The disadvantages of a settlement agreement (2026)

Since the introduction of the Work and Social Security Act In 2015, an increasing number of employment contracts between employers and employees are being concluded with a settlement agreement, without requiring the involvement of a judge.

A very good development then. Experts are therefore predominantly enthusiastic to use this medication on discharge, but recently (2025) the UWV warned also that there can be significant risks in signing a VSO, particularly in cases of illness.

In addition to these risks associated with illness, we observe in our legal practice that there are other disadvantages to a settlement agreement. Based on input from our former clients, we conducted research into the biggest drawbacks of the settlement agreement process. We have listed the 7 biggest disadvantages for you. Based on our questionnaire, we also indicate what percentage of respondents experienced this aspect as a disadvantage.

Our own research among former clients reveals a disturbing picture: no less than 88% of respondents stated that they did not fully understand the legal jargon in their settlement agreement at the time of signing.

This percentage highlights a fundamental problem in Dutch dismissal practice: employees sign legal documents whose full meaning and consequences they only understand later. By then, it is often too late to go back on them, especially because a settlement agreement often involves a final discharge, ..., meaning that after signing, you have no further claims against your employer.

Emotionele stress en onzekerheid is wat betreft onze cliënten het grootste nadeel van de vaststellingsovereenkomst. Maar liefst 76% van de ondervraagden gaf aan hiermee te maken hebben gehad tijdens het vso traject.

This is mainly due to the negotiation you have as an employee with your employer. In many cases, the reason why termination by mutual consent is often due to a difference of opinion, dysfunction, a strained working relationship, or long-term absence due to illness.

If these reasons underlie the dismissal, there may often already be a breakdown in communication between employer and employee. Not exactly a great starting point to enter into negotiations regarding your dismissal, then.

A settlement agreement often only covers the main points like the end date and compensation, but easily overlooks secondary employment conditions. Think about accrued but unused holiday days, bonus schemes, pension entitlements, outstanding expense reimbursements, or the private use of a company car during the cooling-off period.

If these matters are not explicitly included in the settlement agreement, you will lose the right to claim them later through the final discharge. Employers have no interest in pointing this out to you, meaning many employees unknowingly waive financial claims that they are actually entitled to. This can amount to significant sums in hindsight, which you will never receive again.

Employers like certainty and in many cases want to make swift progress. It is in their financial interest for the employment contract to end as quickly as possible, as they have to continue paying the salary until the formal end date. By overwhelming employees, they try to quickly obtain a signature to settle everything as quickly and cheaply as possible. They present employees with a settlement agreement and want it signed as soon as possible. 

We often receive feedback from clients that employers threaten to withdraw the offer, a costly trip to court if not signed, or even threaten immediate dismissal. This figure of 34% underscores why the legislator introduced a statutory cooling-off period. 

medewerker zich bewust moet zijn van het feit dat er een statutory cooling-off period is for signing a settlement agreement. This is set at 2 weeks. 

A good employer will therefore always give you at least this amount of time to think carefully about the conditions stipulated in the settlement agreement yourself, but also to seek legal advice.

Another significant disadvantage that often arises with a settlement agreement is a too low or no severance pay. Employers are keen for the employment contract to end, but they also want to terminate an employment contract as 'advantageously' as possible. 

Here, an employer often has a significant advantage, namely knowledge and resources. In larger organisations, settlement agreements are more common, and employers have an edge here. They know what they are legally obliged to pay out at a minimum and often initiate the settlement agreement themselves. Many employees are insufficiently aware that all conditions in a settlement agreement are negotiable and often agree to just the legal minimum, or even less than that.

• Employer only offers the statutory transition payment, while there is scope for more.
• Remuneration is wrongly reduced due to "economic circumstances", especially when, for example, there is a reorganisation
• No compensation is offered for untaken holiday days. In many cases, employers state that it was up to the employee to take those holiday days in good time themselves.

Besides an insufficient severance pay, there are other disadvantages for employees in a settlement agreement, namely the restrictive clauses. This is often overlooked by employees because they seem unimportant. Many employees even skip over this, as it only becomes problematic when such a clause suddenly appears to apply in practice. Therefore, they can significantly restrict you as an employee.

• Non-compete clause Prohibits working for a competitor, often for 1-2 years.
• Confidentiality agreement You are not allowed to have contact with your former employer's customers.
• Confidentiality clause Often remains in effect for years after your dismissal.

Deze bedingen kunnen de zoektocht naar nieuw werk behoorlijk bemoeilijken. obstruct. Especially in specialised sectors, this could mean you are forced to look for different work or, for example, have to move to another region.

We therefore always advise employees to critically examine these restrictive limitations.

Final release and discharge is a clause in an settlement agreement whereby the employer and employee can no longer make any further claims against each other after signing. Our research shows that a small proportion of employees experience this as a disadvantage. Although in our own survey only 3% of respondents experienced this as a disadvantage, our survey only included clients who had sought legal assistance. For employees who have not sought legal assistance, this disadvantage may be experienced more frequently.

Employees experience a lack of clarity as a major disadvantage because they often don't understand precisely what is covered by the final settlement. For example, an employee might ask for a bonus that hasn't been explicitly named as part of the agreement, prompting the employer to refer to the final settlement. This lack of clarity leads to employees feeling disadvantaged afterwards.