Terminating an employment contract during illness is one of the most complex cases in employment law. However, termination by mutual consent, recorded in a settlement agreement, can be a strategic and cost-saving solution for employers. When applied correctly, it can prevent unnecessary wage costs while ensuring a respectful conclusion of the employment relationship.
What does termination by mutual consent entail?
In termination by mutual consent, employer and employee jointly decide to terminate the employment contract. The agreements regarding this are recorded in writing in a settlement agreement. The employee’s illness does not legally prevent this.
In practice, this route can provide a solution when reintegration is not realistic, or when the employment relationship is permanently disrupted. For the employee, this can be an opportunity to work on recovery or a new career step in peace, often with financial compensation as additional support.
Why employers choose this approach
- Cost control – Reduction of wage payment obligations during long-term absence.
- Efficiency – Termination of administrative and reintegration obligations.
- Relationship relief – Respectful conclusion without prolonged conflicts.
- Flexibility – Faster response to changing personnel needs.
Legal Considerations
A settlement agreement with an ill employee requires utmost care:
- Voluntariness – The employee must consent completely voluntarily. Pressure or coercion can lead to nullification of the agreement.
- Preservation of benefit rights – The end date must be chosen so that the employee leaves service recovered. This preserves entitlement to unemployment benefits.
- Legal soundness – The agreement must comply with all legal requirements and be clear about compensation, end date, and other arrangements.
Step-by-step Plan for Employers
- Analyze the case: fully map out the course of illness and reintegration efforts.
- Initiate the conversation: discuss the possibilities openly and respectfully with the employee.
- Negotiate the conditions: make clear agreements about termination date, compensation, and work exemption.
- Have it legally reviewed: prevent errors by having the agreement drafted or checked by an employment law attorney.
- Check the benefit position: ensure that the agreements do not hinder potential benefits.
Conclusion
Termination by mutual consent during illness can be a cost-saving and strategic choice for employers. Its success depends on good preparation, legally sound agreements, and transparent communication.
Would you like to know if this approach is suitable for your situation, or would you like to have a settlement agreement drafted or reviewed? The employment law specialists at Wessel Van der Lans guide you from the first conversation to the final signature – with attention to both your interests and those of the employee.
