What Is a Settlement Agreement (Termination Agreement) in the Netherlands and What To Do?

A settlement agreement, also known as a termination agreement, is a document in which agreements are recorded between two parties to prevent a conflict in the future or to resolve an existing conflict. In disputes, opting for a court solution is common, but it rarely offers advantages. It is an energy-intensive and costly process that offers no benefits to either party.

It is better to make agreements together, or with the support of a professional, and include them in the settlement agreement. This agreement is binding. Free review of the settlement agreement.

Always Have Your Agreement Checked Before Signing It

It’s important to review the information carefully when you, as an employee, are presented with a settlement agreement by your employer. Also, get good advice on what is and isn’t possible within dismissal law. An incorrectly drafted agreement can have major financial consequences.

As an employee, there are situations where the right to unemployment benefits (WW-uitkering) is lost when you sign the document. Avoid these risks by having your agreement checked.

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How Does a Settlement Agreement Work in 2024?

Settlement agreements can be used in various legal fields, including administrative law, tax law, insurance law, and labor law. When an employer and employee make agreements about terminating an employment contract, a settlement agreement can be drafted. Typically, in 8 out of 10 dismissal cases, such an agreement is used. We focus here online on settlement agreements related to labor law, i.e., those drafted at dismissal.

What Services Can We Offer You?

We advise employees about settlement agreements at dismissal. On our website, you can find extensive information about these agreements. We provide explanations about unemployment safety, the applicability of non-compete and non-solicitation clauses, taxes, bonuses, and vacation days. We also advise on situations where it may or may not be wise to enter into a settlement agreement, notice periods, and the amount of any transition compensation.

A Lot of Uncertainty Among Employees

In practice, there is a lot of uncertainty among employees about settlement agreements. It’s important to know that you are never obligated to sign the document. If you do not fully agree with the arrangements noted in the document, you don’t have to sign it. The agreement must be satisfactory to both the employer and the employee.

As an employee, you want to be sure that you still have the right to unemployment benefits after signing the agreement. Additionally, questions often arise about the right to a transition compensation. You can always come to us for checking your agreement. We can provide sound advice so you know whether it is wise to sign or not. You can also come to us for negotiating your dismissal proposal.

What Is Included in the Settlement Agreement?

The settlement agreement must include the details of both parties, the employer’s company details, and the employee’s personal information. A drafting date must be stated, and it’s important that the employee’s position and date of entry are included.

Optional items can also be added to the settlement agreement. For example, it can specify which company properties the employee must return on the last working day, such as a phone, company clothing, company car, or laptop. It can state how many vacation days are remaining and whether they will be paid out, exemption from work, or if a non-compete or non-solicitation clause is active after the employment contract ends.

Employer Wants to Avoid a Dismissal Procedure

Employers cannot just fire employees; they need a good reason. If it is desirable for an employee to leave the company, a dismissal procedure often has to be initiated. This can proceed through the UWV or the subdistrict court, depending on the situation. There’s a risk that the employer ultimately won’t get permission to dismiss the employee. Moreover, such procedures are time-consuming and expensive.

If the employer and employee can make mutual agreements about terminating the employment contract, using a settlement agreement, then no dismissal procedure is needed. Often, the agreement is drafted to avoid a lengthy and costly dismissal procedure.

How Much Time Do You Have to Rescind a Settlement Agreement?

The settlement agreement is a binding agreement between employer and employee, but there is a reflection period for the employee. After signing the agreement, you have two weeks to reconsider this decision. It’s important that the agreement indicates a reflection period of two weeks.

If no reflection period is mentioned in the agreement, you have a total of three weeks to reconsider. If a new settlement agreement is drafted after you reconsider the first agreement, the reflection period starts again. Read more about the settlement agreement and reflection period.

Do I Have the Right to a Transition Compensation with a Settlement Agreement?

We know the dismissal compensation and the transition compensation. There is often confusion about this, and we like to make the difference clear immediately. Until July 1, 2015, dismissed employees could receive a dismissal compensation. Since July 1, 2015, there is the severance pay. If you are dismissed on the spot or if you resign yourself, you are not entitled to a transition compensation in any case. If you are employed by your employer and they present you with a settlement agreement, you are usually entitled to this compensation, even if there is no permanent contract. The reason for dismissal is also not relevant, except for dismissal on the spot, and you may also be entitled to a transition compensation for a fixed-term contract about to expire. We can check this for you. Read more about the settlement agreement transition compensation.

