Severance payment in 2024
Am I entitled to severance pay if I'm dismissed under Dutch law? And what's the difference between the transition payment and the severance payment? We'll explain when you're entitled to compensation and inform you about how much it can be.
What is severance payment?
Since the introduction of the Wab in 2020, every employee who is involuntarily dismissed is entitled to severance pay. By 'involuntary' we mean the condition that the initiative to terminate or not renew your employment lies with your employer. A severance payment is a financial compensation that your employer pays to you. It does not matter whether you have (had) a contract for a fixed or indefinite period. Your severance package is made up of the statutory transition payment supplemented with other emoluments.
Am I entitled to severance pay?
You are entitled to severance pay if your employer terminates your employment contract or does not extend your temporary contract. In other words: your employer initiates your dismissal. You are also entitled to severance pay if you resign or do not wish to extend your temporary employment contract due to seriously culpable actions or omissions by your employer. In the cases above you are entitled to the statutory transition compensation, possibly supplemented with other compensations.
Calculate your severance payment (2024)
The transition payment is a statutory compensation that must be paid by your employer in the event of involuntary dismissal. A severance payment may be higher as it includes all emoluments that you will ultimately receive upon dismissal.
What is the amount of my transition payment?
The amount of your transition payment is calculated based on your monthly salary and the duration of your employment. The transition payment will be a maximum of € 94,000 in 2024, unless your annual salary is higher. Use the calculator below to calculate your transition compensation in 15 seconds.
What is the amount of my severance payment?
Your severance payment often exceeds the height of your transition payment, because many employees are entitled to payment of unused vacation days or bonuses. In case your employer has behaved in a seriously culpable manner or your dismissal file is incomplete, a lawyer is often able to increase your severance payment. Your severance package can't be calculated with a calculator. Just have one of our lawyers check your dismissal proposal (settlement agreement).
Taxes on severance pay (2024)
The Dutch Tax Administration sees your severance pay as wages from work and therefore you are obliged to pay tax on it. However, there are options to reduce the taxed amount and even have your severance payment paid out tax-free.
Taxes in Box 1
Work from (former) employment is taxed in the Netherlands in Box 1. When paying out your gross severance payment, your employer will have to withhold wage tax and national insurance contributions in accordance with the normal rules. You will receive a net severance payment on your account. Because your severance payment is added to your income, you may even have to pay more tax than usual. Ouch!
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Calculate net severance pay
There are ways you can reduce the tax burden on your severance pay. If you don't apply them, the rules of our progressive tax system apply. The amount of your salary and your severance payment are summed up to determine which tax bracket you fall into. You can calculate the tax burden on your severance payment based on current tax rules and amounts from 2024. There is also a calculation example available.
A tax-free severance payment
Options to reduce the tax burden on your severance payment or use it tax-free (net):
- Average your income over a 3 year period;
- Use (the remainder) of your annual space;
- Use your transition payment for training.
Here you'll find more info about these tax options.
Settlement agreement check
Have you just received a settlement agreement or are you willing to resign based on mutual consent? Have our labour lawyers perform a basic check to find out what's missing or should be improved. That doesn't cost you anything.
Dismissal and transition payment
The basic rule for qualifying for a transition payment (a statutory severance payment) is that you cannot be blameworthy. If your empoyer initiates the dismissal, you are probably entitled to a transition payment.
✅ Transition payment
You are entitled to a transition payment if your fixed-term contract isn't extended, if you are dismissed via the UWV or the subdistrict court on valid grounds or if you resign following serious culpable conduct or negligence on part of your employer. You may even be eligible for fair compensation.
❌ No transition payment
If you resign yourself, if you agree to dismissal by mutual consent or if you are to blame for your dismissal (due to culpable conduct or negligence), you are not entitled to a transition payment. With our help and a proper settlement agreement you could still succeed in obtaining a fair severance payment.
Questions about severance payment
Most employees that are confronted with dismissal have the following questions about their transition or severance payment.
When are you entitled to severance pay?
Since the introduction of the Wab in 2020 you are entitled to a severance payment (transition payment) if your employer has taken the initiative to terminate or discontinue your employment. This applies to both employees with a temporary contract and a permanent contract.
Are you entitled to severance pay with a temporary or permanent contract?
With both a fixed-term and an indefinite-term contract, you are entitled to severance pay if your employer terminates or does not renew your employment contract. You are also entitled to a transition payment if you resign due to seriously culpable actions or omissions by your employer.
Are you entitled to severance pay in the event of reorganization?
If the reorganization involves forced dismissal, you are entitled to severance pay. You are not entitled to a transition payment if your employer is bankrupt, has deferred payment, is in debt restructuring or if another provision has been included in your collective labor agreement.
Do you receive severance pay with a settlement agreement?
In the event of dismissal by mutual consent, you and your employer record the agreements regarding the termination of your employment in a settlement agreement. In that contract you state whether you will receive a severance payment and how high it will be.
When am I not entitled to a severance payment?
You are not entitled to severance pay if you have acted seriously culpably or have been negligent, if you are younger than 18 and have worked less than 12 hours per week, if you have reached state pension age, if your employer is bankrupt or you have entered into a new employment contract.
What is the severance payment in 2024?
The amount of your severance payment is the sum of your transition payment plus emoluments (bonus, holiday pay) minus items to be settled (advance payments, loans). The amount of your transition payment depends on your monthly salary and the duration of your employment, but is a maximum of € 94,000 in 2024.
How do you calculate your severance payment?
As of January 1, 2020, you are entitled to a transition payment in the event of dismissal from your first working day. This also applies if you are fired during your probationary period. You calculate the amount of your severance payment roughly by taking 1/3 monthly salary per year of service worked. Or use our free transition payment calculator to do so.
What is the maximum severance payment I can receive?
If you are entitled to a statutory transition payment, it doesn't mean you have to settle for that. Your severance payment can be (much) higher if your employer is seriously culpable, if there is no proper dismissal file or if you let a lawyer negotiate about the amount.
How much tax do I have to pay on my severance pay?
Your severance payment is regarded as income from previous employment and falls into box 1. Depending on the level of your total yearly income, the amount falls into one or two tax brackets. The tax burden ranges from 36.93 to 49.5%, but there are ways to reduce it.
How much net will I have left in my severance payment?
A severance payment is calculated gross. Your employer estimates your annual income and applies the applicable rules to pay you a net compensation. Depending on the level of your income, you will be left with 50 to 63% of your severance payment net without taking any measures.
When will I receive my severance payment?
If you are entitled to severance pay, your employer will pay this out with the final settlement. This must be done within one month after the end of your employment (your dismissal date). Does your employer pay late? Then you can enforce statutory interest and a statutory increase.
Free legal advice about severance pay
We are happy to inform you about all you need to know about your severance pay. You can call us free of charge. If you fill out the form below, we will call you back at an appropriate time.