A settlement agreement is a termination of employment by mutual agreement. Many employees think the terms are fixed once the agreement is on the table and that there can be no negotiation. In reality, a settlement agreement actually provides considerable room for negotiation. Employers often choose this route to avoid legal proceedings and are then willing to make concessions. Provided you know what to look out for.
Severance pay: a matter of substantiation
The most discussed bargaining item is severance pay. Since 2015, there has been a statutory minimum in the form of the transition compensation. It amounts to one-third of a monthly salary per year of service and is based on the gross monthly salary including fixed salary components.
Yet employers are often willing to pay more than this legal minimum. The amount of compensation is closely related to the grounds for dismissal and the strength of the case. If an employer has little or no legal justification for the dismissal, the risk of a negative outcome in UWV or subdistrict court proceedings increases. In such a case, it will usually be possible to negotiate a larger severance payment. Even in the case of so-called reasonable grounds for dismissal, i.e. a good dossier, a termination arrangement in excess of the statutory provisions can be negotiated in the vast majority of cases. Employers are keen to reach a negotiated solution.
Exemption from work: paid-for home
Another important bargaining option is work release. Many settlement agreements agree to release the employee from work with pay until the official termination date. This provides not only financial security, but also space to quietly apply for a new job. In addition, it is fiscally more favorable to continue employment for several months compared to a lump-sum severance payment. In principle, the period of exemption is negotiable and can be extended depending on the situation.
Notice period and retirement
The formal termination date is also negotiable. However, this date must be carefully coordinated with the notice period to ensure the right to unemployment benefits. In some situations it may be beneficial to move the date forward or backward, for example for tax or practical reasons.
Other appointments
Apart from compensation and severance, the parties can set forth additional agreements. Consider the settlement of outstanding vacation days, the dropping of a non-competition clause, a study expense arrangement or the inclusion of a positive reference. Compensation for legal fees is also often a topic of discussion, and employers are willing to pay them in the vast majority of cases.
Why negotiation makes sense
For employers, a settlement agreement is often a practical solution. It avoids lengthy proceedings and uncertainty about the outcome. This is precisely why there is room to negotiate. Legally strong guidance ensures that you do not miss any opportunities and achieve optimal conditions.
Always have your VSO checked by a specialist
A settlement agreement is legally binding. If you sign without advice, you may lose your right to unemployment benefits or settle for too low a compensation. It is therefore very important to seek legal advice from a lawyer specialized in labor law. At Arbeidsadvocaat.nl we can check the content of your VSO on 35 points for € 500 and help you negotiate a better settlement. Our lawyers can assess the conditions under which an employer is willing to 'settle' and ensure that you get the best possible termination arrangement.
This blog was written by mr. Stijn Blom, employment lawyer at Arbeidsadvocaat.nl B.V. Stijn has extensive experience in employment law and supports entrepreneurs and employees on a daily basis with a variety of employment law issues. From dismissal cases to drafting watertight contracts and regulations - with his practical and personal approach, he helps employers and employees move forward. Want to know more? Visit Stijn's page.
Arbeidsadvocaat.nl is happy to think with you if you have questions about severance pay. Please feel free to contact us .
April 2025