Do I Have a Right to Unemployment Benefits with a Settlement Agreement?

There are certain requirements to ensure that the settlement agreement is unemployment proof. Firstly, the notice period stated in the employment contract must be met. This notice period must also be mentioned in the document and must be observed. Secondly, it must be the employer’s initiative. The employee should not request the employer to draft a settlement agreement if they want to resign themselves.

The employer must be the party wanting to terminate the employment contract. Finally, the dismissal must not be related to an urgent dismissal reason caused by the employee. For example, being dismissed on the spot.

How Does the Agreement Work in Case of Pregnancy or Illness?

You may receive a settlement agreement from your employer when you are sick or pregnant. In both cases, it is highly recommended to have the agreement assessed by us first. The settlement agreement in such situations can cause problems, such as the loss of the right to unemployment benefits. If you are pregnant, it must also be considered that it is often more difficult to find a new job.

What Is the Legal Notice Period?

In most cases, a notice period is included in an employment contract. When a settlement agreement is drawn up to terminate the employment contract, the stated notice period must be adhered to. Any unemployment benefits will only start after the notice period. This means that an employee will not receive unemployment benefits until this date. If the employee leaves (much) earlier, and they cannot start elsewhere immediately, then there will be no income during this period.

If this is not observed by your employer, and the stated date in the agreement is much earlier than the official duration of your employment contract, then it is strongly advised not to sign the dismissal proposal. Read more about the notice period in the settlement agreement.

Negotiating the Settlement Agreement?

The employer is responsible for drafting the settlement agreement. Of course, the employer will do so with terms that are desirable for themselves. This does not mean that these terms are also desirable for you as an employee. You do not have to agree to the respective terms. There is room for negotiation.

In this way, agreements can ultimately be made that are satisfactory to both parties. In many cases, both parties will have to compromise to come to good agreements.

What If No Agreements Can Be Made?

It may happen that you and your employer cannot come to an agreement. There remain terms in the settlement agreement that are not fully satisfactory to one of the parties. If these cannot be maintained, then no agreement can be drawn up. In this case, a dismissal procedure must be initiated at the subdistrict court or the UWV. There is a possibility that you cannot and may not be dismissed. Often, this causes difficulties in the workplace. Therefore, it is strongly recommended, in the interest of both parties, to try to come to an agreement.

What Is the Final Discharge?

In most cases, a discharge clause, or final discharge, is included in the settlement agreement. When this is the case, and the agreement is signed by both parties, it means that the employee may no longer claim anything from the employer once all agreed financial matters have been settled. Nor may the employer claim anything more from the employee. With the inclusion of the discharge clause, the parties are essentially freed from each other. If all financial agreements have been met, then no additional claims may be submitted. The dismissal is thus completely rounded off and properly settled.

What Are the Disadvantages of a Settlement Agreement?

Everything recorded in the settlement agreement is not awarded by a judge. Therefore, we say that the agreements are ‘non-executable.’ If they are not complied with, a bailiff cannot, for example, force the party to comply with the agreements. When drafting a settlement agreement, there is no objective view. Both parties mainly see it from their own standpoint. Moreover, the employee can sometimes agree to terms under psychological or financial pressure that are not so favorable for them. Therefore, it is always advised to engage a lawyer.

Do You Need Immediate Help and Support With Your Dismissal?

When you have received a settlement agreement from your employer, you actually already know that there is a period in which a lot will change. With your dismissal, you not only lose your job, but you also lose financial stability, your permanent work environment and colleagues, for example. If you are fired, it must be properly arranged and this is what the settlement agreement is intended for. We have over 10 years of experience in checking and assessing these agreements. In addition, we have all the expertise in-house in the field of advice.

Always Have Your Agreement Checked Before Signing Anything

It is advisable to always have a settlement agreement (= termination agreement dismissal) checked by an employment lawyer before signing anything. We will study your employer’s proposal and contact you today. This assessment in outline (whether or not to agree) is completely without obligation and free of charge.

9 Best Tips for Dismissal Through a Settlement Agreement

When you are faced with a dismissal, it is often a shocking statement. Your future suddenly becomes uncertain and you probably have a lot of thoughts about your future. If your employer submits a settlement agreement to you, it is important to take a good look at this. It is of course the intention that your dismissal is arranged under the most favorable conditions for you. With these 9 tips you will ensure that you get the best out of it.

