Severance pay
Severance pay: when are you entitled to it?
A severance payment or golden handshake (in Dutch: "ontslagvergoeding" or "gouden handdruk") is a compensation for compulsary redundancy. You are entitled to severance pay in case of non-voluntary redundancy with no blame on your side. In addition the financial situation of your employer should allow for severance pay. If the latter is not the case the employer can opt for a (lengthier) redundancy procedure through the UWV. Severance pay is not very probable in that case. If your employer prefers an accelarated procedure, you can agree to a severance payment. If you do not come to an understanding, you can have the court decide on the amount of the severance payment.
Calculation of severance pay
The amount of your severance pay depends on three factors:
- the weighted number of years worked
- monthly pay
- correction factor
You can calculate the amount of your severance pay yourself with the "court formula" ("kantonrechtersformule").
Severance pay and taxes
There are four fiscal options for receiving a severance payment :
stamrecht BV
Your employer transfers your severance pay directly to your own stamrecht BV (literally: "annuity company"). No taxes will be withheld on the severance payment and taxation is postponed until later.
For larger severance payments a stamrecht BV has advantages since you can manage your own money and you have more flexibility when making payments to yourself. You can also borrow money from your stamrecht BV e.g. for repaying your mortgage or use the company for starting a business.
blocked savings account
You deposit your severance pay in a blocked savings account ("banksparen") thus also postponing taxation until a later moment.
As of January 1, 2010 this is a new possibility to obtain the stamrecht exemption. A blocked bank account has lower (hidden) charges than a stamrecht insurance policy and is therefor a suitable alternative voor smaller severance payments (up to at least € 60.000).
insurance policy
You pay your compensation into a insurance policy postponing taxation as in the previous options.
Insurance policies have high, usually hidden, charges. Since the existence of the stamrecht blocked bank account the stamrecht insurance policy is hardly interesting anymore.
direct payout
Your severance pay is paid directly to your personal bank account and you pay taxes according to your highest tax bracket.
This is the most straightforward option but the consequence is that taxes are withheld from your compensation. If your income is such that you will not be taxed in the highest tax bracket and no reasons exist to set up a stamrecht company, this could be the best option.
In summary: if your severance pay is higher than € 60.000, charges and flexibility are important for you or if you want to start a business or want to repay your mortgage, a stamrecht BV can be attractive. In the end, what is best for you, depends entirely on your personal situation and preferences. If you want expert advice without any obligation, please contact us.
In below video (in Dutch) of the mayor Dutch newspaper "Telegraaf" Kapé Breukelaar explains how the amount of a redundancy compensation is calculated and what you can do with it.
severance pay and unemployment benefits
One of the most frequently asked questions in case of redundancy is what the amount of possible unemployment benefits will be. How does severance pay influence your unemployment benefits and how can you best tune your stamrecht payments to your unemployment compensation?
redundancy
Perhaps you are still negotiating with your employer and you need legal counsel for your redundancy. Our partner Ontslagspecialist.nl can be of assistance in this case.
Have you received a written proposal for redundancy from your employer which states the amount of your severance pay? Do not just agree and do not let yourself be put under pressure to sign immediately.
Always have a termination proposal checked by a lawyer first. He or she will ascertain if you will be entitled to unemployment benefits and if the proposed compensation is reasonable.
