Are employees who have reached state pension age entitled to a transition payment?
In brief: the employer does not owe a statutory transition payment where employment ends because the employee reaches Dutch state pension age (AOW) or another agreed retirement age.
The precise termination date matters. If employment ends before the employee reaches state pension age and the employer initiated the termination, the ordinary statutory entitlement may still apply.
Under a settlement agreement, the parties may also agree a payment voluntarily even where there is no statutory entitlement. In that case, describe it clearly as an agreed severance payment and record the amount, payment date and conditions precisely.
The date makes the difference
Always check whether the termination date falls before, on or after the employee’s state pension date. This may affect the transition payment, termination rules, pension and income arrangements.
At a minimum, check:
Statutory exception
The law provides an exception where employment ends in connection with the employee reaching state pension age or another retirement age. In that situation, the transition payment is not required by law.
Dismissal before the state pension date
If the employee is dismissed earlier, it is necessary to assess whether the ordinary rules on the transition payment apply. Consider how employment ends and who initiated the termination.
Continuing to work after state pension age
Special dismissal rules also apply where someone continues working after reaching state pension age. Do not draw conclusions solely from the employee’s age.
Practical consequences under a settlement agreement
Even without a statutory entitlement, a payment may form part of the negotiations. Also consider the final settlement, unused holiday, bonus, pension, release from work duties and legal costs.
Clearly record that the employee has not resigned and check which income arrangements will be available after the termination date.
Mr. Edwin van Jaarsveld
Edwin van Jaarsveld has over 20 years of experience with dismissal cases and regularly publishes about them.
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