Settlement agreement in 2026: what do you need to know?

In practice, these are all different terms referring to the same document: 

• Settlement agreement (VSO) 
• Termination agreement 
• Redundancy agreement 

These terms are often used interchangeably. For clarity on the VSO meaning we have a separate page where we elaborate on legal terminology.

Most importantly, you need to understand that with your signature, you agree to your resignation and its conditions. 

A settlement agreement regulates at least the following points: 

• The end date of your employment 
• The reason for dismissal (note: this is a very important part of your right to WW benefit) 
• Your severance pay (transition allowance and more) 
• Secondary benefits, such as retaining a lease car or other fringe benefits you had during your contract
• Confidentiality agreements or a non-compete clause

Before 2015, dismissal almost always followed going to the subdistrict court. This was always a very legal process. Since the introduction of the Work and Social Security Act in 2015, this changed and you can separate as an employer and employee with a settlement agreement.

A settlement agreement offers many benefits for both parties. For you as an employee, it means it namely clarity about your departure and often a better settlement than in a unilateral dismissal.

You retain control of the situation and can negotiate terms. For your employer, it offers it security that the employment ends definitively, without risk of legal proceedings afterwards (by final discharge). 

The primary motivation employers have for offering you a settlement agreement is speed and security.

A dismissal procedure through the UWV or the subdistrict court takes four to eight weeks on average. Will an appeal be lodged? Then it can just take 6 to 12 months.

With a settlement agreement, the dismissal is settled within weeks. For your employer, this has a number of advantages: 

• No long procedures which can last for months 
• Certainty of outcome with no surprises 
• Lower legal costs than in a court case 
• No risk of rejection by UWV or court 
• Maintaining control about the process 

Often, your employer does not have strong legal grounds for dismissal. This is more common than you think. In fact, your employer has to follow very strict procedures before the dismissal can be initiated. These are the most common reasons in recent years that we have come across in our legal practice:  

• Your employer is pushing for dismissal due to dysfunction. Your employer only cannot prove this, because it is dysfunction file incomplete, or procedural flaws contains.
• Your employer states that the reason for dismissal is economic reasons are. Your employer did not obtain permission from the UWV to dismiss you based on this reason, or did not properly follow procedures such as the separation principle.
• Your employer indicates that there is a disrupted working relationship has arisen, making cooperation within the same company impossible. However, this is a labour dispute that can still be resolved and insufficient measures have been taken to improve the situation. 
• Your employer does not argue a ground for dismissal. The burden of proof for dismissal is simply insufficient.
• Procedural mistakes were made in the preliminary process.

In these cases, a settlement agreement is often the only way to still legally terminate employment, without risking claims for damages in the Cantonal Court. 

A public lawsuit can be damaging for both parties, but often especially for your employer. With a settlement agreement, everything stays indoors and negative publicity is avoided.

Often, even confidentiality is agreed on the circumstances of the departure. This is especially important for employers in sectors where reputation is important for the company's bottom line. 

It may sound crazy: but a settlement agreement can also simply make money for your employer in the longer term.

Although a settlement agreement often gives you higher compensation than the legal minimum (transitievergoeding), it can still be cheaper for employers.

Lengthy proceedings not only cost legal fees, but also management time, lost productivity and possible hassle in the workplace.

These indirect costs can be much higher than an additional severance pay in a settlement agreement. 

A good settlement agreement contains several components that are important for you and your employer to part ways properly.

An extensive research within our legal practice shows that in 95% of the cases, there are mistakes in the settlement agreement you are initially offered by your employer.

We discuss all the different components piece by piece, so you know exactly what to look out for.

Each section has its own function and may affect your legal status after signing. No worries, we make sure it is not 'boring' legal jargon.

