Page - Settlement agreement – comprehensive guide
Comprehensive Guide to Settlement Agreements
A settlement agreement (in Dutch: vaststellingsovereenkomst) is the most common and practical method to end an employment contract in the Netherlands. Each year, thousands of employees and employers choose this route to resolve workplace conflicts, avoid lengthy court procedures, and agree on mutually acceptable termination terms.
This guide explains everything you need to know about Dutch settlement agreements, including WW-safe requirements, severance pay, negotiation tips, and what both employees and employers must consider.
What is a settlement agreement?
A settlement agreement is a legally binding contract in which two parties agree to resolve or prevent a dispute. In Dutch employment law, it is widely used to terminate an employment contract by mutual consent.
It may also be called a termination agreement (beëindigingsovereenkomst).
- Key characteristics:
- The agreement must be in writing
- The arrangements must not violate public order or morality
- The content is freely negotiable, making it flexible and efficient
Why settlement agreements are so popular in employment termination
Faster than court or UWV procedures
Employment termination via court or the UWV often takes 1–2 months. A settlement agreement can be reached in days or even hours.
Low cost for both employer and employee
No extensive legal filings. No court hearings. Limited lawyer involvement if desired.
Flexible and tailor-made
A settlement agreement can include:
1. severance pay
2. reference letter
3. non-compete arrangements
4. outplacement budget
5. final payment of unused leave
6. return of company property
Courts or the UWV usually do not arrange these details.
Less damage to the working relationship
Because both parties agree voluntarily, the process is more respectful and less confrontational.
No appeal or further legal uncertainty
Once signed and final, there is no appeal procedure, ensuring closure and clarity.
WW-Safe (unemployment-safe) settlement agreements
A key question for employees is: “Will I still receive Dutch unemployment benefits (WW)?”
The termination is initiated by the employer
This must be explicitly written in the agreement.
No urgent or culpable reason
There must be no misconduct, such as fraud or violence.
A neutral reason is recommended, for example:
1. “Difference of opinion about job performance”
2. “Organisational restructuring / redundancy”
The employer’s statutory notice period is fully respected
The WW only starts after the “fictitious notice period” has passed.
Example:
If the notice period is 2 months and the agreement is signed in March, the end date must fall on 31 May.
Key components of a strong settlement agreement
A high-quality settlement agreement typically includes:
Termination date
The most crucial clause: When does the employment end?
Final financial settlement
This includes:
holiday allowance
unused vacation days
onuses / 13th month
study-cost arrangements
Severance pay
Often based on the transition payment, although higher or lower amounts may be negotiated.
Release from duties (garden leave)
Common when the relationship is strained or when little work remains.
Non-compete and confidentiality clauses
Can be waived, modified, or confirmed.
Return of company assets
Laptop, phone, lease car, access cards, etc.
Outplacement support
A tax-friendly option for employees needing help finding new work.
Positive reference or employment certificate
Increasingly important in competitive job markets.
Legal fee reimbursement
Usually paid by the employer, as employees must receive proper advice.
14-day reflection period
Legally required. If not mentioned, it automatically becomes 21 days.
Mutual discharge (“final settlement”)
Ensures no future claims after the agreement is fulfilled.
When should employers offer a settlement agreement?
Common scenarios include:
- Disturbed working relationship
Continuous tension, trust issues, or conflict.
- Underperformance or disfunctioning
Despite feedback and improvement plans.
- Redundancy / restructuring
Business-economic reasons making the position unnecessary.
- Personality conflicts
Clashes in working style that cannot be resolved.
- Long-term medical non-workability (after 2 years of illness)
Offering a settlement agreement is often cheaper, faster, and less risky than court proceedings.
Employee strategy: How to respond to a settlement agreement offer
If you receive an offer from your employer:
✔ Stay calm
Even if the proposal surprises you.
✔ Request everything in writing
Verbal promises are worthless in dismissal law.
✔ Express your preference to stay employed
This strengthens your negotiating position.
✔ Take time — at least one week
Do not sign the agreement immediately.
✔ Seek expert legal advice
A lawyer or dismissal specialist can improve your terms significantly.
✔ Negotiate
You can always request:
- higher severance
- later termination date
- removal of non-compete
- outplacement budget
- extra vacation payout
- legal fee reimbursement
Severance Pay (Ontslagvergoeding): What is reasonable?
The transition payment is often used as a basis:
📌 1/3 monthly salary per year of service
However, deviations are entirely legal.
Higher severance is justified when:
- dismissal grounds are weak
- employer failed to redeploy the employee
- redundancy rules are applied incorrectly
- dismissal prohibition exists (illness, pregnancy)
- employer acted blamefully
Lower severance may apply when:
- employee wants to leave
- employer provides long garden leave
- employer waives study costs
- non-compete is removed
- outplacement is offered
Tax considerations for severance pay
- Severance pay is taxed as income.
- Payroll tax is withheld by the employer.
- Employees may reclaim tax later via the “middeling” (income averaging) scheme.
- Outplacement budgets are tax-free.
- Part of the net severance can be used to fill a pension gap (with tax benefits).
Special situations: Illness and pregnancy
Settlement agreement during illness
⚠️ Usually not advisable, because:
- employer must pay salary for 2 years
- dismissal prohibition applies
- UWV may refuse benefits (Ziektewet / WW)
Only in specific recovery-expected cases can it be safe.
During pregnancy
Possible, but:
Pregnant employees have extra protection and should negotiate higher compensation or an end date after maternity leave.
Checklists for employers and employees
Both sides should carefully check:
- Is the agreement WW-safe?
- Are all financial elements correct?
- Is the notice period followed?
- Is the severance fair?
- Should a non-compete be waived?
- Are study-cost clauses included?
- Is the 14-day reflection period stated?
- Are all personal and employment details accurate?
Professional support for settlement agreements
Our lawyers at Settlement-Agreement.nl provides:
- 20+ years of experience in dismissal law
- review of your settlement agreement
- negotiations on your behalf
- ensuring WW-safety
- drafting a watertight agreement
- representation in UWV or court procedures
- fast assistance, clear communication, and fair pricing
So in case of dismissal, always contact our lawyers. We go for the best possible result.
First advice is always free. So mail or call us ( 020 6160 120 ) for a first free advice!
