As of January 1, 2020, the transition payment will change. It will be lower, especially for older employees with long service. This is due to the implementation of the Work and Security Act and the expiration of the transitional arrangement that currently applies to employees aged 50 and over with longer service.
Calculation of transition payment now
Currently, the right to a transition payment arises when an employee has been employed for 2 years or longer. The amount of the transition payment is then calculated as follows:
- For each year of service, an employee is entitled to ⅓ monthly salary.
- After ten years of service, an employee receives ½ monthly salary per year of service.
- An employee who is 50 years or older and has been employed for more than 10 years receives 1 monthly salary per year of service worked for those years when they were older than 50. This rule only applies to large employers (25 employees or more).
Calculation of the transition payment in the future (from January 1, 2020)
The right to a transition payment will arise in the future (after January 1, 2020) from the first day of employment. This means that even with a temporary employment contract of, for example, six months, an employee will be entitled to a transition payment upon termination. This is a change from the current system that requires additional attention from the HR department.
This also represents a major change for government employers, who must start working with civil employment law after January 1 as a result of the implementation of the WNRA.
The amount of the transition payment will also be different. From January 1, 2020, an employee is entitled to ⅓ monthly salary per year of service worked, regardless of their age or seniority.
The court may also award an additional transition payment in case of termination based on the so-called ‘i’ ground, also known as the combination ground. This additional compensation is in addition to the transition payment and amounts to a maximum of half of the transition payment to which the employee is entitled.
Using this dismissal ground, an employee may also be dismissed in the future if there is a combination of dismissal grounds (for example, partly poor performance and partly disruption of relationships). The employee will then receive an extra high compensation.
What are the consequences?
For older employees (50+) with longer service, the transition payment will decrease significantly as of January 1, 2020.
A 55-year-old employee with 25 years of service and an all-in salary of €4,000 gross is currently entitled to a transition payment of approximately €55,000 gross, but after January 1, 2020, the same employee will be entitled to an amount of approximately €33,000 gross. A significant difference indeed.
Looking for a suitable solution?
Do you want to know what is best for your company and do you want a suitable plan for a possible dismissal? We are happy to help you further. Or do you have questions about your own transition payment or a possible end to your employment? Please contact us.