Check that all names, addresses and positions are listed correctly. A small mistake can cause problems later, for example when you apply for your unemployment benefit from the UWV:

• The correct names of both you and your employer
• Correct job title 
• Current address details 
• Employer's Chamber of Commerce number 

We cannot stress it often enough, but this part is very important for your right to WW benefits. The reason must be neutrally worded to preserve your right to WW. Formulations that are not accepted by the UWV include: 

• "Parties have a difference of opinion on the filling of the position" 
• "For business reasons, employer is forced to let job go" 
• "Cooperation between parties has not been satisfactory" 
• "Organisational changes make continuation of job impossible" 

It must explicitly state in the agreement that: 

• The initiative for termination lies with the employer 
• There is no culpable action on your part 
• You initially indicated that you objected to the dismissal

The end date must take into account the legal notice. This prevents an unemployment gap and ensures that you can apply for benefits immediately after your employment ends. These are the statutory notice periods, but also check your employment contract carefully:

• Years of service 0-5 years: 1 month
  
• Years of service 5-10 years: 2 months
• Years of service 10-15 years: 3 months
• Years of service over 15 years: 4 months

The transition compensation is the legal minimum, but you can often negotiate more. The compensation is usually expressed in different forms: 

• A fixed gross amount (e.g. €25,000 gross) 
• A number of monthly salaries (e.g. 6 monthly salaries) 
• The statutory transitional allowance plus an additional amount 
• A combination of the above 

Make sure to clearly state whether amounts are gross or net and when they are paid out. 

Clear agreements on all financial aspects are essential: 

• Payment of last salary including exact date 
• Holiday pay pro rata (calculated by employment end date)
• Accrued holidays (will you have them paid out or taken) 
• Any bonuses or profit sharing 
• 13th month or end-of-year bonus pro rata 
• Expense reimbursements still outstanding 

Depending on the reason for dismissal, exemption from work may be 1 of the components of a settlement agreement. It is important that this also specifies that you keep your salary during this period.

This gives you time to apply while you are still being paid. Important agreements on this: 

• Effective date of exemption 
• Retention of salary and fringe benefits 
• Reachability during exemption 
• Transfer of operations 

Concrete agreements on when to hand in things like: 

• Laptop, phone and other ICT tools 
• Lease car including fuel card 
• Access cards and keys 
• Company clothing or uniforms 
• Documents and files 
• Possible acquisition of assets 

Our legal practice shows that this part is often overlooked by employees, even though this provision can be very important. In fact, these clauses can significantly limit your future career opportunities. Negotiate: 

• Dropping the clauses entirely (both the non-competition clause and the non-solicitation clause) 
• Time or geographical area limitation (e.g. only competitors in the Amsterdam region with a radius of 50 kilometres)
• Compensation when the clause is enforced 
• Other specific exceptions (e.g. sector X does, sector Y does not)

The last thing you want is to have found a new job, but your new employer checks with your old employer to see how you performed there. Only to find out that your employer left a bad reference. That could just cost you that new job.

So good agreements on this are essential for your future: 

• A positive or (at least) a neutral certificate 
• What your employer says at reference checks 
• A LinkedIn recommendation

In our legal practice, we always ensure that draft texts are attached to the settlement agreement. This way, your former employer cannot deviate from it after your dismissal has taken place.

Pay close attention to the final discharge clause. This stipulates that once the agreement is executed, you cannot demand anything from each other. Make sure any exceptions are clearly named. 

For a complete overview of all terms that belong in a settlement agreement, we have a separate page with detailed information and examples. 

Preserving your right to a WW benefit is important for your financial security after redundancy. After all, you won't have a job for a while because you have to look for a new one.

The UWV strictly checks your settlement agreement for wording, so they can be sure the dismissal is not your fault.

One wrong word could mean that your benefits are rejected, with all the financial consequences. Below, we take you through the golden rules for maintaining your right to unemployment benefits.

The reason for termination must be through no fault of your own. The UWV accepts wordings such as: 

• "Employer has a difference of opinion with employee on job performance. Dismissal by employer could not but follow." 
• "For business reasons, employer is forced to let job go" 
• "Due to organisational changes, the position cannot be continued" 

The end date should be the statutory notice respect. Failure to do so will create an unemployment gap where you will not receive benefits for a period of time.

So make sure you always maintain the correct notice period. Even if your employer prefers to move towards a shorter notice period.

It UWV tests whether you have become involuntarily unemployed. In doing so, they look at: 

• The literal text of the agreement 
• Whether all required elements are present 
• Whether there are no contradictions in the text 

The UWV reads the agreement very literally. Even minor deviations from the standard wording can lead to rejection. Therefore, keep the standard formulations as much as possible to avoid problems.

