Gross net severance pay
The transition allowance is a legal compensation you receive as an employee when you are dismissed by your employer.
You will always receive the transition compensation as gross salary from your employer. So tax still has to be paid on this.
Finding it difficult to calculate your net severance pay? Then we have created a simple tool for you to calculate the exact amount.
Your employer must comply with the timely payment of your statutory transitional compensation.
Last updated: 22/07/2025
What is transition allowance?
Severance Pay is a legal compensation you receive as an employee when you are fired or your temporary contract is not extended.
This allowance is intended to facilitate the transition to other work or training.
The amount of the transition compensation is calculated based on your gross monthly salary and the length of your employment. This means that the longer you have worked for an employer, the higher your transition compensation will be.
Do you always get transitional compensation if you are fired?
Since 1 January 2020, it has been regulated that, as an employee, you already accrue transfer compensation from the first working day. This is not part of your contract, but is regulated by law.
This compensation is paid at the time you, as an employee, are dismissed by your employer. It is then part of your settlement agreement.
As an employee, you get to decide what you spend the transition allowance on. An employer may not decide this for you.
Not sure if you are entitled to transitional pay?
Calculate gross net amount
Transition compensation is paid as a gross amount on top of your salary. But what exactly do you keep from it as an employee? We explain to you step by step how to calculate your net severance pay and what to look out for (keeping in mind the latest 2025 legislative changes).
In addition, we will show you with an example how to calculate it yourself using our calculation tool.
Calculate gross transitional compensation
The gross transfer compensation is calculated based on your years of service and monthly salary, as stipulated by law. Here are the steps to calculate your own gross transfer compensation:
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Grab your gross monthly salary: The first step in calculating your transfer compensation is to check your gross monthly salary. Note - to this you also add your holiday pay, bonus and any other fixed allowances.
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Calculate severance pay with gross hourly wages: to calculate the transition compensation, you can also use your gross hourly wage. This is especially useful if you work part-time or have irregular hours. Multiply your gross hourly wage by the number of hours worked per month to determine your gross monthly salary.
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Calculate the number of full years of service: for each full year of service, you are entitled to 1/3 transition compensation of your gross monthly salary. First calculate what the full duration of your employment is.
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Calculate incomplete years of service: then calculate your incomplete years of service in remaining months and remaining days.
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Check the maximum amount of transitional compensation: there is a maximum amount of transitional compensation. Don't worry, this is only relevant if you have worked for an employer for a very long time. In 2024, the maximum amount was almost €100,000 (aka: a tonne). From 1 January 2025, the maximum amount is €98,000 gross, or one gross annual salary if the annual salary exceeds this amount. So you won't reach this so soon, but it's a good thing to bear in mind.
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Do the maths: multiply the full annual salary, the monthly salary and the salary of the remaining days by 1/3rd. This is your transition allowance.
Pretty complicated, right? Moreover, are you curious about possible other allowances you may be entitled to? Then we also have a free transitional compensation calculator where you can just fill in all your details. Takes about 2 minutes and you immediately get an overview with all your reimbursements. Nice and easy.
Simpler calculation of gross transitional compensation
Pretty complicated, right? Moreover, are you curious about possible other allowances you may be entitled to? Then we also have a free transitional compensation calculator where you can just fill in all your details. Takes about 2 minutes and you immediately get an overview with all your reimbursements. Nice and easy.
View our free e-book immediately: redundancy, and now?
Calculate net transitional compensation
To calculate the net amount of transition compensation, add this to your annual income. The tax bracket you are in with your total annual income will ultimately determine the net amount of severance pay to be received.
Do you fall into two separate tax brackets with the transitional allowance? If so, you will also pay more tax.
Do you have to remit the gross amount of transition compensation to the Tax Office yourself?
No, you do not have to pay this amount to the tax authorities yourself. Your employer deducts this gross amount for you and remits it to the Tax Office. So in practice, it works exactly the same as with the payment of your salary.
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When do you receive the statutory transitional compensation?
When can you expect transition pay? When will your employer pay you the transitional compensation? Well, not immediately in the same week. But by law, the employer does have to pay the transition compensation within a certain time.
In this piece, we explain when you will receive your severance pay by the latest, what the legal rules are in this, and what you can do if your employer is late in paying.
Legal deadline
The law is very clear on this: an employer has a maximum of one month after the end of your employment to transfer the amount to your bank account. For example: if your employment contract ends on 31 December, you should receive your transitional compensation by 31 January at the latest.
Employer pays late
If your employer does not pay the transitional compensation within one month of the end of your employment, you put your employer in default. After that, the employer has one more month to still pay without further consequences. Make this clear in your notice of default as well. If the employer still hasn't paid the transitional compensation after that, you can, on top of the transitional compensation legal interest progress.
Statutory interest on late payments
For every day the payment of transition compensation is late, the employer will owe statutory interest. The statutory interest already starts to accrue 1 month after the end of employment and is usually 2% per year on the amount due.
Example
If your transitional allowance is 10 thousand euros and it is paid 1 year late, the employer will owe you an additional 200 euros.
Do you want for free help with your redundancy? Then get in touch with us!
Spend severance pay tax-free: tax benefit for training and outplacement
Do you use your transitional allowance for training or an outplacement programme? Then you benefit from a significant tax advantage. The big advantage: you pay no tax on this part of your transitional allowance.
How exactly does this tax benefit work?
The reason for this tax advantage is simple: the transition allowance is not paid directly to you as an employee. As a result, this amount does not fall under your taxable income. This means concrete savings on your tax bill.
Important condition: arrange it through your employer
Please note that this tax benefit only applies if you arrange this through your employer. This must be done before the transition compensation is paid to you. If you wait too long, you will miss out on this tax opportunity.
Official conditions and regulations
Want to know exactly what conditions apply? Then consult the Decision on conditions for deducting costs from transitional compensation from the central government. Here you will find all the official criteria and procedures.
What you can do if your employer does not pay the transitional allowance
First of all, it is important to put the employer in default on your initiative. For example, you can send a letter reminding your employer of its obligation to pay the transitional compensation.
If this does not work, the first step would be to seek legal help. This can be done for free through us Or by knocking on the legal counter.
"Fine platform, fine calculation tool, fine people! Thickly satisfied"
Gillian wondered what would happen if she was made redundant and what exactly she would be entitled to. She filled in our calculation tool and then contacted us.
We explained to her exactly what she had to take into account when she was made redundant, such as the amount of the transitional compensation, but also what she would end up with on a net basis. She was initially shocked that the net amount was much lower than expected. In the conversation, we indicated that there are other options for using your severance pay, for example for training or outplacement. She was happy with all the information provided.
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About the author: This article was written by Mickey Heimans, dismissal lawyer at redundancy-lawyers.co.uk. With years of experience in both HR and dismissal law, he has extensive experience in assisting employees with their dismissal cases.