Fair compensation: What factors determine the amount? Part 2.

Part 1 revealed, among other things, that the median fair compensation amount is €15,000 and that the basis makes a significant difference. But what factors determine whether fair compensation is high or low?

The Supreme Court refers to “considerations,” which, strictly speaking, is more accurate. Here, I use the term “factors” as a practical umbrella term for the considerations that judges explicitly include in their reasoning regarding the budget.

What factors do judges most often cite in budget decisions?

In 1,043 cases in which equitable compensation was awarded, I used AI to examine which factors judges explicitly consider in their reasoning regarding the award. The picture is clear: in practice, judges rely on a core set of five to six factors.

The degree of the employer’s culpability is explicitly stated in 70% of cases. The expected remaining duration of employment is mentioned in 60% of cases. Loss of income or wages is mentioned in 56% of cases. Together, these three factors form the basis for the calculation: how serious was the employer’s conduct, how long would the employment have continued without that conduct, and what is the loss of income over that period?

Below that is a second layer: the employee’s employment status is explicitly taken into account in 36% of cases. Whether benefits are deducted is considered in 31% of cases. Whether the employee has found new employment is considered in 30% of cases. And non-pecuniary damages are considered in 26% of cases.

Factors such as loss of pension benefits (13%), suspension from duty (11%), and the employer’s financial situation (8%) occur less frequently, but, as will be shown below, they are strongly correlated with the amount when they are taken into account.

Boot & Pesser (2024) [1] analyzed factors in 139 court rulings from 2021–2023 and found that lost wages and expected duration were most frequently taken into account, followed by expected future earnings and the employer’s liability. My data shows a similar picture, although the exact ranking differs because I count loss of income and expected remaining duration as separate factors. In both studies, loss of income, remaining duration, and employer liability are the key factors.

What higher or lower amounts are associated with those factors?

The question is not only how often a factor occurs, but also: how does that factor affect the amount of fair compensation? For each factor, I compared the median fair compensation in cases where the factor explicitly increased or decreased the amount with the overall median of €15,000.

The strongest upward correlation: when missed bonuses or variable compensation are explicitly included in the budget, the median is €95,000. That is €80,000 above the overall median. In the case of pension losses, the median is €68,000 (+€53,000). For suspension from duty, €50,000 (+€35,000). For an unfavorable labor market position, €49,033 (+€34,000).

On the lower end: if a short period of employment is taken into account as a mitigating factor, the median is €6,300 (€8,700 less than the overall median). If the employee is at fault, the figure is €10,000 (€5,000 less). If the court determines that the employer could also have lawfully terminated the employment contract, the median is also €10,000 (−€5,000).

Which type of charge is associated with the highest fines?

In addition to budgetary factors, I also examined which types of employer allegations are associated with the highest amounts. Allegations of intentionally disrupting the employment relationship are associated with a median of €40,000. Insufficient improvement plan resulted in €39,250. Violation of reintegration obligations resulted in €34,565. Unjustified summary dismissal is associated with a median of €7,500, consistent with the picture from Part 1 that voidable terminations structurally result in lower amounts.

Which pairs of factors stand out?

How much of the claim will be granted?

In 875 rulings, both the amount claimed and the amount awarded are known. The median of the amount claimed is €58,328. The median of the awarded amount is €15,000. That is approximately one-quarter of the amount claimed. This ratio is also remarkably stable across categories: approximately 25% for grossly negligent conduct, 28% for voidable termination, 26% for appeals, and 25% for directors.

Beukhof & Rietveld (2017) [2] concluded, based on 100 judgments, that on average approximately one-third of the amount claimed is awarded. My data shows a similar but more nuanced picture: the median ratio is 27%, the average 37%. The difference is explained by a number of cases in which the judge awards more than was claimed, or in which the amount claimed was very low.

In conclusion

The data from Parts 1 and 2 reveal a number of clear patterns. At €15,000, the median fair compensation is significantly lower than the averages of over €40,000 reported in legal literature. Judges typically rely on a limited set of key factors, with loss of income and the expected remaining duration of employment forming the core. And the factors that the judge explicitly includes in the calculation are strongly correlated with the amount awarded. This makes the fair compensation less unpredictable than is often assumed. Anyone who knows which legal basis applies, which factors are considered, and in which direction they influence the outcome can make a more realistic estimate than one based solely on averages.

In the coming weeks, I’ll be sharing more case law analyses.