When your employer wants to end your employment in the Netherlands, they have two main options: offering you a settlement agreement (vaststellingsovereenkomst or VSO) or applying for dismissal through the UWV (Employee Insurance Agency).
Each route has distinct legal procedures, financial outcomes, and rights for you as an employee.
A settlement agreement allows you to negotiate better terms and additional compensation, whilst a UWV dismissal provides an objective assessment but limited room for negotiation.
Understanding which option your employer chooses affects your transition payment, unemployment benefits, and ability to secure extras like outplacement support or training budgets.
This article breaks down the key differences between these dismissal routes and explains how each process works.
You’ll learn what to expect in terms of compensation and how to protect your interests.
Key Differences Between Settlement Agreement and UWV Dismissal
A settlement agreement allows you and your employer to agree on termination terms together.
A UWV dismissal requires official permission from the Dutch Employee Insurance Agency.
The main differences lie in how much control you have over the process and what you can negotiate.
Mutual Consent Versus Official Procedure
A settlement agreement (vaststellingsovereenkomst or VSO) is a voluntary arrangement between you and your employer.
You both must agree to the terms before signing.
If you refuse to sign, your employer cannot force you to accept it.
The UWV procedure is a formal dismissal process.
Your employer submits a request to the UWV, which then decides whether the dismissal is justified.
You have less direct control in this process because the decision rests with the UWV rather than through negotiation.
With a VSO, you can walk away from discussions if you don’t like the offer.
Your employer might then start a UWV procedure instead.
In a UWV dismissal, you can only object through official channels, and the UWV makes the final decision based on legal grounds.
Applicable Dismissal Grounds
The UWV only accepts specific reasons for dismissal.
These include business economic reasons like reorganisation or cost savings, and long-term occupational disability when you’ve been sick for more than two years.
Other grounds require different procedures.
A settlement agreement can be used for almost any reason.
Your employer might offer a VSO during a reorganisation, poor performance discussions, or simply when the working relationship isn’t working.
The VSO doesn’t need to meet the strict legal grounds required by the UWV.
Statistics show that 85% of employers use settlement agreements for economic dismissals because the process is faster than court procedures.
This flexibility makes VSOs more common in practice than UWV dismissals.
Negotiability and Flexibility of Terms
The UWV dismissal gives you the statutory transition payment only.
Extra compensation, training budgets, or outplacement support are rarely part of a UWV decision.
A settlement agreement lets you negotiate for better terms.
You can ask for extra monthly salaries, a longer notice period with paid leave, removal of non-compete clauses, or career coaching.
Your employer might agree to avoid the time and uncertainty of a UWV procedure.
The terms you negotiate must be written clearly in your termination agreement.
This includes your leaving date, final payment amounts, and any special arrangements.
Make sure your unemployment benefit (WW) rights are protected in the agreement’s wording.
Settlement Agreement: Process, Rights, and Implications
A settlement agreement (vaststellingsovereenkomst or VSO) provides a structured way to end your employment contract through mutual consent.
This approach protects your right to unemployment benefit whilst offering room to negotiate severance pay, garden leave, and other benefits beyond the basic statutory requirements.
How a Settlement Agreement Works
Your employer initiates the process by proposing a settlement agreement when they want to terminate your employment contract.
This is a voluntary arrangement, meaning you are not obligated to accept the offer.
If you refuse, your employer may choose to pursue a formal dismissal through the UWV or court instead.
The negotiation phase allows you to discuss and adjust the terms of your departure.
You can propose changes to the severance pay, request an extended notice period, or ask for additional benefits like a training budget or outplacement support.
Both parties must agree to all terms before signing.
Once you reach an agreement, both you and your employer sign the termination agreement.
The document becomes legally binding after the cooling-off period expires.
This creates certainty about your termination date and the compensation you will receive.
Essential Clauses and Legal Requirements
Your settlement agreement must clearly state that your employer initiated the dismissal and explain the reason.
This documentation is crucial for maintaining your right to unemployment benefit.
