What Severance Pay Rules Must Employers Follow in The Netherlands?

Which Employees Qualify for Severance Pay?

• Employees dismissed at your initiative (including via UWV or court) after any length of service, unless an exception applies.
• Employees on fixed-term contracts that you choose not to renew at your initiative, including when you shorten the agreed term.
• Employees whose hours are structurally reduced by at least 20 percent for business reasons, triggering partial transition pay.
• Employees terminated for business-economic reasons or long-term incapacity, provided you followed Dutch dismissal procedures.
• Employees dismissed during probation or for serious misconduct generally do not qualify, unless a CAO or contract grants severance.
• Agency and payroll workers may qualify where you are the legal employer or where a CAO or case law extends similar protection.

What Are the Legal Timelines for Paying Severance?

You must pay the transition payment no later than one month after the employment contract ends, usually together with or shortly after the final salary. If you miss this deadline, statutory interest starts to accrue automatically from the day payment was due. Dutch law allows you to offset certain transition costs (such as outplacement or training) only if they meet strict conditions and are documented in advance. For long-serving employees, you may request limited payment in instalments in cases of serious financial hardship, but this must follow the statutory rules and often requires legal advice. Always confirm timelines and any instalment arrangements clearly in the termination agreement and on the final payslip.

What Penalties Apply if Severance Is Not Paid Correctly?

If your company fails to pay the transition payment correctly or on time, the employee can claim the outstanding amount plus statutory interest and, in some cases, additional compensation. Courts in The Netherlands tend to enforce the transition payment strictly, especially where dismissal procedures were employer-initiated. Non-compliance can also undermine the validity of a settlement and damage your reputation with works councils and unions.

• Employees can file a claim in court within three years to recover unpaid transition pay.
• Statutory interest (wettelijke rente) accrues from the due date until full payment.
• Courts may award additional fair compensation (billijke vergoeding) if the dismissal was seriously culpable.
• UWV or tax authorities can scrutinise underpayments that affect social security or payroll tax calculations.
• Repeated non-compliance can increase litigation risk and complicate future reorganisations.

Does Outsourcing Employment via an EOR Change Severance Liability?

Using an Employer of Record (https://www.playroll.com/employer-of-record) in The Netherlands shifts day-to-day HR administration, but it does not eliminate your severance exposure. The EOR is the formal employer and is responsible for calculating and paying the transition payment under Dutch law. However, if you direct the termination decision or push for an unlawful dismissal, employees may still claim that you are a co-responsible party in court. Your commercial contract with the EOR should clearly allocate who funds statutory transition pay, any enhanced severance, and legal costs. You should also ensure the EOR follows proper Dutch dismissal routes (UWV, court, or settlement) so that severance and documentation stand up to scrutiny.

Be 100 Percent Compliant in Offering Severance with Playroll

Playroll helps your company navigate Dutch transition payment rules by standardising how terminations are planned, documented, and costed. Our team tracks updates to the Dutch Civil Code, case law, and CAO practice so your severance calculations reflect the latest statutory formula and caps. We also help you distinguish between mandatory transition pay, any enhanced severance you choose to offer, and other termination-related benefits.

By partnering with Playroll, you can structure compliant exit packages whether you employ talent directly or through an EOR model. We coordinate with local legal and payroll experts to align notice periods, dismissal grounds, and severance payments, reducing the risk of disputes. Your HR and finance teams get clear breakdowns of severance costs, timelines, and documentation requirements, so you can close out Dutch employment relationships confidently and on time.