A settlement agreement can be a quick and practical way to terminate your employment contract. But without the right arrangements, it can cost you dearly. Read here what must be included, what to watch out for and how to protect yourself.

A settlement agreement – also called VSO or termination agreement – is the most commonly used method in the Netherlands to terminate an employment contract.
Employer and employee agree on the conditions by mutual consent, such as the end date, any compensation and exemption from work.

Are You Obligated to Sign?

No. Your employer cannot force you to sign a settlement agreement.
If you do not sign, they will have to go to the UWV or the court to terminate your employment contract. This involves (legal) costs and risks for both parties. For this reason, many employees do agree to a settlement agreement.

A reason to sign may also be that you want to leave yourself. However, be careful with job applications or looking for other work, as you must report concrete prospects for other work to your employer.

What is Included in a Settlement Agreement?

Important components include:

• Reason for termination, for example business economic reasons or a difference of opinion.
• End date of the employment contract. Often the statutory notice period is followed or a later end date, also in connection with entitlement to unemployment benefits.
• Severance payment. Although you formally have no right to the statutory transition payment if you sign a VSO, usually a payment equal to or higher than the statutory transition payment is offered to motivate you to sign.
• Final settlement of what you should still receive at the end of your employment, such as holiday pay, year-end bonus, thirteenth month or (pro-rata) bonus.
• Exemption from work so that you no longer have to work. Sometimes this is not possible or desirable, such as if you receive the 30% ruling. A work continuation bonus is also often offered if you have to continue working.
• Non-compete and relationship clauses often lapse to facilitate finding new work.
• Legal budget. Many employers reimburse the costs for a legal review.
• Certificate of employment and references are often positive for better chances in the job market.
• Final release which puts an end to all known and unknown disputes between parties. You cannot ask anything else from each other than what has been agreed in the settlement agreement.

Right to Unemployment Benefits

With a VSO you may be eligible for unemployment benefits if you are not culpably unemployed and the VSO is correctly formulated. An incorrectly drafted agreement can jeopardize this right.

Cooling-off Period

After signing, you have 14 days to reconsider. You can withdraw your decision without giving a reason.

Negotiating for a Better Deal

It pays to negotiate: higher compensation and better conditions are often achievable. There is also almost always need for improvement of the text to protect you properly. By obtaining legal advice from Wessel Van der Lans, you know whether you can get a better deal and whether text needs to be changed. We can also assist you in the negotiations.

Conclusion

A VSO is more than just signing your name. It determines how your employment relationship ends and which rights you retain. Therefore, have your VSO legally reviewed before you sign, so that you can continue with certainty and the best possible conditions. Often the employer pays for these costs.

At Wessel Van der Lans we have extensive experience in reviewing and advising on settlement agreements. If you want to have your settlement agreement reviewed or need help negotiating a better deal, please contact us to schedule an appointment.