The agreement should specify your final working day and whether you will work through your notice period or take garden leave.
Key financial terms include the transition payment (transitievergoeding), any additional severance pay, and payment for unused vacation days.
The agreement should detail payment dates and amounts.
You may also negotiate coverage of legal fees incurred when seeking legal advice about the VSO.
Common clauses address confidentiality, non-competition restrictions, and references.
A non-competition clause may limit where you can work after leaving.
You can negotiate to remove or reduce such restrictions in exchange for accepting other terms.
The agreement should also confirm how your pension rights and other benefits are handled.
Entitlements and Employee Protections
You retain your right to unemployment benefit when the VSO is drafted correctly and shows the employer initiated the termination.
The statutory transition payment remains your legal entitlement based on your salary and years of service.
Many employees negotiate for additional compensation beyond this minimum amount.
You can request various benefits during negotiations:
- Extra monthly salaries as severance pay
- Garden leave during your notice period
- Training budget for career development
- Outplacement services to find new employment
- Removal or adjustment of non-competition clauses
The agreement must comply with Dutch employment law requirements.
Seeking legal advice helps ensure the VSO protects your interests and meets all legal standards.
An employment lawyer can identify unfavourable terms and negotiate better conditions on your behalf.
Cooling-off Period and Legal Consequences
Dutch law provides a 14-day cooling-off period after you sign a settlement agreement.
During this time, you can withdraw from the agreement without providing a reason or facing penalties.
This protection gives you time to reconsider the terms or seek legal advice if you haven’t already done so.
The cooling-off period begins immediately after both parties sign the VSO.
You must notify your employer in writing if you wish to cancel during these 14 days.
After this period expires, the agreement becomes binding and you cannot withdraw.
Breaking the agreement after the cooling-off period ends can result in legal action and financial penalties.
Your employer could claim damages if you violate terms like confidentiality or non-competition clauses.
Similarly, your employer must honour all commitments in the VSO, including severance payments and the agreed termination date.
UWV Dismissal Procedure: Process and Outcomes
The UWV (Employee Insurance Agency) handles dismissal requests for specific grounds like business economic reasons or long-term illness.
Employers must follow strict steps to get approval, and the process determines what compensation and benefits you receive.
Step-by-Step Overview of the UWV Procedure
Your employer must submit a formal dismissal request to the UWV before they can end your contract.
The UWV then reviews whether the dismissal meets legal requirements.
The process starts when your employer files an application explaining why they want to dismiss you.
You receive notice about the request and can respond with your own arguments or concerns.
The UWV examines the facts and checks if your employer followed proper procedures.
They look at whether alternatives to dismissal were considered and if the reason is valid under Dutch dismissal law.
If approved, the UWV grants a dismissal permit.
Your contract ends on the date specified in the permit.
The whole process typically takes 4 to 8 weeks from application to decision.
You have limited room to negotiate during this procedure.
The UWV focuses on whether the dismissal is lawful, not on additional compensation beyond what the law requires.
Legitimate Grounds for UWV Dismissal
The UWV only handles dismissals for two main reasons.
You can only be dismissed through this route if one of these grounds applies.
Business economic reasons include redundancy due to reorganisation, company closure, or cost-cutting measures.
Your employer must prove the economic need is genuine and that your position is redundant.
Long-term illness qualifies after you’ve been unable to work for more than two years.
Your employer must show they cannot provide suitable alternative work and have met their reintegration obligations.
The UWV will reject applications that don’t fit these categories.
Poor performance, conflicts, or other personal reasons require a different dismissal route through the courts.
Your employer must follow specific rules for each ground.
For redundancy, they need to apply a fair selection process if multiple employees do similar work.
Employee Rights and Employer Obligations
You are entitled to the statutory transition payment when dismissed via the UWV.
This payment compensates for job loss and the amount depends on your salary and years of service.
Your WW (unemployment benefits) rights remain protected.
You can claim these benefits if you meet the standard conditions, as UWV dismissal counts as involuntary job loss.
