Drawing up a settlement agreement
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.
What is 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. This is also known as dismissal by mutual consent. So, you do not dismiss the employee on the spot (immediate dismissal). You only draw up a settlement agreement when you yourself propose to terminate the employment agreement. Not when your employee resigns.
Why draw up a settlement agreement?
The settlement agreement contains agreements you make about the dismissal. The agreement is proof of the agreements you make together. This prevents a dismissal process through the Employee Insurance Agency (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. You must record at least 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 the reason for dismissal has nothing to do with the employee's behaviour
- that it is a termination by mutual consent
- the date on which the employment contract ends
- that you agree on what still must be paid, for example, holiday pay
- 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 (modelovereenkomst in Dutch) on UWV.nl.
Transition payment with settlement agreement
Is it your proposal to terminate the employment contract? If so, your employee may receive a transition allowance after the dismissal. In a settlement agreement, you agree together not on a transition allowance but on a severance payment.
Settlement agreement during illness
Is your employee sick or unfit for work for more than 2 years? Then you can end the contract in agreement with your employee. You must agree this in a settlement agreement. With such an agreement, you do not need to request permission for dismissal from UWV.
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.
Your employee does not have to agree
Your employee does not have to agree to your proposal. In that case, your employee will remain in your employment or you will start proceedings to dismiss your employee.