Calculating employer transition payment: everything you need to know in 2026

Did you know that approximately half of all Dutch employers do not pay the transition allowance fully in accordance with legal regulations? It is a frustrating reality, as calculating the transition allowance as an employer often raises complex questions about exactly which wage components you need to include. You simply want to arrange your affairs properly without the fear of legal claims or unexpected tax assessments afterwards. We understand that you need straightforward facts and predictability in a process that is already difficult enough for both parties.

With this guide, you as an employer can accurately calculate the transition payment and avoid costly legal errors during dismissal. We provide immediate insight into the subject matter by focusing on the current figures for 2026, such as the new maximum amount of €102,000 and the specific calculations for part-time employees. You will gain clarity on which costs you may deduct and how a structured approach ensures you obtain full legal certainty regarding the entire dismissal procedure.

What is the transition payment for the employer?

The transition payment is more than a mandatory final settlement; it is a statutory right that has been firmly anchored in our dismissal law since the introduction of the Balanced Labour Market Act (WAB). For you as an entrepreneur, this means that you owe financial compensation in almost all cases of dismissal. The purpose of this regulation is twofold. On the one hand, it serves as a balm for the loss of the job; on the other, it is intended to facilitate the transition to new work. For a deeper dive into the legal background and the history of its origins, you can consult the Transition Payment on Wikipedia .

When you start calculating the employer transition payment, you will immediately notice that the rules have been tightened significantly since 2020. Whereas employees previously were only entitled to compensation after two years of service, nowadays every day counts. Even if an employee is dismissed during the probationary period, you owe a pro rata payment. This makes accurate record-keeping necessary from the very first working day. It is a harsh reality that every Dutch employer faces, regardless of the size of the company.

The purpose of the compensation for your company

Paying a transition payment can sometimes feel like an extra burden, but it also offers strategic benefits for your business operations. A proper settlement prevents lengthy and costly legal proceedings before the subdistrict court. In practice, we see that the statutory compensation often forms the basis for termination by mutual consent. By offering a transparent calculation in a settlement agreement, you create peace of mind and clarity. This contributes to a proper termination of employment, which is essential for your reputation as a good employer. It offers both parties the certainty needed to end the working relationship without protracted conflict.

The scope of the payment obligation

The obligation to pay is broad. It applies not only to employees with a permanent contract, but also to temporary and on-call workers. As soon as you decide not to renew a temporary contract, the payment obligation arises. However, there are clear limits. You do not have to pay compensation if the employee resigns voluntarily, has reached retirement age, or if there is serious misconduct by the employee. Therefore, ensure you have watertight employment contracts to prevent ambiguity regarding the nature and duration of the employment. Only with a clear file will you know exactly where you stand during the employer transition payment calculation process.

The calculation of the transition payment in 2026

Determining the exact amount of the severance payment begins with the statutory standard formula. For each year an employee has been employed by you, you pay one-third of the gross monthly salary. Did someone work for less than a year, or did the employment end halfway through a calendar year? Then you perform the calculation pro rata over the remaining days. Since the introduction of the WAB, every day counts, from the very first working day to the day of the actual dismissal. This makes the process of calculating the transition payment for the employer a precise exercise, where rounding differences can quickly lead to unnecessary disputes.

For 2026, the maximum amount of the transition payment has been set at €102,000 gross. This is an increase compared to previous years due to annual indexation. However, there is an important exception for high-income employees. If your employee's gross annual salary exceeds this statutory maximum, the payment is capped at one full gross annual salary. For a detailed overview of these rules, please consult the official transition payment calculation to ensure you apply the correct limits.

What is included in the gross monthly salary?

The largest margin of error in the employer transition payment calculation process lies in the definition of wages. You do not calculate solely with the bare base salary. The following components are mandatory:

• The gross monthly salary including the fixed holiday allowance of 8%.
• Structural overtime payments and fixed shift allowances over the past 12 months.
• Variable salary components such as bonuses, profit sharing, and commissions.

For variable components, look at the average over the last 36 months prior to the termination date. This prevents an isolated outlier from unreasonably influencing the calculation. Do you want to be sure you are not overlooking any wage components? A quick check of your employment contracts often provides immediate clarity on which agreements are structural in nature.

Calculation for variable working hours

Do you employ on-call workers or employees with zero-hour contracts? In that case, you determine the scope of employment by looking at the average working hours over the past 12 months. This reference period provides a representative picture of the actual workload. A specific exception applies to the youngest employees in the workplace. Employees under the age of 18 who worked an average of no more than 12 hours per week are not entitled to a transition payment upon dismissal under the law. For all other situations, the pro rata calculation remains the gold standard to prevent legal claims.

Exceptions and deductible expenses for entrepreneurs

Did you know that, as an entrepreneur, you do not always have to transfer the full amount from the standard formula? Although the law is strict regarding the right to compensation, it also allows for the deduction of certain incurred costs. When calculating the employer transition payment, it is essential to know where these margins lie. This prevents you from paying more than legally required, while still fulfilling all your obligations. It revolves around a clear distinction between what you owe and what you have already invested in your employee's future.

