Transition compensation for temporary contract: what are you entitled to?

A transition allowance is, simply put, a statutory severance payment that your employer must pay when your employment contract ends or is not renewed.

It does not really matter here whether you have a permanent or temporary contract. The rules on transition compensation are the same for everyone since the introduction of the Labour Market in Balance Act (WAB) in 2020.

The transition allowance was established by the government to serve as a financial safety net. Employees on temporary contracts whose contracts are not renewed it gives them the leeway to: 

• Find a new job without immediately running into financial trouble. After all, you have enough resources to cover your time without a job.
• You can also use the transitional allowance for training, making retraining to another sector a lot easier, for example
• As an employee, you can take some time to get your bearings on your career

Transition compensation applies to everyone with an employment contract, including when you have a temporary contract. It does not matter: 

• Whether you are in full-time or part-time employment
• What age you are (transition allowance also applies to young people) 
• What the duration of your contract was (even people facing dismissal during probationary period are entitled to it)

The latter is an important change since the introduction of the WAB in 2020. Before, you were only entitled to a transition allowance after 2 years of employment. So now this applies from day one of your temporary contract. 

As an employee with a temporary contract, you are entitled to a transitional allowance in the following situations:

This is the situation most people face. We also find that this question comes up often: your contract expires and your employer decides not to renew it. The answer is simple: then you are automatically entitled to a transfer fee.

Even if your employer terminates your contract early (for example, if there is a reorganisation), then you are entitled to transitional compensation.

If your employer requests dismissal through official channels (UWV or cantonal court), in many cases your right to transition compensation remains. 

This is a special situation. If your employer commits serious misconduct (e.g. non-payment of salary, discrimination, or dangerous working conditions) and you therefore resign yourself, you may still be entitled to transitional compensation.

Many people think that with a short contract, they are not entitled to transitional compensation. This is therefore not true! Even with a contract of, say, 3 months, you are simply entitled to this compensation.

Calculating your severance pay seems simple, but it is important to get it right. Also the height is adjusted annually. I explain step by step how to calculate the fee:

The transitional allowance amounts to 1/3 monthly salary per year of service. This applies to everyone, regardless of your age or years of service.

But note that you also get compensation for portions of years of service. So it is important to check for your temporary contract what your date in service and your date out of service are.

Step 1: Determine your gross monthly salary

• Add up your fixed monthly salary
• Add 8% holiday pay if you are entitled to this
• Add any fixed allowances on top (such as shift bonus)
• Structural bonuses also count

Step 2: Calculate years of service

• Number of full years × 1/3 × gross monthly salary

Step 3: Calculate for remaining months/days
For the remainder, use this formula:
(Gross salary over residual period ÷ gross monthly salary) × (1/3 × gross monthly salary ÷ 12)

For a quick and much easier calculation, you can also use our own severance pay calculator.

Suppose you have worked for 2 years and 7 months on 2 contracts with a gross monthly salary of €2,500 (this salary includes holiday pay):

Full years: 2 × 1/3 × €2.500 = €1.666,67

Remaining months:

• Salary over 7 months = 7 × €2,500 = €17,500
• Calculation: (€17,500 ÷ €2,500) × (€833.33 ÷ 12) = €486.11

Total transitional compensation: €1.666,67 + €486,11 = €2.152,78

There are many people who do not know exactly about multiple temporary contracts and severance pay. Here are the main rules:

Temporary contracts are considered one continuous employment contract if:

✓ The break between contracts is maximum 6 months
✓ It is the same employer
✓ You perform similar work

✓ All contracts with the same employer with a maximum 6-month break
✓ Contracts through different legal entities of the same corporate group
✓ Temporary periods that change directly into a contract with the hirer
✓ Contracts from before 1 July 2015 (with some exceptions)

✗ Contracts with more than 6 months' interruption
✗ Contracts with different, unrelated employers
✗ Contracts ended before 1 July 2012 (with more than a 3-month break)

Tom has the following contracts:

1 January - 31 December 2022 (Company A)
1 March - 31 August 2023 (Company A)
1 October 2023 - 30 September 2024 (Company A)

The break between contract 1 and 2 is 2 months, between 2 and 3 is 1 month. So all contracts count towards his transition allowance.

