Everything about the settlement agreement

A settlement agreement (VSO) is the written agreement by which the employer and employee terminate the employment contract by mutual consent. It requires a written agreement (Article 7:670b of the Dutch Civil Code), with a 14-day reflection period for the employee (21 days if they have not been explicitly informed of the term). Unemployment benefit rights remain unchanged — provided there is no "urgent cause" stated in the agreement and the agreement meets the UWV (Dutch Unemployment Insurance Agency) assessment criteria. For SME employers, this is often the smartest route to termination: fast, no UWV procedure, and predictable costs.

The short answer

• What: termination of employment contract by mutual agreement.
• Legal basis: Article 7:670b of the Dutch Civil Code.
• Required in writing: verbal agreements are not binding.
• Cooling-off period: 14 days (21 if the employee has not been informed of the deadline).
• WW: remains, provided VSO is formulated neutrally.

What should it contain?

A good VSO contains at least:

• Name and details of employer and employee.
• End date.
• Employer's initiative (crucial for unemployment benefits).
• Reason for termination (neutral — no urgent cause).
• Final settlement: salary up to end date, vacation days, holiday allowance, 13th month, transition payment.
• Any termination payment (“golden handshake”) in addition to or instead of transition payment.
• Exemption from work (whether or not to work during the notice period).
• Return company assets (car, laptop, phone).
• Confidentiality and any non-compete/non-solicitation clause.
• Mention of cooling-off period.
• Final discharge: no further claims on either side.

The cooling-off period

Since July 1, 2015 (WWZ), the employee has a 14-day reflection period to dissolve the settlement agreement without stating a reason. If the employee is not explicitly informed of this period in the settlement agreement, it becomes 21 days.

The cooling-off period can only be used once every 6 months — otherwise, the settlement agreement remains valid. This prevents strategic use by employees.

protect unemployment benefits

The VSO must comply with UWV regulations to retain unemployment benefits. Conditions:

• Initiative lies with the employer (not with the employee).
• No urgent reason for dismissal.
• The notice period is observed.

If the voluntary settlement agreement meets these requirements, the employee can apply for unemployment benefits after termination. In case of doubt — for example, because the initiative came from the employee — have an employment lawyer review the matter.

Transition payment

Statutory entitlement upon dismissal initiated by the employer: one-third of a monthly salary per year of service. In 2024: a maximum of €94,000 or an annual salary in case of higher income. In a voluntary severance agreement, a higher “termination payment” can be agreed upon — often common practice to secure prompt cooperation.

For the calculation: gross monthly salary × years of service × 1/3. Shorter employment: pro rata.

Negotiation tips

For employer:

• Start with a reasonable but conservative proposal.
• Calculate the transition payment in advance so you know what the minimum costs are.
• Offer time off frequently — accelerates completion.
• Take into account a negotiation margin: usually €5,000–€20,000 above the transition payment.

For employee:

• Request transition payment plus supplement (calculation differs).
• Negotiate employer's contribution to legal fees (€500–€2,500 is standard).
• Check your unemployment benefit position before you sign.
• Request an outplacement budget with a major appointment.

How much does VSO cost?

• Legal assistance for the employer: € 500 – € 2.500.
• Legal assistance for employees: often reimbursed by the employer (€500 – €2,000).
• Transition payment and termination payment: depending on the situation.

Compared to a UWV procedure or the subdistrict court, a settlement agreement is often cheaper and faster — typically with a turnaround time of 2–6 weeks.

Honest recommendation

For most non-conflictual dismissals, a settlement agreement is the smartest route. It costs less than an appeal to the UWV (Dutch unemployment agency) or a lawsuit, is faster, and provides certainty for both parties. Invest in well-written terms — a sloppy settlement agreement leads to remedial negotiations or loss of unemployment benefits. Employers: reimburse the employee's legal costs (€500–€2,000); this smooths out the process.

For other dismissal routes: dismiss employee.

Frequently Asked Questions