Dismissal on the verge of retirement: no reduction of transitional compensation

Whenever a service contract is terminated upon the employer’s initiative, the employee in question will be entitled to collecting transitional compensation where his or her term of employment has outlasted 24 months. The statutory transitional compensation regime is mandatory in nature (i.e. it cannot be departed from). The criteria for transitional compensation entitlement and the regulations governing the calculation of the level thereof are described in detail in the relevant legislation. The abstract and standardised characteristics of the transitional compensation scheme make it irrelevant whether the employee upon dismissal has or has not succeeded in landing a new job. Any employee whose employment contract is terminated moreover will be entitled to transitional compensation in the event of his or her having been off sick for more than two years immediately prior to dismissal.

The statutory regime may entitle employees who are dismissed immediately prior to their reaching retirement age to transitional compensation at a higher amount than the wage they would have been paid had their employment not been terminated. This does not warrant the transitional compensation undergoing downward adjustment: it seems that the legislator has not held any truck with the sort of phase-out scheme that formed part of the Sub District Court formula at one time. Given the mandatory nature of the transitional compensation regime, it is expected from the Court that it should tread carefully when using its powers to curtail the transitional compensation.

Dutch version: Geen matiging transitievergoeding bij ontslag kort voor pensioen

Read more: Maximum transitional compensation 2019