Transition payment: entitlement, calculation and payment in 2026

1. When does entitlement arise?

Employer-initiated dismissal and an employer’s decision not to continue a fixed-term contract usually create transition payment entitlement. Accrual generally begins on the first day. You do not need two years’ service first. Illness during or before dismissal does not itself exclude entitlement.

Resigning usually gives no entitlement, except, for example, in cases of seriously culpable employer conduct. Rejecting an offered renewal can also matter. Consider not only the formal dismissal letter but proposals made before the end. With a VSO, a payment must be expressly agreed: the statutory entitlement does not automatically arise through that route.

2. Recognise important exceptions

Exceptions include seriously culpable employee conduct, reaching the applicable pension age, bankruptcy and certain young employees working limited hours. For business-related dismissal, a valid cao provision may replace the payment. Timely offered continuation or an equivalent contract may also matter. Assess the offer and its conditions carefully.

An employer is not automatically exempt merely because it reports financial difficulty. Nor does every summary dismissal automatically mean a transition payment can never be due. Conditions and exceptions must match the facts. If entitlement is denied, ask which specific statutory ground is used and keep the documents needed to check that conclusion.

3. Establish complete service

List all start and end dates. Successive fixed-term contracts can count, as can earlier work with a successive employer, for example first through an agency and then directly doing the same work. Gaps and older contracts have their own rules. A gap does not always count as service, even where contracts are connected for the calculation.

Compare the proposed service period with your contract history and payslips. Look at business transfers, changed company names and changes in hours. Do not automatically use the date at the top of your latest contract. Request a breakdown of any differing calculation so you can see which periods the employer includes and excludes.

4. Use the correct monthly salary

Relevant monthly salary is more than just basic pay on the final payslip. Holiday allowance, a fixed year-end payment and certain fixed or variable wage components can count under the applicable calculation rules. Reference periods matter for variable hours and remuneration. You cannot automatically add a net payment or expense claim as a gross wage component.

Collect recent payslips and, where needed, longer-term information for bonuses, commission or other variable pay. Have illness, leave or changing hours expressly considered if they distort ordinary earnings. The calculation applies the statutory wage definition; it is not simply the last bank payment multiplied by years. Request the basis used for each component. If less pay was received because of sickness or leave, the calculation rules use the pay you would have earned without that sickness or leave. A temporarily lower payment therefore does not automatically reduce this calculation base.

5. The main formula and maximum

The main formula is 1/3 of the relevant gross monthly salary for each complete year of service. The remaining period is calculated proportionately. In 2026, the maximum is €102,000 gross or one gross annual salary if higher. A contract may also contain a more favourable termination arrangement; do not confuse it with the statutory transition payment cap.

A simple check can reveal errors. Six complete years and relevant monthly salary of €3,300 produce 6 × 1/3 × €3,300 = €6,600 gross under the main formula, before considering special circumstances. Keep advance notification payment, outstanding leave and unpaid wages separate. The outcome also says nothing about possible additional fair compensation for seriously culpable conduct.

6. Payment, interest and deduction of costs

The transition payment is generally paid within one month after employment ends. Instalments may be possible over up to six months under statutory conditions. Statutory interest is due on the outstanding amount from one month after the end. An instalment agreement is therefore no reason to remove the original strict court deadline from your calendar.

Certain transition or employability costs may be deducted subject to conditions. Ordinary training costs are not automatically deductible. Ask which costs are claimed and the consent or other basis relied on. The payment is taxable; the employer’s withholding does not exactly establish your final tax. Income-related schemes can also be affected, so assess gross, net and any allowances separately.

7. Claiming an unpaid or insufficient payment

Immediately request an itemised calculation and payment of the shortfall. For an application solely about the transition payment, Rechtspraak says it must reach the subdistrict court within three months after employment ends. A reminder, payment promise or negotiations do not automatically preserve that period. Arrange support well before the final week.

Other dismissal applications may have a shorter deadline, often two months. Have it assessed at the same time whether more is at issue than the amount alone. Keep contracts, payslips, the termination letter, renewal offers and bank payments. With part payment, clearly identify the remaining dispute. A general full-and-final settlement declaration can complicate a later claim.

Practical checklist

• Check who ends employment and any exception being relied on.
• Make a complete contract history.
• Establish relevant gross monthly salary by component.
• Request payment and calculation in writing.
• Protect the three-month court deadline.