From our legal practice, we experience on a daily basis that the settlement agreement contains incorrect wording, as a result of which, as an employee, you are not entitled to unemployment benefits after all. Below, we have listed common mistakes:

• "By mutual agreement" - This suggests mutual initiative
• "At its own request" - This means voluntary departure
• "Due to dysfunction" - This implies culpability
• Incorrect notice period - This creates an unemployment gap
• Conflicting formulations - This leads to rejection 

A "notional notice period" is often used in a settlement agreement. This means that: 

• Your employment ends formally in the short term 
• For WW purposes, it is pretended that the full notice period has been observed 
• You will be released from work but keep your salary during the notional notice period 
• You can start applying immediately without having to show up at the workplace 

Suppose you work for your employer for 7 years and sign a settlement agreement on 15 January 2025. 

• Legal notice period: 2 months 
• End date of employment: 31 March 2025 
• Start of unemployment benefit: 1 April 2025 
• Exemption from work: from 16 January 2025 

With a notional notice period, the employment would already end on 31 January, for example, but counts for the WW as if it ends on 31 March. Make sure you include this in your VSO as well.

In certain situations, you can deviate from the legal notice period: 

• By mutual agreement (but pay close attention to the unemployment consequences) 
• For urgent reasons (summary dismissal) 
• If the collective agreement stipulates a different deadline 
• With explicit permission from the UWV 

The basis of a settlement agreement is that it can be negotiated by employee and employer. So it is not some kind of diktat from your employer, in which a proposal can be made unilaterally.

Many workers do not know they can negotiate and accept the first proposal. This is a shame, because in most cases there is plenty of room to negotiate. 

Your position is often stronger than you think. Here, it is good to look at a number of factors that strengthen your negotiating position. Check for yourself if:

• Your employer is keen to get rid of you (without hassle) 
• The legal ground for dismissal is strong
• What your performance file looks like, are there many positive or negative reviews in here? 
• Procedural errors were made in the preliminary stages of your dismissal 
• You have specific knowledge that is difficult to transfer 
• The labour market in your sector is tight, or in other words: is it difficult to get a new job again?
• Does your employer want to avoid image damage?

Start high with your first proposal. For example, ask: 

• 1 gross monthly salary per year of service (based on the subdistrict court formula used previously) 
• Statutory transitional allowance + 50% extra 
• Compensation for missed career opportunities and bonuses 
• Compensation for loss of fringe benefits 

Negotiate favourable terms during your exemption: 

• Immediate exemption with full salary 
• Retention of all fringe benefits 
• Use of company assets during exemption (laptop, phone, company car) 
• Ability to work on job applications from home 

Try to have the clause waived or limited: 

• Dropping completely without consequences 
• Employer pays compensation on enforcement of the non-compete clause, after all, you cannot work for a competitor
• Geographical restriction (direct region only) 
• Temporary restriction (maximum 6 months) 
• Other, specific exceptions for certain employers 

Negotiate support for your future: 

• An outplacement process with a professional agency 
• Career coaching for 6-12 months 
• Training budget for retraining or further training 
• Possible retention of ongoing training which you are now following

1. Take sufficient time 
   Don't be pressured. As indicated above, many employers are in a hurry and would like to finalise this as quickly as possible and without hassle. Know that as an employee, you are entitled to time for reflection to reconsider everything. 
2. Demand for substantiation 
   Why exactly is your employer offering this compensation? Why this termination date? Let your employer justify its proposals set out in the settlement agreement. 
3. Use silences
   Make a counter-proposal and leave silences after this. Let your employer look for solutions. You don't have to fill the silence yourself.
4. Think in total packages 
   Don't just look at money you receive (transition allowance and severance pay), but the total picture, including all fringe benefits. 
5. Get professional help 
   Can't figure it out yourself? Or would you like help from one of our dismissal lawyers in advance? Then take contact us free of charge and without obligation. An experienced lawyer sees opportunities you miss and knows the fees charged in similar cases. 

Since 2015, you are legally entitled to cooling-off period after signing a settlement agreement (VSO). The reason the government chose to institute a reflection period is because employers often pressure employees to sign.