Your employer must respect the statutory notice period during the dismissal process.
You continue working and receiving salary until your contract officially ends.
The employer cannot dismiss you whilst you’re ill, pregnant, or during parental leave without UWV permission.
These protections still apply during the procedure.
You keep your right to challenge the dismissal if you believe the UWV made an error.
However, appeals are only possible on procedural grounds.
Comparative Pros and Cons
A settlement agreement offers flexibility and negotiation opportunities, whilst the UWV route provides independent oversight and guaranteed statutory benefits.
The choice between these paths affects your financial outcome, time commitment, and control over the terms of your departure.
Advantages of a Settlement Agreement
A settlement agreement gives you direct negotiation power with your employer.
You can secure additional compensation beyond the statutory transition payment, such as extra monthly salaries, training budgets, or career support services.
The process typically moves faster than UWV procedures.
You control the timeline and can request immediate release from work duties whilst still receiving pay.
This flexibility allows you to start job hunting or training without delay.
You can negotiate removal of restrictive clauses, such as non-compete agreements or confidentiality terms that might limit future employment.
The agreement can include positive references and agreed statements about your departure.
Your unemployment benefit eligibility remains intact when the agreement is properly drafted.
However, poor wording can make you culpably unemployed, which blocks benefits.
Legal advice ensures the document protects your rights.
The negotiations happen privately between you and your employer.
This avoids formal government involvement and keeps employment issues confidential.
Benefits of the UWV Dismissal Route
The UWV provides independent assessment of your employer’s dismissal grounds.
They verify whether the reason meets legal standards for business economic circumstances or long-term illness situations.
You automatically receive the statutory transition payment.
The amount is calculated based on your salary and years of service, with no risk of receiving less than legally required.
The process follows clear legal procedures that protect against unfair dismissal.
Your employer cannot dismiss you without UWV approval, which provides security against arbitrary decisions.
You retain full unemployment benefit rights without concerns about culpable unemployment.
The UWV approval confirms you are not responsible for the job loss.
The procedure costs you nothing directly.
Your employer pays the application fees and administrative costs.
Risks and Disadvantages Each Option Presents
Settlement agreements carry negotiation risks. Your employer may offer less severance pay than you deserve, and you might feel pressured to accept quickly.
Without legal advice, you could sign away rights or include terms that make you culpably unemployed.
The UWV route offers no room for negotiation beyond statutory minimums. You receive only the transition payment with no additional compensation, training budget, or extended notice periods.
The process takes longer, often several weeks or months, delaying your departure.
Both paths require careful documentation. Settlement agreements need precise wording to protect unemployment benefits.
UWV procedures demand complete employment records and proper notice periods. Mistakes in either process can cost you thousands of euros in lost benefits or compensation.
Special Considerations for Illness, Expats, and Migrant Workers
Dutch employment law offers strong protections during illness. The rules work differently for international workers who need to consider residence permits and tax benefits.
Settlement agreements and UWV dismissals can affect your right to stay in the Netherlands and receive benefits.
Dismissal During Illness or Disability
You cannot be dismissed during the first two years of illness under Dutch law. This protection applies to both settlement agreements and UWV dismissal procedures.
During illness, you receive at least 70 percent of your salary from your employer. If you sign a settlement agreement whilst ill, you lose your right to sickness benefit from the government.
This means you will not have income support if you cannot work with a new employer. You should only consider a settlement agreement during illness if you expect to recover soon enough to find new work.
If your illness will continue for a long time, keeping your current job protects your income for up to two years. The UWV can reject your sickness benefit claim if you sign a settlement agreement during illness.
They consider this a harmful action that removes your right to benefits. Some employees have tried to cancel settlement agreements after learning about this consequence, but legal disputes can take time and money.
Impact on Expats and Highly Skilled Migrants
Expats and highly skilled migrants face additional risks when ending employment in the Netherlands. Your residence permit depends on having a recognised sponsor, which is usually your employer.
