Does an employee receive compensation when a temporary contract is not renewed?
When a temporary contract expires and is not renewed, the employee may be entitled to certain compensation. This is regulated by law to provide financial compensation for loss of employment. Two important compensations are the transition compensation and the notice compensation.
Severance pay when contract is not renewed
If an employer decides not to renew an employment contract, the employee is entitled to a transition fee. This applies to both temporary and permanent contracts. The amount of this compensation is calculated as follows:
- One-third of gross monthly salary for each full year of service worked.
- This applies from the first working day and does not depend on the reason for termination of the contract.
Example: an employee has worked in employment for two years and receives a gross monthly salary of €3,000. The transition compensation then amounts to:
(2 x 1/3) x €3,000 = €2,000
Notice fee for late notice
In addition to the transition fee, an employee may be entitled to a notice fee. This applies when a temporary contract of six months or longer is not renewed, and the employer does not inform the employee in time.
The obligation to give notice means that the employer must give written notice at least one month before the end date whether the contract will be extended or not. If this is not done in time, the employee is entitled to a notice fee:
- The compensation is equal to the gross salary for the period for which the employer is late in giving notice, with a maximum of one month.
- If the employer did not give notice at all, the compensation is one gross monthly salary.
Conclusion
Employees facing the non-renewal of their contract would do well to check whether they are entitled to a transition fee and/or a notice fee. Employers should be aware of these obligations to avoid unnecessary costs.
This blog was written by Mr. Stijn Blom, employment lawyer at Arbeidsadvocaat.nl B.V. Stijn has extensive experience in employment law and assists entrepreneurs daily with a wide range of employment-related matters. From dismissal cases to drafting watertight contracts and policies – with his practical and personal approach, he helps employers and employees move forward. Want to know more?Visit Stijn's page.
Arbeidsadvocaat.nl is happy to think with you if you have questions about transition or notice fees. Please feel free to contact us .
April 2025
