 'transitievergoeding', is generally granted to employees who face dismissal or non-renewal of fixed-term contracts. 

However, certain exceptions exist where employees may not be entitled to receive severance compensation. Understanding these eligibility criteria is essential to ensure fair treatment for all parties involved.

Eligible Employees for Severance Pay:

1. Employees dismissed by the employer (except in specific situations).

2. Employees whose fixed-term contracts expire.

3. Employees Not Eligible for Severance Pay:

4. Employees who resign by mutual consent (unless agreed otherwise).

5. Employees dismissed due to serious culpability or negligence, unless the sub-district court decides otherwise.

6. Employees under 18 years old, working an average of 12 hours per week.

7. Employees dismissed upon reaching the pension or other retirement age.

8. Employees dismissed due to company bankruptcy or employer's debt restructuring/suspension of payments.

9. Employees covered by provisions in the Collective Labor Agreement (CAO) that deviate from the standard rules.

Calculating Severance Pay under Dutch Employment Law

Severance pay is calculated based on the entire duration of employment, considering every day worked. The standard calculation involves one-third of the monthly salary per year worked, precisely calculated to the day. Both employees and employers should understand this calculation method to ensure transparency during the process.

How to Calculate Severance Pay:

1. Determine the total number of days in the employment contract's duration.

2. Calculate the years of service and any remaining days as a fraction of a year.

3. Multiply the years of service by one-third and add the fraction calculated in the previous step.

4. The resulting sum represents the base severance payment, which is then multiplied by the employee's gross monthly salary.

Flexibility in Severance Pay Arrangements under Dutch Employment Law

While the standard calculation method provides clarity, employers and employees may agree to different arrangements that deviate from the statutory compensation. This flexibility allows both parties to negotiate severance payments that align with their specific circumstances and requirements.

Additional Compensation for Serious Culpability under Dutch Employment Law

In cases where an employer's actions involve serious culpable acts or omissions, employees have the option to request additional compensation from the subdistrict court. Such circumstances might include discrimination, sexual harassment, gross neglect of reintegration obligations, false grounds for dismissal, or deliberate disruption of the employment relationship.

Deducting "Employability" Costs

Employers may deduct costs incurred for the employee's benefit to enhance employability and reduce unemployment. This may include expenses related to outplacement or training. It is essential for employers to understand these deductions to ensure fair compensation for both parties.

Claiming Severance Pay Reimbursement under Dutch Employment Law

In most cases, employers are responsible for paying severance pay. However, if an employer is unwilling or unable to pay, employees must claim the compensation through the court within three months of the employment contract's termination. Legal assistance may be sought to navigate this process effectively.

Seeking Legal Assistance for Severance Pay under Dutch Employment Law

The rules governing severance pay can be complex, making it crucial for both employees and employers to seek legal advice before agreeing to dismissal or compensation terms. At Fennek Advocaten, our specialized team is well-equipped to handle severance pay cases and negotiate fair compensation. We work diligently to safeguard the rights and interests of both employers and employees.

Conclusion

Understanding severance pay under Dutch employment law is vital for ensuring fair and equitable outcomes for both employees and employers. At Fennek Advocaten, we provide impartial guidance and effective legal representation throughout the severance process. Whether you are an employee seeking rightful compensation or an employer navigating the complexities of Dutch labor law, our experienced team is here to support you. Contact us today to explore equitable solutions and secure your rights in severance pay cases.

Disclaimer: This article is provided for informational purposes only and does not constitute legal advice. For specific guidance on your situation, I recommend consulting with a qualified professional.