Please note that the official calculation of the transition payment forms the basis, but your specific situation may offer scope for a deduction. The law distinguishes between transition costs and employability costs. Transition costs are directly aimed at preventing unemployment, such as the costs of an outplacement program or targeted retraining for another industry. Employability costs are broader; these are investments you have made during employment to make the employee more broadly employable outside your own organization. Think of a general management training course that was not necessary for the current position.

When does the payment obligation expire?

There are situations in which the sober conclusion is that no compensation needs to be paid at all. The best-known exception is dismissal due to reaching the state pension age or another agreed retirement age. The right to compensation also usually lapses in cases of seriously reprehensible conduct by the employee, such as theft or fraud. In such cases of serious misconduct, it is of great importance that you act immediately and carefully; to understand how to issue a legally valid dismissal that will stand up in court, please read our comprehensive guide on summary dismissal advice for employers in 2026. Please note: the legal bar for “seriously reprehensible” is very high. Finally, you do not have to pay if your company is in financial distress and there is a bankruptcy, suspension of payments, or a statutory debt restructuring scheme. In such cases, the protection of the remaining estate takes precedence over the individual severance payment.

How to correctly settle transition costs

Do you wish to deduct costs during the employer transition payment calculation process? If so, three strict conditions apply. First, the costs must have actually been incurred for the employee to whom you are paying the payment. Second, these costs must be in reasonable proportion to the purpose. However, the most important condition is that the employee has agreed in writing in advance to the deduction of these specific costs from the future transition payment. Without this signature, retroactive offsetting is legally impossible. Therefore, ensure that such agreements are always included in your employment contracts or supplementary study agreements. Transparent records including invoices from educational institutions are your best defense against future claims in this regard.

Step-by-step plan for an error-free calculation

Calculating a flawless transition payment for an employer does not start with a calculator, but with a complete and organized file. Errors in the basic data inevitably lead to an incorrect final result. This opens the door to wage claims and unnecessary tension during the dismissal procedure. By following a structured step-by-step plan, you maintain control and ensure a transparent settlement that both parties can rely on. The process demands the utmost precision, especially now that the rules regarding wage components and indexations have been tightened again in 2026 to safeguard the legal certainty of employees.

Steps 1 to 3: data collection and wage components

The first crucial step is determining the exact duration of employment. Look beyond just the most recent employment contract. Previous temporary contracts that followed one another with intervals of less than six months also count towards the total length of service. This is a point where things often go wrong in practice. Next, inventory all relevant wage components. In addition to the base salary and the fixed 8% holiday allowance, for variable income such as bonuses or commissions, you must take the average over the past 36 months. Finally, always check the current indexation for 2026. The compensation is capped at €102,000 gross this year, unless the employee's annual salary exceeds this amount.

Steps 4 and 5: the final calculation and check

Once the data is complete, apply the statutory formula of 1/3 of a monthly salary per full year of service. For the remaining months and days, perform a pro rata calculation. To do this, divide the gross monthly salary by the actual time worked during that period. In this final phase, do not forget to check whether you have written agreements regarding deductible transition or employability costs. You may only deduct training costs or outplacement programs from the final amount with a pre-signed declaration of agreement.

Because minor nuances in case law can have significant financial consequences, it is advisable to have your calculation reviewed in case of doubt or complex cases. This prevents you from being faced with the statutory surcharge for late or incomplete payment afterwards. Do you need professional support with your dismissal procedure? You can immediately engage expert legal assistance to minimize legal risks and build a watertight case file.

Legal risks and file building in case of dismissal

Calculating an incorrect transition payment as an employer is more than just an administrative oversight; it is a legal risk that directly impacts your bottom line. If you pay out an insufficient amount or overlook wage components, the employee can file a wage claim within three months of the dismissal. In that case, you risk not only having to pay the shortfall but also the statutory surcharge, which can amount to up to 50% of the outstanding sum. Additionally, you owe statutory interest for the period during which the amount remained unpaid. It is a sober calculation: the costs of a preventive check do not outweigh the financial consequences of a legal dispute.

Be aware that the transition payment is often only a part of the total dismissal costs. In addition to the payment, you will have to deal with continued salary payments during the notice period and any outstanding vacation days. Moreover, if you do not follow the process carefully, the risk of equitable compensation looms. This is additional compensation that a sub-district court judge may award in the event of seriously reprehensible conduct on your part, such as failing to offer a fair improvement plan. To avoid these extra costs, our ContractCheck™ is an essential tool for drafting watertight agreements.

File building as a foundation

A watertight file is your best defense against unexpected claims. Especially in cases of dismissal due to poor performance, you must be able to demonstrate that you repeatedly and promptly pointed out areas for improvement to the employee. A single performance review is insufficient; the law requires a documented improvement plan in which you actually offered the employee the opportunity and resources to grow. Would you like to know how to structure this process step by step? Then read our comprehensive guide on Building a Dismissal File: How to Create a Watertight File. Proper record-keeping of every conversation forms the basis for a smooth settlement.

