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Is It Possible to Pass On the Transition Fee in the Hourly Wage in Advance?

Previously, Eva Knipschild wrote an article about the tricks employers use to circumvent the transition fee and about an employer who was punished by the court for not observing the notice period in order to avoid the transition fee. A new brilliant idea recently appeared before the Subdistrict Court of Rotterdam.

Mutual Consent

Firstly, we will give some background information. An employer must pay an employee a transition fee if the employee is employed for longer than two years and the initiative of the termination (or discontinuation of the employment agreement) is the employer’s. If the employment agreement is terminated by mutual consent, the parties can make other arrangements and they are not bound by the statutory transition fee. They can agree on a higher fee, but also on a lower fee or no fee at all. But if it is possible to make arrangements on the amount of the severance payment, is it also possible to agree on a salary in which the transition fee is already included? An all-in hourly wage? This question was presented to the Subdistrict Court in Rotterdam.

Transition Fee in the Hourly Wage

The employer was a temporary employment agency and the employee was placed at a client. Because the temporary employment agency could not (or did not want to) pass on the costs of the transition fee to the client, it was included in the secondment agreement that the gross hourly wage was inclusive of the transition fee. It was added to this provision that if a transition fee would still have to be paid, the hourly wage would be decreased by the transition fee. In the end, the agreement of the employee was not extended, but since he had been employed for more than two years, he claimed payment of the transition fee.

Financial Risk

The temporary employment agency argued that the secondment agreement with the above-described provision must be considered equivalent to a settlement agreement as is concluded in a termination with mutual consent. After all, in that case the parties are free to agree that the employer does not need to pay a transition fee. The Subdistrict Court did not follow this reasoning. The court considered that no other arrangements could be found in the agreement concerned relating to the termination of the employment agreement. The arrangement is vague and not clear, and the employer is to blame for this.

The Subdistrict Court therefore concluded that in principle the transition fee must always be paid by the employer if the conditions for this fee have been met. The financial risk of this can only be passed on the employee in very extraordinary situations. In any case, there is no question of such an extraordinary situation if it is decided for commercial reasons not to pass on the costs of the transition fee to the client but to pass them on to the employee instead.

Settlement Agreement

It is possible to agree in a settlement agreement that no transition fee will be paid upon termination of the employment agreement. However, it is not allowed to already agree when the employment agreement is concluded that the transition fee is included in the hourly wage. This is just another example of a trick that failed.

Author(s)

  • Eva KnipschildEva Knipschild