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Tip 1: Never sign the agreement immediately

sign a settlement agreement The most important thing is that you never sign a settlement agreement directly. Even if your employer tries to pressure you. Receive the agreement and indicate to your employer that you first want to read it thoroughly and have it tested before you sign it. Using coercion to sign the agreement is illegal and you can challenge it in court if it does happen. In addition, you always have the right to revoke a signed settlement agreement in writing without stating a reason. The term for this is 14 days after the signing date.

Tip 2: The employment will remain in effect until you sign

Recall that on the basis of the law remains employed by your employer until you sign a settlement agreement. Even then, the dismissal does not take effect immediately, there are legal rules for this. You have the right to thoroughly study the agreement and have it checked by a lawyer before you agree to this. If you do not agree with the conditions, this must be discussed before signing can be done.

Tip 3: Have it checked whether you are entitled to unemployment benefits

If you are fired, you are entitled to benefits if you do not find a new job in time. In most cases you are entitled to unemployment benefits. In the event of illness, you are entitled to benefits under the WIA after dismissal. The nature and amount of this benefit depends on the percentage of incapacity for work. Your employer may only fire you if you have been ill for 2 years and are not yet able to resume all or part of your work. If you are not entitled to benefits due to an error in the agreement, you may immediately fall back on social assistance. This benefit is almost always lower than another benefit. It is therefore important to have this properly checked by us.

Tip 4: What does the Social Plan say?

When a large company goes bankrupt or during a major reorganization , a Social Plan is usually drawn up in consultation with the trade unions for the employees who will lose their jobs. The schemes in the Social Plan are generally more favorable than with an individual dismissal. If you find yourself in such a situation, always have your settlement agreement checked against the agreements in the Social Plan to prevent you from being disadvantaged.

Tip 5: Avoid a gap in income

euro Keep in mind that you are only entitled to unemployment benefit if it meets the legal requirements. So make sure that your settlement agreement includes the date up to which your employer will continue to pay your salary, even if you immediately resign from your activities. If this is not properly arranged, you run the risk that the UWV will only start your unemployment benefit and you will therefore have no income for that period.

Tip 6: Check the accrued pension

If you are employed, you almost always accrue pension rights. Check how much pension you have accrued and check whether the employer has paid the pension contribution in full. Once you have chained the settlement agreement and the statutory withdrawal period has passed, you cannot change it again. This is because almost all settlement agreements include an article on ‘final discharge’, whereby the employer and employee declare that they have nothing to claim from each other outside this agreement.

Tip 7: Are there things missing from the agreement?

Check whether all aspects that are important have actually been included in the settlement agreement. This includes the payment of overtime, any outstanding days of leave and the right to bonuses and a 13th month. But the use of a company car, telephone or laptop must also be included in this. When do you return the car, can you possibly take over the business telephone because the mobile number is also used privately? When must keys and / or access cards be returned? What about the non-competition clause when looking for another job? Make sure that good and clear agreements are made about this and that these are also included in the settlement agreement.

Tip 8: Have a reimbursement for legal costs included

It is always wise to seek legal advice during dismissal proceedings. It is advisable to include in the settlement agreement that you will receive compensation for engaging us.

Tip 9: Have your agreement checked by us for free

Unless you have legal training yourself, there is a good chance that you will overlook something when going through the settlement agreement. That is why it is always advisable to engage us. Even if you think you can arrange it yourself, this is recommended. Dismissal often involves emotions and there is a good chance that you will overlook something essential. So make use of the opportunity to obtain legal assistance. Never sign a settlement agreement before having it reviewed by us. We specialize in employment law.

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Should I Sign The Settlement Agreement or Not?

The basic principle of a settlement agreement is that the employer and employee come to termination of the employment relationship in consultation. Both employer and employee must therefore agree to the content of a settlement agreement before signing it. Employers often want to put pressure on an employee to sign the agreement quickly. After all, they have an interest in the employment contract ending as soon as possible because the salary must continue to be paid up to the formal end date. However, don’t let that pressure you. Indicate that you first want to read the agreement thoroughly and submit it to us before deciding whether or not to sign it. Remember that you will remain employed as long as you have not signed the settlement agreement.