Have you received a settlement agreement? Should you sign it or not?
Your employer has presented you with a settlement agreement. Don’t sign it until you know your legal standing and negotiating position. In this article, you’ll learn exactly what a settlement agreement is, when you should and shouldn’t sign it, and how to get the most out of the negotiation.
What is a settlement agreement?
A settlement agreement (also known as a VSO or termination agreement) is a written agreement through which you and your employer mutually agree to terminate the employment relationship. No court or UWV is involved. In practice, the VSO is by far the most common way to terminate an employment contract, as it is faster and more predictable for both parties than litigation.
You are not required to sign
Keep this in mind: as long as you don’t sign, you remain employed. Your employer cannot force you to agree. If you refuse, your employer will have to take a different route—through the UWV or the subdistrict court. Those routes are time-consuming, expensive, and uncertain, and that is precisely what strengthens your bargaining position.
If your employer lacks a valid reason for termination (no performance improvement plan, no disciplinary record, no business necessity), you’re in a very strong position. The weaker your employer’s position, the more you can ask for in negotiations.
The 14-day cooling-off period
Once you’ve signed the agreement, you have a 14-day cooling-off period by law. Within that period, you can terminate the VSO without giving a reason by sending a written notice to your employer. If the cooling-off period isn’t specified in the VSO, it’s automatically extended to 21 days. However, don’t count on this as a strategy—it’s obviously better to make sure everything is in order before signing. That said, in certain cases, the cooling-off period can be used strategically.
15 things to check
Before signing, check the VSO for at least the following points:
Initiative and reason for termination. The VSO must state that the decision to terminate your employment was initiated by your employer and that you are not at fault. This is essential for your unemployment benefits application.
End date and notional notice period. The end date must take into account the notice period your employer would be required to observe if they were to terminate your employment. Otherwise, you will not (yet) be eligible for unemployment benefits, and there will be a gap in your income.
Amount of the severance pay. You are legally entitled to a transition payment of 1/3 of your gross monthly salary for each year of service. In a voluntary severance agreement, this is typically the starting point for negotiations.
Unemployment benefits. A well-drafted VSO does not preclude an application for unemployment benefits. Errors in the wording may result in the UWV denying the claim.
Leave of absence. If you are granted a leave of absence, you will continue to receive your salary but will not be required to come to work. This gives you time to look for a new job.
Vacation days and vacation pay. Check how many days you have left and whether they will be paid out.
Bonuses and variable compensation. Are you entitled to a bonus or a thirteenth month’s salary? This must be explicitly stated in the employment contract. If it’s not included, you may not be able to claim it after signing.
Non-compete and non-solicitation clauses. Check whether your employment contract includes such a clause and discuss whether it expires.
Final release. Once signed, neither you nor your employer can make any further claims. Make sure everything is included before you sign.
Legal fees. Many employers contribute toward your legal fees. Amounts ranging from €1,000 to €1,500 are common.
Letter of recommendation. Make sure you receive a positive letter of recommendation and positive references.
Reporting sick. Are you sick at the time of the VSO? Exercise extra caution. Signing the VSO while sick could result in the loss of your benefits (both unemployment and sickness benefits).
Social plan or collective bargaining agreement. Is a social plan or collective bargaining agreement applicable? Verify that the VSO is in line with collective agreements.
Outplacement budget. A separate budget for outplacement or training helps employees find a new job.
Pension and other benefits. Consider the implications for pension accrual, health insurance, or a company car.
When you're better off not drawing
Don’t just sign a termination agreement if you’re sick, unless you’ve specifically sought legal advice. The prohibition on termination can protect you while you’re sick. Signing such an agreement could result in the loss of your entitlement to unemployment and sickness benefits.
In addition to illness, extra caution is warranted during pregnancy (enhanced protection against dismissal), if your employer does not have a valid reason for dismissal, or if the amount offered is significantly lower than the transition payment. In these cases, you may be in a stronger position by refusing to sign and asking your employer to come up with a better offer.
Determining your negotiating position
The key question is: Can my employer fire me if I refuse to sign? If the answer is no—because there is no formal record of the issue, no proper performance improvement process has taken place, or there is no legitimate business need—then you’re in a strong position. An employment lawyer can assess your situation, review the termination agreement for legal flaws, and draft a counterproposal that your employer will take seriously.
Have you received a VSO?
We’ll review your settlement agreement, verify that the compensation amount is correct, and negotiate if necessary. In 95% of cases, your employer will cover the costs.
Have your VSO inspected →Frequently Asked Questions
This is strongly recommended. By signing a VSO, you waive important rights. Errors in the wording could result in you not receiving unemployment benefits, your compensation being too low, or a non-compete clause remaining in effect unnecessarily.
No. A settlement agreement is based on mutual consent. Without your signature, the employer cannot terminate the employment contract in this way. You have leverage in the negotiations.
In more than 95% of cases, yes. Most settlement agreements include a provision requiring the employer to contribute to the costs of legal counsel.
Yes, provided the VSO has been drafted correctly. Among other things, it is important that the initiative comes from the employer, that a neutral ground for termination is included, and that the notice period is correctly specified.
Yes, virtually all settlement agreements are negotiable. Consider the initial proposal as a starting point. Common points of negotiation include a higher severance package, a more favorable termination date, exemption from work, and the removal of a non-compete clause.
