Understanding Transition Compensation in the Netherlands: What You Need to Know

If you work in the Netherlands and your employer ends your contract, you might be entitled to a financial compensation known as transition compensation – in Dutch: transitievergoeding. This regulation is part of Dutch labor law and is designed to support employees when their jobs come to an end. Whether your contract ends after just a few months or several years, this payment can make a significant difference as you move toward your next job.

In this article, we explain everything you need to know about transition compensation: who qualifies, how it is calculated, and what your rights are. This guide is especially helpful for international workers and EU migrants who may not be fully familiar with Dutch employment regulations.

What Is Transition Compensation?

Transition compensation is a mandatory payment from your employer when your employment contract ends at their initiative. It is meant to help you during the period between jobs – a form of financial bridge while you look for new employment or upskill yourself.

It became law in 2015 under the Dutch Work and Security Act (Wet Werk en Zekerheid) and applies to all employees, including temporary and part-time workers, regardless of nationality.

When Are You Entitled to It?

You are entitled to receive transition compensation if:

Your employer terminates your employment contract.
Your temporary (fixed-term) contract is not renewed by your employer.
You resign due to serious misconduct by your employer (e.g. unsafe conditions or harassment), and the court agrees with your decision.
Your contract ends by mutual agreement, only if both parties explicitly agree that transition compensation will be paid.

You do not qualify for transition compensation if:

You resign voluntarily without a compelling reason.
You were fired due to serious misconduct (gross negligence or criminal behavior) – this must be proven.
You are under 18 and worked less than 12 hours per week on average.
You have reached the state pension age (AOW).

Even if you worked for a very short period, for example only a few months, you may still be entitled to a small amount of transition compensation.

How Much Will You Receive?

The amount of transition compensation depends on your monthly gross salary and the length of your employment.

✅ Standard Formula:

Since 2020, the formula for calculating transition compensation is:

1/3 of your monthly gross salary × number of years worked

Partial years are also calculated proportionally. For example:

If you worked 2 years and 6 months, the calculation includes those extra 6 months.
If you worked only 5 months, you still receive a portion of compensation.

🧮 What counts as “monthly salary”?

Your monthly salary includes:

Your base gross salary
Holiday allowance (8%)
Fixed shift bonuses or structural overtime
13th month or fixed end-of-year bonus (if part of your contract)

Irregular or performance-based bonuses are not always included, unless they are paid consistently.

💡 Example:

Let’s say you earned €2,400 gross per month and worked 2.5 years.
Your transition compensation would be:

1/3 × €2,400 = €800 per year
2.5 × €800 = €2,000 total transition compensation

When Will You Receive It?

By law, the employer must pay the transition compensation within one month after the contract ends.

If they don’t, you can send a written request. If the payment is still not made, you may take legal action – you have up to 3 months after your contract ends to claim it.

Special Cases: Illness or Bankruptcy

❗ Ending a contract after long-term illness

If your contract is terminated after 2 years of sickness, you are still entitled to transition compensation. This is a common situation in the Netherlands. In some cases, you may even be entitled to additional payments through insurance or union support.

❗ If your employer goes bankrupt

If your employer is bankrupt, it can be more difficult to claim transition compensation. In this case, you can apply for compensation through the UWV (Employee Insurance Agency). However, this must be done quickly, and the outcome depends on the financial situation of the company and the bankruptcy proceedings.

Important: Transition Compensation vs. Severance Pay

Do not confuse transition compensation with severance pay.

Transition compensation is a legal right based on Dutch labor law.
Severance pay is extra money that may be negotiated in your contract or in special agreements (e.g., social plans during mass layoffs).

You can receive both, but severance pay is not mandatory.

How to Claim Your Rights

To make sure you get what you are entitled to, follow these steps:

Check your contract: See the end date and any termination clauses.
Ask your employer in writing for a confirmation of the transition compensation.
Calculate the expected amount using the formula above.
If the employer does not pay, send a reminder letter (registered mail).
If needed, contact the Juridisch Loket, a free legal help service in the Netherlands.
Consider asking help from a union (vakbond) or a legal advisor.

You can also calculate your estimated transition compensation on the UWV website or other online tools.

Final Tips for Migrant Workers

Always ask for a termination letter in writing, clearly stating the reason for the end of the contract.
Save your payslips and contracts – they are needed to calculate the correct compensation.
You can translate your documents into Dutch or English if you need legal help.
Don’t be afraid to ask questions – many employers are not clear about your rights unless you insist.

Conclusion

Transition compensation is a valuable right for every employee in the Netherlands – including migrant workers. Whether you work through an agency, in logistics, production, cleaning, or any other field, you should know your rights and stand up for them.

Even a short contract can lead to a financial benefit if it ends unexpectedly. Be informed, stay organized, and don’t hesitate to seek help if you believe you are entitled to this payment.