Is it mandatory to provide a severance payment in the Netherlands

When it comes to terminating an employee's contract, one may be left wondering whether it is necessary to provide a transition fee or if one is allowed to deviate from this obligation.

If both parties are in agreement and want to come to an end of the working relationship, the transition fee does not have to be given to the employee. The legislator granted freedom for the parties to make other arrangements which could mean providing the employee with a higher or lower compensation. Employers could also provide a study or outplacement program or have the employee remain employed without working so they can look for a job from their existing employment. Additionally, they may offer the employee the chance to take over their lease car at a discounted price or give them a new bicycle. Whatever the scheme, it is important for the employee to understand the implications. To make sure that the negotiations are done properly, it is advised for the employee to find someone to oversee the process.

In the event that negotiations are unsuccessful and the contract is terminated through the government or the subdistrict court, the employer is typically obligated to pay the transition fee unless the employee had behaved improperly.