This arrangement protects you from hasty decisions and gives you the option to still waive the agreement without giving a reason. 

The statutory cooling-off period has the following features: 

• Duration: 14 calendar days (note: these are calendar days, so this includes weekends) 
• Start: The day after signing by you and your employer
• Revocation: In writing. You do not have to give a reason to your employer for this.
• Consequence: The agreement is rescinded in full 

The cooling-off period is a legal right that cannot be excluded. Even if the contract states that you waive the cooling-off period, this right simply remains. 

You automatically get 21 days reflection time instead of 14 days if: 

• The cooling-off period is not explicitly mentioned in the contract 
• You were not informed in writing of your right to a cooling-off period 
• The information about the cooling-off period is incorrect or incomplete 
• The employer has not made you aware of the possibility of legal advice 

If you decide to revoke the agreement, this: 

• Written event (email is already sufficient, but registered mail is safer) 
• Being timely (within the period of 14 or 21 days) 
• Being clear ("I hereby revoke the settlement agreement signed on [date]") 
• Be received by your employer within the deadline 

After revocation, the situation is as if no agreement ever existed and your employment contract simply remains. 

You can use the reflection period strategically: 

• To still seek legal advice 
• To explore finding a job elsewhere 
• To drop emotions and decide rationally 
• To start additional negotiations 

Be careful not to use the cooling-off period lightly and always strategically. This may in fact put relations on edge. 

With your signature, you irreversibly agree to: 

• The end of your employment 
• The agreed terms 
• Giving up your dismissal protection 
• Final discharge (you cannot claim anything later) 

After signing (and the expiry of the reflection period), you cannot go to court, even if it later turns out that you were entitled to more. Want to know more about the disadvantages of the settlement agreement? You can read here MORE ABOUT.

Through the subdistrict court, you can get more in certain cases: 

• Fair compensation for your employer's seriously culpable actions 
• Higher compensation for gross procedural errors 
• Full transitional allowance plus additional compensation 
• Reimbursement of legal fees 

A judge looks at the situation objectively, while in negotiations you depend on your employer's insight and willingness. Is your employer not forthcoming? Then, in some cases, it may be better to go to court.

Proceedings through the UWV or court will involve an objective assessment of whether: 

• The dismissal is justified
• The correct procedure has been followed 
• You are adequately compensated in the form of transitional compensation and any equitable remuneration
• Your rights are respected 

A settlement agreement completely lacks this independent review. 

After signing, you usually cannot claim anything, even if it later turns out that: 

• You were entitled to higher compensation 
• There was discrimination, for example 
• Your employer withheld important information 
• There were errors in the calculations (calculate your statutory transitional compensation here)

• Loss of salary continuation: je are entitled to 70% wage payment for at least 2 years (often 100% in year 1, decreasing in year 2)
• Unemployment benefit is at risk: hhe UWV may rule that you became unemployed voluntarily and are therefore not entitled to WW benefits
• No time for full recovery: je have to reapply immediately while you are still sick. 
• Weak negotiating position: je are vulnerable and less resilient during illness, take this into account during negotiations

We have a lot of experience with people who are sick and are offered a settlement agreement. Our advice is always the same: 

• Don't rush to sign your settlement agreement, preserve calm
• Are you considering leaving with a VSO after all? Then always have your VSO legally assessed by a dismissal lawyer
• In negotiations, you should make sure that you demand much higher compensation. In fact, there are a large number of reasons why there is a real chance that you will not be able to return to work just like that.
• First, have your rights during illness explained by your employer. Require him to do so.
• Have the negotiations done by an experienced dismissal lawyer. After all, your position is vulnerable during illness.

If you do decide to sign during illness, demand compensation for, say: 

• Missed wage payment (up to 2 years)
• Giving up dismissal protection
• Risk of unemployment problems
• Cost of private guidance
• Missed reintegration opportunities

You misrepresented what you were drawing. Examples: 

• You thought you were getting less severance pay than was actually the case 
• You were not aware of major reorganisation plans 
• You did not understand the implications for your pension 
• There was a miscalculation to your detriment 

Your employer deliberately lied or withheld important information: 

• On the company's financial situation 
• On alternatives to dismissal 
• About your performance (false accusations) 
• On the level of customary fees