Drawing up a settlement agreement

Published by:
Netherlands Chamber of Commerce, KVK
Netherlands Chamber of Commerce, KVK

Do you and your employee mutually consent to end an employment contract? Then you must reach a settlement agreement. Within it, you document the agreed terms of the termination of contract.

Why a settlement agreement?

In a settlement agreement (also known as a termination agreement. ‘vaststellingsovereenkomst’ in Dutch) you and your employee both agree to end the employment contract. In the agreement, you establish the conditions under which you can terminate the employment contract. This prevents a dismissal process through the Employee Insurance Agency (Uitvoeringsinstituut Werknemersverzekeringen, UWV). Also going to the subdistrict court is not necessary with a termination agreement.

What is recorded in a settlement agreement?

You determine the content of the settlement agreement together with the employee. In any case, you must record this information:

  • the name and address of the employer and the employee
  • that you have proposed to terminate the employment contract, and what the reason is
  • that there is no urgent reason for dismissal
  • that it is a termination by mutual consent
  • the date on which the employment contract ends
  • the date on which you make a final settlement
  • location and when you and the employee signed the agreement
  • that the employee has a 2-week reflection period

If necessary, you and your employee can record additional agreements in the settlement agreement. You can find an example of an agreement (in Dutch) on UWV.nl.

You terminate the employment agreement

You only draw up a settlement agreement when you have proposed to terminate the employment agreement. Make it clear that the proposal for dismissal is initiated by you, the employer. If you do not, your employee may not be entitled to unemployment benefits.

Note: Your employee is not obliged to sign the settlement agreement. You cannot force them to agree to your proposal.

Pay attention to the notice period

You have recorded a notice period in the employment contract. This also applies when you end the working relationship with a settlement agreement. Take this into account when determining the end date.

Your employee has a 2-week reflection period

After signing, does your employee disagree with the made agreements or with the dismissal? Then they can change their mind. They must notify you in writing within 2 weeks. You can agree on a longer reflection period. You must record this 2-week reflection period in the settlement agreement. If you do not, the reflection period will be 3 weeks. A shorter refection period (or a cooling-off period) is not allowed

Note: In the case of dismissal by mutual consent, there is no urgent reason for dismissal. So you can not dismiss the employee on the spot (op staande voet, in Dutch).

Questions relating to this article?

Please contact theNetherlands Chamber of Commerce, KVK