A settlement agreement ends your employment immediately or after an agreed notice period. This can include garden leave, where you receive pay but do not work.
Once your employment officially ends, your residence rights may be affected. The UWV dismissal process typically takes longer than a settlement agreement.
This gives you more time to search for new employment whilst your residence permit remains valid. However, the process creates uncertainty about when your employment will end.
International workers should check their visa conditions before signing any termination agreement. Some permits require you to notify immigration authorities within specific timeframes when employment ends.
Residence Permits, 30% Ruling and Job Search Period
When your employment ends, you have a job search period to find new work and maintain your residence permit. Highly skilled migrants get three months to find a new sponsor or leave the Netherlands.
The 30% ruling can continue if you find new employment within three months. However, you must meet the salary requirements with your new employer.
If you remain unemployed beyond this period, you lose the tax benefit. A settlement agreement often includes severance pay and an agreed end date.
You can negotiate garden leave to extend your time on the payroll, which keeps your residence permit valid longer. This gives you more security whilst searching for new work.
Your access to unemployment benefits depends on how your employment ended. Settlement agreements may affect your right to benefits, which can create financial problems if you do not find work quickly.
Highly skilled migrant status does not guarantee unemployment benefits unless you meet specific conditions. Contact the Immigration and Naturalisation Service (IND) before signing any termination agreement.
They can explain how the agreement affects your residence rights and what steps you need to take to stay legally in the Netherlands.
Legal Strategies and Negotiation Tips
Getting legal advice helps you understand your rights and secure better terms, whether you’re negotiating a settlement agreement or facing a UWV dismissal. An employment lawyer can guide you through complex clauses, negotiate higher compensation, and ensure you don’t lose important benefits like WW rights.
The Importance of Employment Lawyers
An employment lawyer provides essential support when your employer proposes dismissal. Legal advice is particularly important for settlement agreements because these documents contain complex clauses that can affect your future employment and income.
Employment lawyers like GMW Lawyers specialise in Dutch employment law and understand how to navigate both UWV procedures and settlement negotiations. They can spot unfavourable terms, such as overly restrictive non-competition clauses or incorrectly drafted WW provisions.
Without proper legal guidance, you might sign an agreement that seems fair but actually limits your rights. Dutch law requires specific language in settlement agreements to protect your unemployment benefits.
An employment lawyer ensures the document meets these requirements. Legal fees are often worth the investment because lawyers typically negotiate significantly higher severance payments.
Many employment lawyers work on a success fee basis, meaning they only charge if they improve your package. Some employers even agree to cover your legal costs as part of the settlement.
Negotiating Severance, Clauses, and Additional Benefits
Settlement agreements offer room to negotiate beyond the statutory transition payment. You can request additional monthly salaries as extra compensation, particularly if your employer has no proper dismissal grounds or lacks documentation to support their case.
Key negotiation points include:
- Higher severance payment (often 2-6 months’ salary on top of transition payment)
- Early release from work duties whilst remaining on payroll
- Garden leave with full pay
- Removal or reduction of non-competition clause restrictions
- Positive reference letter
- Company car retention period
- Mobile phone and laptop ownership
A non-competition clause can severely limit your job prospects. Negotiate to remove it entirely or reduce its duration and scope.
Dutch law allows you to challenge unreasonable non-compete terms, giving you leverage in negotiations. Start negotiations high but remain realistic.
Research typical severance packages in your industry and use this as justification for your requests.
Outplacement, Training Budgets, and Further Support
Outplacement services help you find new employment through career coaching, CV writing, and job search support. These services typically cost €3,000-€10,000, making them a valuable negotiation point.
Request a training budget to develop new skills or obtain certifications that improve your employability. Training budgets of €2,000-€5,000 are reasonable requests, particularly if you’ve worked for the company for several years.
Additional support options include:
- Career coaching sessions (typically 5-10 sessions)
- LinkedIn profile optimisation
- Interview preparation
- Access to job boards and recruitment networks
- Psychological counselling for work-related stress
Employers often agree to these benefits because they’re tax-deductible business expenses. Frame your request around career development rather than simply asking for more money.
