How Does a Settlement Agreement Work in the Netherlands?

The reason for termination is particularly important, as employees in the Netherlands cannot claim unemployment benefits if they resign voluntarily. Settlement agreements also typically cover arrangements regarding severance pay, compensation for legal fees, payment for unused vacation days or holiday allowances, the return of company property (e.g., cars, laptops, smartphones), and agreements about exemption from work duties.

When Is a Settlement Agreement Used?

Settlement agreements can be used for various reasons. These include conflicts that make collaboration impossible, business-related reasons (restructuring, lack of work), underperformance, or even dismissal for cause.

In some cases, it may not be in the employee’s best interest to sign a settlement agreement, especially if it is unclear that the termination is initiated by the employer. Such situations can have significant consequences.

Seeking Professional Advice

It’s advisable for both parties to seek expert advice. For employers, this often involves assistance in drafting the agreement, while employees should focus on understanding the terms of the settlement agreement. Employees are strongly encouraged not to sign any document without first consulting a professional.

Experts can often provide assistance in both Dutch and English. For instance, it’s generally not recommended to sign a settlement agreement if you’re ill, as this could affect your eligibility for sickness benefits. Similarly, an employer cannot terminate a permanent contract during pregnancy due to the “prohibition of dismissal.” Exceptions exist, which highlights the complexity of knowing your rights and obligations as either an employer or employee.

Settlement Agreement and Unemployment Benefits

The same applies to unemployment benefits (WW), which are not granted if an employee resigns voluntarily or is dismissed for cause. Even in cases where the employee is at fault, it’s wise to have the settlement agreement reviewed to explore any available options.

The key takeaway is never to resign voluntarily or sign a settlement agreement without careful consideration. This is perhaps the most important advice regarding termination in the Netherlands.