€ 12.5 million bonus counts toward transition payment: employer must pay nearly €840,000.00

The Gelderland District Court recently heard a case in which an employee had received a substantial exit bonus upon the sale of a company. When his employment contract was later terminated, a dispute arose over whether the bonuses paid should be included in the calculation of the transition payment.

The employee joined the Employer in 2020. One of his objectives was to grow the company and eventually sell it. In addition to his fixed salary and annual bonuses, he was therefore entitled to a so-called exit bonus. The amount of this bonus depended on the increase in the company’s value at the time of sale.

In October 2024, the company was sold, and the employee received an exit bonus of no less than € 12.5 million. In March 2026, the employer terminated the employment contract without the employee’s consent, without authorization, and without observing the six-month notice period. The employee then filed a lawsuit and claimed, among other things, a transition payment of over € 861,000.

According to the employer, the exit bonus should not be included in the calculation of the transition allowance. The parties had explicitly agreed that the exit bonus was not part of the regular salary and would not be taken into account when calculating any severance pay.

The labor court judge did not agree. Deviations from the statutory rules for calculating the transition allowance are permitted only through a collective bargaining agreement, not through an individual agreement. Since no deviating collective bargaining agreement applied in this case, the exclusion of the exit bonus was null and void.

The judge ruled that the exit bonus must be classified as a variable pay component. This was because the parties had made prior agreements regarding the conditions under which the employee was entitled to the bonus, and the amount of the bonus was not fixed. The total monthly salary used to calculate the transition allowance thus amounted to € 375,979.71. This was despite the fact that the base salary was only € 8,333.33 per month. The result: a transition payment of € 839,630.79.

But that was not all. Because the employer had failed to comply with the six-month notice period, the employee was also entitled to fixed compensation. The claimed equitable compensation of € 300,000, on the other hand, was set at zero because the financial consequences of the termination were limited.

This ruling demonstrates that even a one-time bonus can have a significant impact on the amount of the transition payment - even if the parties have expressly agreed that a bonus does not count toward the calculation of the transition payment. Furthermore, this ruling underscores how important it is to carefully comply with the rules governing termination. Otherwise, terminating an employment contract could end up costing you dearly.

Do you have questions about termination or your bonus plan? Please contact Dennis Oud, Tessa Sipkema, Elke Hofman-Bijvank, or with me.

You can read the ruling here.