Settlement agreement vs. transition payment

In practice, most employment contracts do not end via the subdistrict court, but via a settlement agreement. In this termination by mutual consent, the statutory transition payment often serves as the starting point for negotiations. It offers you the opportunity to make agreements regarding matters such as confidentiality, a non-compete clause, or the termination date, in exchange for often slightly higher severance pay. This provides both parties with tax benefits and, above all, peace of mind, as going to court is avoided. In addition to a non-compete clause, when an experienced employee leaves, it is also wise to consider the employer draft -solicitation clause, so that your client base and revenue remain protected. However, it is crucial that the wording of the settlement agreement is legally sound to safeguard the employee's right to unemployment benefits. Therefore, always have your settlement agreement reviewed by our specialists before you sign it.

Ensure a watertight handling of your dismissal file

The process of calculating the transition payment requires the employer to keep a close eye on both the new indexation and the structure of your personnel file in 2026. By accurately applying the standard formula and taking into account the new maximum of €102,000 gross, you lay the foundation for a fair settlement. Do not forget that prior written consent is crucial for successfully offsetting incurred training costs; without a signature, you are often left legally empty-handed.

Do you want the assurance that you do not overlook any wage components or make mistakes that lead to costly additional assessments? Since 2009, MKB Juristen has been the leading specialist in employment law for entrepreneurs, guiding you through every dismissal procedure in a pragmatic and transparent manner. With our ContractCheck™, you can be certain that your settlement agreement and final settlement are legally sound, saving you a great deal of worry and unnecessary costs.

Have your dismissal file and calculation reviewed by MKB Juristen to complete this procedure with peace of mind. Together, we ensure a professional result where a human touch and business efficiency go hand in hand.

Frequently asked questions about the transition payment

Is an employee entitled to a transition payment upon dismissal during the probationary period?

Yes, since the introduction of the WAB, an employee is entitled to statutory compensation from the very first working day. Even in the event of dismissal during the probationary period, you, as the employer, must calculate the transition payment, determining the amount pro rata based on the exact number of days worked. Although the amount is often limited for short-term employment, the payment obligation remains fully in effect to avoid legal risks.

Do I have to pay a transition payment if the employee resigns?

As a general rule, you are not required to pay compensation when an employee terminates the employment contract themselves or does not wish to extend a temporary contract. This changes only if the dismissal is the direct result of seriously reprehensible conduct or negligence on your part as an employer. In those exceptional situations, a judge may rule that you must still pay the statutory compensation, sometimes supplemented by equitable compensation for the damages suffered.

How do I calculate the transition payment for an employee with an on-call contract?

For an on-call contract or zero-hours contract, you determine the monthly salary by looking at the average working hours over the past 12 months. You add up all the hours worked in this reference period, divide this by 12, and multiply the result by the current hourly wage. Do not forget to include the holiday allowance and any fixed allowances in the calculation here as well for a correct final settlement.

May I deduct the costs of an outplacement program from the transition payment?

You may deduct costs for outplacement or training, provided that these costs are aimed at increasing the chances of finding a new job outside your organization. A strict condition is that the employee has agreed to this deduction in writing beforehand. Without this signed declaration of agreement, you may not unilaterally deduct the incurred costs from the final compensation retroactively, regardless of the amount of the investment.

What is the maximum transition payment I have to pay in 2026?

For the year 2026, the maximum transition payment has been set at €102,000 gross. However, an exception applies to employees with a very high income: if the employee's gross annual salary exceeds this statutory maximum, the payment is capped at one full gross annual salary. This amount is indexed annually by the government to align with average wage developments in the Netherlands.

What happens to the transition payment if my company goes bankrupt?

In the event of official bankruptcy, suspension of payments, or a statutory debt restructuring scheme, the employer's direct obligation to pay the transition allowance ceases. In such cases, the employee can often rely on the UWV's wage takeover scheme. It is important to note that in these situations, the bankruptcy estate gives priority to other creditors, meaning the employee usually does not receive the compensation directly from the employer.

Do I have to pay a transition allowance after an employee's illness for 2 years?

Yes, after the statutory period of two years of continued salary payment during illness, the employee is still entitled to a transition payment if you terminate the contract. However, as an employer, you can apply to the UWV for compensation for the payment made upon dismissal due to long-term incapacity for work. This significantly reduces the financial burden on your company following a prolonged illness, provided you meet the administrative requirements.

Can I pay the transition payment in installments if my company is in financial distress?

If payment in a single lump sum would seriously jeopardize the continuity of your business operations, you may pay the transition allowance in installments over a maximum of six months. In that case, however, you are obliged to pay statutory interest on the portion that has not yet been paid. The interest starts accruing one month after the end of the employment, which offers a straightforward and fair solution for both parties.