Settlement agreement (vaststellingsovereenkomst): what should you check as an employee?

A settlement agreement (vaststellingsovereenkomst) is a written contract in which you and your employer end your employment by mutual consent, without the UWV or a court. Properly drafted, it keeps your right to unemployment benefit (WW) intact; the main exception is an agreement that suggests you chose to leave, which can cost you that benefit.

Under Article 7:670b of the Dutch Civil Code (BW), the agreement must be in writing. After signing, you have fourteen days to dissolve it without giving reasons. No permission from the UWV is needed, and no application to the subdistrict court (kantonrechter) has to be made.

That is also why the wording matters more than the amount: a generous payment in a text suggesting you chose to leave can leave you with money and no WW benefit.

What is a vaststellingsovereenkomst?

It is an agreement that ends the employment contract on a date and on terms that you and your employer set yourselves. No third party assesses whether there is a ground for dismissal.

Dutch practice uses several names for the same document: termination agreement (beëindigingsovereenkomst), VSO and settlement agreement. They mean the same thing. None of them changes your legal position.

How does it differ from a dismissal?

In an ordinary dismissal, a third party tests the reason. With a settlement agreement, nobody does.

For an ordinary dismissal, the employer needs either a permit from the UWV, for redundancy or long-term incapacity, or a court order dissolving the contract on one of the grounds in Article 7:669 BW. Both take months, and both can fail. Summary dismissal (ontslag op staande voet) requires an urgent cause, takes effect immediately and normally destroys the right to benefit. The settlement agreement bypasses all of that. That is why employers offer it, and why employees are usually right to consider it seriously.

When are employees offered one?

Mostly when the employer’s own case for a dismissal is uncertain. The weaker that case would be in court, the more room you have to negotiate.

The situations are predictable. A reorganisation removes the position. The working relationship has broken down. The employer thinks you underperform but would struggle to prove it in court. Or there is a difference of opinion about the direction of the role. Knowing how strong the employer’s alternative is, is the single most useful thing before you reply.

A settlement agreement can also end a fixed-term contract before its end date. That works if the contract allows early termination, or if the parties agree to it anyway. The statutory rules below apply in exactly the same way.

What does the law require?

Article 7:670b BW requires the agreement to be in writing and gives you fourteen days after signing to dissolve it. An oral agreement to end the employment does not bind you.

You dissolve the agreement with a written statement to your employer, without giving a reason and without owing anything. The employment then simply continues. If the employer did not mention this right in the agreement itself, the period is three weeks instead of fourteen days. The right does not apply if you already used it for an agreement about the same employment within the previous six months. That prevents the mechanism from being used to negotiate endlessly.

Do you have a set time to consider the proposal before signing?

No. There is no statutory period before you sign; the fourteen days run after signature. But a good employer gives you reasonable time.

Article 7:611 BW requires the employer to act as a good employer (goed werkgeverschap). An employer that demands a signature within forty-eight hours and refuses to allow legal advice is not acting as one. An agreement signed under that kind of pressure can be challenged on the grounds of undue influence or mistake. In practice, a reasonable employer allows one to two weeks and contributes to the cost of legal advice.

Are you entitled to a transition payment?

Not by law. The transition payment (transitievergoeding) of Article 7:673 BW is owed when the employer terminates the contract or does not continue it, not when the parties agree to end it.

In practice it works as the floor of the negotiation. You could refuse to sign and force the employer down the formal route, where the payment would be due. But it is a benchmark, not a right, and it must be written into the agreement to be owed. How the payment is calculated, and why the statutory cap that is indexed each year is not the ceiling everyone assumes, is set out in our article on the transition payment.

How do you keep your unemployment benefit?

By making sure the agreement shows you are not culpably unemployed (verwijtbaar werkloos). Three points in the text decide that: the initiative, the absence of blame, and the end date.

Under the Unemployment Insurance Act (Werkloosheidswet, WW), the UWV refuses benefit in two situations. The first is when the employment ended because of an urgent cause attributable to you. The second is when you ended the employment yourself without an important reason. A settlement agreement is drafted to keep your case out of both.

Who took the initiative?

The agreement should state that the employer took the initiative to end the employment. It should give a neutral reason and say expressly that there is no urgent cause and that you are not to blame.

A typical neutral reason is that the position has ceased to exist, or that the parties differ about how the role should be performed. Wording such as “at the employee’s request” or “by mutual wish” is exactly what should not be there. The UWV itself states that the agreement must show that the employer proposed the dismissal and that you did nothing wrong.

Does the end date respect the notice period?

It should. Set the end date as if the employer had given proper notice; otherwise your benefit starts later.

Count the applicable notice period from the date of the agreement. In the usual case, it ends at the end of a calendar month. If the parties agree an earlier end date, the UWV applies a notional notice period (fictieve opzegtermijn). The benefit then does not start until the date on which the contract would have ended. The severance payment does not fill that gap. An end date that is one month too early simply costs you a month of income.

Which ordinary conditions still apply?

The same conditions that apply to every WW claim, however the employment ended. You must have worked enough weeks in the reference period, be available for work, and register with the UWV in time.

In practice this means you must have worked at least 26 of the last 36 weeks before your first day of unemployment. The benefit lasts between three and 24 months, depending on your employment history, and is 75 percent of your previous daily wage in the first two months and 70 percent after that, up to a maximum daily wage.

The practical rule: apply for the benefit as soon as the agreement is final, and in any event within one week after your last working day. A late application can lead to a reduced benefit. Send the signed agreement with your application. If anything in the text is likely to raise a question, it is better to have that discussion before you sign than after your first payment fails to arrive.