If you first work as a temporary worker and then join the company you were deployed to, your deployment period may also count towards your transitional allowance. This is considered by the chain clause as 'successive employment'.

If you first work as a temporary worker and then join the company where you were deployed, your deployment period may count towards your transitional allowance. This is considered 'successive employership'.

While the main rule is that you are entitled to transitional compensation on every termination of a temporary contract, there are also exceptions:

If you terminate your contract yourself, you are not entitled to transition compensation. The only exception is if your employer has behaved in a seriously culpable manner.

At summary dismissal because of, for example, theft, fraud or violence against colleagues.

When your contract ends because you reach state pension age, the right to transitional compensation lapses.

Some collective labour agreements contain deviating regulations, but often only for dismissal for economic reasons. So always check your collective agreement carefully.

In case of bankruptcy of small employers (<20 employees), the UWV can take over the transition compensation, but this must be requested by your employer.

Are you ill when your temporary contract expires? Then you are still entitled to transition compensation. In fact, your employer is often not allowed to let your contract expire at all during illness because of the prohibition on dismissal during illness.

Note: After 2 years of illness, the dismissal ban expires and your employer can terminate your contract. But even then, you are entitled to transition compensation. You can read more about this in our article on transitional allowance after 2 years of illness.

Even with an on-call contract or zero-hours contract, you are entitled to transition compensation. The calculation is then based on your average salary over the last 12 months (or shorter if your contract was shorter).

Do you only work in the summer or during holidays? Even then you build up the right to transitional compensation. If you work several seasons for the same employer, all periods count (note, again: provided the interruption does not exceed 6 months).

In case of reorganisation, temporary contracts are also entitled to transition compensation. Your employer cannot just wait until your contract expires to get out from under the compensation.

Your employer must pay the transition fee no later than one month after the end of your contract pay out. This is a hard deadline that employers must meet.

Is your employer not paying on time? Then:

• Are you entitled to statutory interest from the day the deadline expired
• Can you start proceedings in the subdistrict court within 3 months
• Can your employer face additional charges

The transition allowance is a gross amount. There is therefore still wage tax and premiums to be deducted. Want to know how much you will retain net? Check our article on severance pay gross net.

Usually, the transition allowance is paid along with your final salary. You will then receive a final statement stating:

• Your last salary
• Accrued holidays
• Possible end-of-year bonus (pro rata)
• The transition allowance

You pay payroll tax on your transition allowance. The rate depends on your total income in that year. More on this in our article transitional allowance tax.

Tip: Ask your employer to pay the transitional allowance in January if your contract ends in December. This way, you may avoid a higher tax rate.

Yes. Indeed, we do this for many of our clients. The statutory transitional compensation is a minimum. You can always negotiate for higher compensation, especially if:

• Your employer is keen for you to leave quickly
• There is ambiguity about the ground for dismissal
• You have strong arguments (such as loss of bonuses or fringe benefits, etc.)

1. Know your rights - Calculate your minimum transitional compensation first
2. Gather arguments - Think missed opportunities, investments in the business
3. Timing matters - Start negotiating early
4. Stay professional - Emotions do not help negotiation
5. Consider help - A lawyer can often achieve more

In negotiations, it often ends in a settlement agreement. This states:

• The agreed fee
• Arrangements for your departure
• Possible confidentiality
• Final discharge

Note: Always have a VSO checked! In many cases, there are areas for improvement. More info: settlement agreement.

A transitional compensation on a temporary contract is not a favour, but your legal right. Whether you have a 3-month or 3-year contract - once your employer decides not to renew the contract, you are entitled to this financial compensation. The rules have become much more favourable for employees since 2020, and with the increase to a maximum of €98,000 in 2025, the amounts could be substantial.

The most important thing is that you know your rights and dare to stand up for what is due to you. Calculate your severance pay yourself in advance with our free calculator, so you know where you stand. Do you doubt your situation or want more than the minimum? Then professional help is often worth the investment.

As many satisfied customers before you have experienced: with the right knowledge and possibly professional support, you can make sure you get what you are entitled to. So don't settle for less and get well informed. Your future is worth it.

Do you have questions about your specific situation? Then contact us for a no-obligation consultation. Our experienced lawyers will be happy to help you with personal advice on your transitional allowance.