Severance Pay and Career Coaching in The Netherlands
Being dismissed? This is the moment to hire a career coach. Why? Your employer will often pay for it. Moreover, there are tax advantages. Your time off can be used to transform yourself, do some professional education, or business coaching in case you are thinking of becoming a business owner.
In this article I explain for English speaking employees in Amsterdam, or elsewhere in The Netherlands how the Dutch severance pay (transitievergoeding) works.
Dismissal and career coaching
First of all, in the event of dismissal, an employee in The Netherlands under Dutch laws is entitled to a so-called 'transitievergoeding' (severance pay). On one condition though: the initiative to terminate or not to continue the employment lies with your employer. You will, therefore, not receive such compensation if it is your decision to leave.
Both permanent and temporary employees are entitled to such a legal transition payment provided for in the Dutch Labour laws.
Furthermore, and this is attractive for those wanting to switch jobs or even careers, in the event of dismissal, you may use your (gross) transition payment to purchase outplacement and / or training (including coaching). The tax man pays.
Outplacement or Coaching
It is wise to first determine in a coaching journey which are the skills you need to develop in your next steps. Previously, I wrote about five reasons for taking a career coach:
get rid of negative energy
support with jobhunting
self-examination: who are you and what do you want?
help with LinkedIn profile and CV
stress management.
With a business coach or career coach you can make simple or more permanent changes in the description of your work experience on Linkedin or in your CV to increase your chances.
Severance pay (transition payment)
Going back to the costs of such coaching/training, and how you can pay for it.
Let’s take a closer look at what exactly the Dutch transition payment or severance pay (transitievergoeding) is. The tax authorities see the transition payment, your severance payment, as income. Hence, if you do not spend the transition allowance on career coaching (sometimes called an outplacement program) or a professional course, you will have to pay taxes on it.
In that case, your employer withholds the tax and transfers the net transition payment to your private account. The amount of the tax percentage depends on the total income, i.e. income plus transition allowance.
So, be smart and let the tax man contribute to your career coaching!
Reorganization: Social plan and outplacement package
An employer in Amsterdam or The Netherlands soften draws up a so-called social plan for a reorganization.
This is usually drawn up in collaboration with trade unions and the works council. A Social Plan contains matters such as: which employees are redundant, will they be made redundant in a ‘natural way’ or should there be compulsory redundancies, what measures are there for reassignment AND is there an outplacement scheme.
Employees are usually entitled to an extra financial allowance, provided in the Social Plan.
The statutory transition payment is a minimum scheme, so that a social plan can offer a higher compensation or an additional scheme. At large companies there are sometimes internal mobility agencies that guide employees to other work.
Or agreements have been made with the outplacement agency, that is used by the employer.
If you want more information about transition payments, read the government website about transition payments.
Leave by Mutual Agreement
Employee and Employer regularly agree to separate "by mutual consent" (not every organization is sensitive to this and will ask you to cancel - employment conflicts are more likely in such a case).
With a settlement agreement, the employer and employee can terminate the employment contract in mutual consultation. If the agreement meets certain requirements, the employee will not become culpably unemployed, and thus retains the right to unemployment benefit.
However, the settlement agreement must meet a number of points. Obtain legal advice about this from a lawyer (if necessary, I can refer you to a good employment law lawyer in Amsterdam*). You can also ask a mediator to negotiate a settlement agreement for you.
A compensation for the employee can be agreed in the settlement agreement.
In doing so, this compensation may simply be equal to the “transition payment”, but there may certainly be reasons for a higher payment. That depends on the reason and circumstances of the forced dismissal.
Conclusion
All in all, the message is clear. If you leave and you are part of a reorganization - there is a social plan which often includes a coaching or outplacement package. Be wise, and make good use of it by hiring a career coach; it is financially much more advantageous than hiring one yourself at a later stage. If you leave by mutual consent, it is common - depending on the company’s budget and willingness - to negotiate a coaching package as part of the deal.
It will benefit your entry into a new employer, with hopefully much inspiration and more growth.
* please note: although I am a lawyer, this article is not meant to be legal advice but merely serves to inform on the benefits of using the transition payment for career coaching.
Robert de Wilde is a career coach and business coach in Amsterdam, for corporate professionals and business owners, with 10+ years experience.