Employee Termination Compensation

News
12 April 2019

Suppose your contract is not renewed or you are dismissed. In the past, you might have been entitled to termination compensation based on the district court formula or a golden handshake. Since the introduction of the Work and Security Act in 2015, this has changed. What compensation are you now entitled to if you are dismissed?

Transition Compensation

If you have been employed for two years or longer and your contract is not renewed at your employer’s initiative or you are dismissed, you are usually entitled to transition compensation. It does not matter whether it concerns a temporary or permanent contract. In theory, the compensation is intended to get you back to work as quickly as possible, for example by using it for retraining. In practice, you may use the compensation as you wish. The compensation is calculated based on your monthly salary and the number of years of service. Generally, this amounts to 1/3^rd monthly salary per year of service. This becomes slightly higher if you have been employed for more than 10 years. The maximum amount of transition compensation is €79,000 or 1 annual salary.

Fair Compensation

In some cases, the employer must pay you fair compensation upon dismissal, in addition to the transition compensation. This is the case when your employer has acted seriously culpably by, for example, creating a conflict situation or by accusing you of something that is not correct in order to dismiss you in that way. The amount of fair compensation is difficult to determine in advance. The court considers all circumstances of the case and may, for example, look at the consequences the dismissal has for you. There is no maximum limit to the amount of fair compensation. If you yourself have acted seriously culpably, for example by violating rules and being dismissed as a result, there is no right to fair compensation and it may even be the case that you have no right to transition compensation.