If you receive a so-called golden handshake when your employment ends, it will not reduce your earnings-related allowance. However, it may postpone the date from which the allowance can be paid.
What does a golden handshake mean?
A golden handshake is additional compensation paid to an employee when their employment ends, which the employer is not required to pay under legislation or a collective agreement. The compensation is usually agreed upon in a termination agreement. Under the Unemployment Security Act, this type of compensation is referred to as a financial benefit.
How does it affect earnings-related allowance?
A golden handshake does not affect the amount of your earnings-related allowance. However, it may postpone the start of the payment of the allowance.
The compensation is periodised, meaning that its amount is converted into a calculated number of days based on the daily wage from your most recent employment. The calculated number of days is called the periodisation period. Earnings-related allowance can only be paid after this period has ended. The periodisation period runs for five days a week, from Monday to Friday. Weekends are not counted towards the periodisation period.
Compensation subject to periodisation includes, for example
- a golden handshake
- severance pay
- a support package based on a termination agreement
- other similar compensation that the employer would not have been required to pay under legislation or a collective agreement.
Remember to apply for earnings-related allowance in time
A golden handshake does not reduce the amount of your earnings-related allowance. However, it may postpone the start of the payment of the allowance because the compensation is periodised before your entitlement to the allowance begins. Remember to apply for earnings-related allowance within three months, even if the payment of the allowance does not begin until later.
Example:
Your employment ends on 31 July, and under a termination agreement you receive additional compensation of €6,000, equivalent to three months’ salary. The compensation does not reduce your earnings-related allowance, but it results in a periodisation period of approximately three months. The payment of earnings-related allowance can only begin after this period has ended.