This approach makes it easier for employers to justify the expenditure internally whilst giving you practical support for your next role.
Frequently Asked Questions
What are the primary differences between a settlement agreement and UWV dismissal procedures in the Dutch employment landscape?
A settlement agreement is a mutual termination where you and your employer negotiate the terms of your departure. You can discuss compensation, notice periods, and other conditions before signing.
UWV dismissal requires your employer to submit a formal request to the Employee Insurance Agency (UWV). The UWV reviews whether the dismissal reason meets legal requirements.
This process applies specifically to business economic reasons or long-term illness exceeding two years. The UWV makes an independent decision based on evidence your employer provides.
You receive the statutory transition payment but cannot negotiate additional benefits through this route.
What advantages does a settlement agreement offer over the UWV process for terminating employment contracts in the Netherlands?
Settlement agreements allow you to negotiate for compensation beyond the statutory transition payment. You might secure additional monthly salaries, training budgets, or removal of restrictive clauses like non-compete agreements.
You maintain control over the termination terms rather than waiting for an external decision. The process typically moves faster than UWV procedures because it does not require government review.
Many employers offer work exemption during your notice period as part of settlement agreements. You can also negotiate for outplacement services or references that support your next career move.
Your WW (unemployment benefit) rights remain intact when the settlement agreement includes proper language. This protection gives you financial security whilst you search for new employment.
What potential drawbacks may employees face when opting for a settlement agreement compared to the UWV dismissal route?
You might face pressure to accept terms quickly without proper legal review. Some employers set tight deadlines that limit your ability to negotiate effectively.
Settlement agreements are voluntary, which means your employer might threaten UWV dismissal if you refuse their offer. This creates an unequal power dynamic during negotiations.
You could inadvertently agree to terms that reduce your legal rights or compensation. Without legal advice, you might not recognise unfavourable clauses in the agreement.
The negotiation process can be stressful and time-consuming. You must evaluate multiple factors whilst dealing with the emotional impact of losing your job.
How might the choice between a settlement agreement and UWV dismissal affect an employee’s eligibility for unemployment benefits in the Netherlands?
Both routes typically preserve your right to WW benefits if structured correctly. However, settlement agreements require specific language to protect these rights.
A poorly drafted settlement agreement might include terms that the UWV interprets as voluntary resignation. This classification could result in a temporary WW suspension.
UWV dismissals automatically preserve your benefit eligibility because the termination is employer-initiated. You face no risk of being considered culpable for the job loss.
You must meet standard UWV requirements regardless of dismissal method. These include sufficient work history and active job-seeking behaviour after termination.
What legal considerations should employers be aware of when deciding between a settlement agreement and initiating a UWV dismissal?
Employers must have valid grounds before pursuing UWV dismissal. Business economic reasons require proof of financial necessity or organisational changes.
Long-term illness dismissals only apply after two years of sickness. The UWV rejects requests that lack proper documentation or fail to meet legal standards.
Rejection means employers cannot dismiss you through this route and must consider alternatives. Settlement agreements require voluntary employee consent.
Employers cannot force you to sign, though they may proceed to UWV dismissal if you decline. Employers must provide the statutory transition payment in both scenarios.
This payment increases based on your salary and years of service.
Can an employee challenge the terms of a settlement agreement or the outcome of a UWV dismissal, and what are the implications of such actions?
You can refuse to sign a settlement agreement if you find the terms unacceptable. Your employer then must choose between improving the offer or pursuing UWV dismissal.
Once you sign a settlement agreement, you generally cannot challenge it later. The agreement becomes legally binding unless you can prove fraud, duress, or other serious procedural errors.
You can object to UWV dismissal requests during the review process. The UWV considers your objections when deciding whether to grant your employer’s request.
If the UWV approves dismissal and you disagree, you can appeal the decision through the courts. Appeals require valid legal grounds and often involve lengthy procedures.