What can you negotiate?

Almost everything, and the first proposal is rarely the employer’s last position. Your starting point is the strength of the employer’s alternative.

If a court would probably refuse to dissolve the contract, the employer has good reason to improve its offer. The same applies if a court would award a fair compensation (billijke vergoeding) on top of the transition payment because of the employer’s conduct.

How much severance should you ask for?

Anchor the severance payment on the transition payment for your own service and salary. Then argue upwards on the basis of what is really at stake.

Relevant factors are your length of service, your age and realistic prospects on the labour market, and a specialised role that is hard to replace. So are the loss of a pension arrangement or a bonus that would have vested. Procedural weaknesses on the employer’s side also count, such as the absence of an improvement plan in an underperformance case.

Why does the end date matter so much?

The end date is worth as much as the payment, and it is often easier to move. Every extra month of employment means another month of salary, pension accrual and holiday accrual.

It also postpones the start of your benefit period. Release from work (vrijstelling van werkzaamheden) during the notice period, without the duty to remain available, lets you look for a new job while you are still paid.

Which other points matter?

The restrictive clauses, the amounts still owed to you, and the practical arrangements around your departure. Put amounts in the agreement, not just principles.

• Non-competition and non-solicitation clauses. Ask for them to be waived in full, or narrowed in scope and duration. They survive the end of the employment unless the agreement says otherwise, and their reasonableness is a live issue in Dutch case law, as our article on non-compete clauses under Dutch employment law explains.
• Outstanding holiday days, holiday allowance, a pro rata bonus or thirteenth month, and any expense claims. State the amounts.
• A reference, and an agreed internal and external message about your departure.
• A budget for outplacement or retraining, and a contribution to your legal fees, which employers commonly pay.
• The return of company property and arrangements for a lease car, telephone and laptop.
• Confidentiality. If it is imposed, it should be mutual, and it should never stop you from giving information to the UWV or the tax authority.

Finally, check the final discharge clause (finale kwijting). It ends every claim either party could still bring, including claims you may not have thought of yet, such as unpaid overtime or an incorrect pension contribution. If anything is still outstanding, exclude it from the discharge in so many words.

Should you sign while you are ill?

Not without specific advice. An employee who is ill is protected by a statutory prohibition on termination during the first two years of incapacity, and you give that protection away by agreeing to end the employment.

The benefit consequences are the real problem. Unemployment benefit requires that you are available for work, and an employee who is unfit for work is not. Sickness benefit under the Sickness Benefits Act (Ziektewet) is the alternative. But the UWV can refuse or reduce it if you acted to the detriment of the benefit fund, and cooperating in ending the employment while ill is treated as exactly that. The result can be no wage, no sickness benefit and no unemployment benefit, all at the same time. Our article on leaving employment while sick explains how UWV assesses this.

Where the illness is the reason the relationship broke down, the order of steps matters. Reintegration obligations run on both sides for two years, and during that period the employer keeps paying wages within statutory limits. A settlement is normally only sensible once the reintegration route has been properly followed, or once you are fit again. Our article on what happens when reintegration fails sets out who carries the risk.

What should you check as an employee?

Go through the document once with a pen before anyone discusses money. The UWV reads the wording, not the label.

• The employer took the initiative, the reason is neutral, and the agreement states there is no urgent cause and no blame.
• The end date respects the notice period of Article 7:672 BW.
• The severance payment, holiday days, holiday allowance and any bonus are stated by amount, with a payment date.
• Non-competition, non-solicitation and confidentiality clauses are dealt with expressly.
• The fourteen-day right to dissolve is mentioned.
• The final discharge is mutual and excludes anything still open.

What should you check as an employer?

Check that the agreement will hold and that it does not cost the employee benefit, because an agreement that does is rarely signed.

• State the fourteen-day dissolution right in the agreement; otherwise the period is three weeks.
• Record your own initiative and a neutral reason, and confirm there is no urgent cause.
• Check for a prohibition on notice, such as illness or pregnancy, before you open the conversation.
• Give the employee reasonable time and a contribution to legal advice, as Article 7:611 BW expects of a good employer.
• Calculate the transition payment under Article 7:673 BW as the benchmark for the offer.

The severance payment is taxed as wages in the year it is paid, so the payment date affects the net amount. Ask your employer or a tax adviser what the payment date means for you. Law & More does not give tax advice, but we will point out where the payment date is worth discussing with someone who does.

Once you have signed, apply to the UWV promptly and put the fourteen-day period in your diary. If something turns out to be wrong, that period is the cheapest remedy you will ever have.

What can we do for you with a settlement agreement?

Our settlement agreement lawyers review and negotiate agreements for employees and employers, in English and Dutch.

• We review the draft agreement against the UWV requirements, usually within a few working days.
• We calculate your transition payment and the correct end date under the notice period.
• We negotiate the severance, the end date, release from work and the non-compete.
• We draft the dissolution statement if you want to use the fourteen-day period.
• We act for you before the subdistrict court if no agreement is reached.

Summary

• A vaststellingsovereenkomst ends your employment by mutual consent, without the UWV or a court; it must be in writing (Article 7:670b BW).
• You can dissolve it within fourteen days after signing, or three weeks if the agreement does not mention that right.
• To keep your WW benefit, the agreement must show the employer’s initiative, no urgent cause, no blame, and an end date that respects the notice period.
• There is no statutory right to a transition payment in a settlement, but it is the usual floor of the negotiation.
• Do not sign while ill without specific advice, and check the final discharge for claims that are still open.

Frequently asked questions