Foreign employers often underestimate the cost of ending a Dutch employment contract. The transitievergoeding is the statutory severance payment owed to most departing employees. Moreover, Dutch notice periods add timing constraints to every dismissal procedure. This guide explains the 2026 calculation, who pays, and how the rules interact with dismissal cost in the Netherlands. Therefore, any foreign company hiring locally must budget for these costs from day one.
What is the transitievergoeding in the Netherlands?
The transitievergoeding is the mandatory Dutch transition payment owed when an employer ends or fails to renew a contract. It applies to permanent and fixed-term employees from day one of service. Furthermore, employers must pay it regardless of company size or sector. The rule comes from the Wet Arbeidsmarkt in Balans (WAB), which took effect on 1 January 2020. Before WAB, only employees with two or more years of service qualified. Now every dismissed worker earns this statutory severance payment.
How is the transitievergoeding calculated in 2026?
The formula is simple. Employees receive one-third of their gross monthly salary for every full year of service. Partial years count pro rata, down to the day. Additionally, the monthly salary includes holiday allowance, fixed bonuses, and structural overtime. The statutory cap is indexed annually. Alternatively, the employee receives one full year of salary if that figure is higher than the cap.
| Service length | Transitievergoeding entitlement |
| Each full year of service | 1/3 of gross monthly salary |
| Partial year of service | Pro rata, calculated to the day |
| Statutory maximum (cap) | Indexed annually; full year’s salary if higher |
For example, an employee earning €4,000 gross per month with six years of service receives roughly €8,000 in transition payment.
Who pays the Dutch transition payment?
The employer always pays the transitievergoeding directly to the employee. Payment is due within one month after the employment ends. However, in specific cases the UWV reimburses the employer through compensation schemes. These cases include dismissal after long-term illness exceeding two years of work incapacity. Additionally, small business closures due to retirement, death, or illness of the owner qualify. In every other situation, the full Dutch dismissal cost stays with the company.
Dutch notice periods explained
Notice periods run alongside the transitievergoeding and shape the total termination timeline. The statutory notice for employers depends on the employee’s length of service. Employees usually owe one calendar month, unless the contract states otherwise.
- Less than 5 years of service: 1 month employer notice
- 5 to 10 years of service: 2 months employer notice
- 10 to 15 years of service: 3 months employer notice
- 15 years or more: 4 months employer notice
Importantly, the UWV dismissal procedure can shorten the employer notice by one month. However, the remaining notice must always be at least one full month.
When does the transitievergoeding apply?
The transition payment applies whenever the employer initiates termination. This includes dismissal, non-renewal of a fixed-term contract, and forced resignation due to serious employer misconduct. Furthermore, temporary workers also qualify, regardless of contract length. Conversely, the payment does not apply if the employee is seriously culpable, voluntarily resigns, or reaches state pension age. Additionally, employees can waive the right through a settlement agreement, though most negotiations still include severance.
How can foreign employers prepare?
Foreign companies entering the Netherlands should budget transitievergoeding from day one of every hire. Moreover, severance combines with notice pay, holiday allowance, and potential legal fees. An employer of record in the Netherlands handles these calculations, payments, and UWV procedures on the employer’s behalf. Consequently, the dismissal cost becomes predictable and fully compliant. Always document performance and conduct issues carefully, because Dutch courts scrutinise every dismissal ground before approving termination.
Hiring or terminating staff in the Netherlands? Talk to Octagon for compliant payrolling, EOR, and HR support that takes the transitievergoeding off your plate.
FAQ
How much is the transitievergoeding in 2026?
The transitievergoeding equals one-third of one month’s gross salary per year of service. Partial years count to the day. The statutory cap is indexed annually for 2026. Alternatively, the employee receives their full annual salary if that figure exceeds the cap. Most dismissals therefore fall below the maximum.
Does the transitievergoeding apply to temporary contracts?
Yes, fixed-term employees receive the Dutch transition payment when the employer does not renew the contract. Entitlement starts from day one of service. Therefore, even short contracts of a few months trigger a pro-rated payment. The calculation rules match those for permanent contracts under WAB.
Can an employer avoid paying severance in the Netherlands?
Employers rarely avoid the transitievergoeding through standard dismissal procedures. Only seriously culpable misconduct by the employee removes the entitlement. Moreover, mutual termination agreements usually still include severance to secure unemployment benefits. Therefore, careful negotiation matters before signing a settlement, also called a vaststellingsovereenkomst.
What is the Dutch notice period for employees?
Employees in the Netherlands usually give one month written notice. However, the contract or collective labour agreement (CAO) can extend this period. Notice always ends on the last day of the calendar month. Importantly, employees do not owe transitievergoeding when they resign voluntarily and without employer misconduct.
