What is a transition payment, and when are you entitled to it?

The transition allowance (Article 7:673 of the Dutch Civil Code) is a statutory payment that an employee receives when the employer terminates the employment contract or decides not to renew it. In principle, the employee is entitled to a transition allowance from day one, even during the probationary period. The initiative to terminate or not renew the employment contract must come from the employer in order for the employee to be eligible for a transition allowance. In other cases, the transition allowance is not payable. In addition, no transition allowance is payable to anyone who has reached the statutory retirement age, or to anyone under 18 years of age who works no more than twelve hours per week. It is also common in a termination agreement or settlement agreement for an employee to waive such compensation by mutual agreement.
The transition payment is equal to 1/3 of the gross monthly salary per year of service. Any period shorter than one calendar year is taken into account on a pro-rata basis when calculating the transition allowance. The transition allowance is intended as financial compensation for the loss of employment and to support the employee in finding other work or retraining.