Settlement Agreement in the Netherlands
Understand your rights before you sign a vaststellingsovereenkomst — and make sure the terms are fair.
What is a settlement agreement?
A settlement agreement (vaststellingsovereenkomst or VSO) is a mutual agreement between you and your employer to end your employment contract. It is a common way to formalize the termination of employment contracts during a reorganization in the Netherlands.
The legal basis for the settlement agreement is found in Article 7:900 of the Dutch Civil Code. A VSO is a binding document that sets out all the terms of your departure: the end date, severance payment, notice period, garden leave, reference letter and any other conditions agreed upon.
Unlike a unilateral termination through UWV, a settlement agreement requires your consent. This gives you negotiating leverage — but only if you understand what you are agreeing to. Many expats unfamiliar with Dutch employment law sign agreements without realizing there may be room to negotiate better terms. If you and your employer cannot agree on the terms, the employer will need to initiate a formal dismissal procedure, for example through UWV or the subdistrict court.
Key elements we review
- Severance amount and calculation method
- End date and notice period
- Unemployment benefit (WW) eligibility
- Final settlement and discharge clause
- Non-compete and non-solicitation clauses
- Garden leave arrangements
- Bonus, holiday pay and accrued leave
- Reference letter and announcement
- Legal costs contribution
Cooling-off period and unemployment benefits
The statutory cooling-off period
Under Article 7:670b paragraph 2 of the Dutch Civil Code, you have a statutory cooling-off period of 14 days after signing a settlement agreement. During this period, you can withdraw your consent without giving a reason by sending a written statement to your employer.
Your employer is legally required to inform you in writing about this cooling-off period. If the employer fails to do so, the period is extended to 21 days. This is an important safeguard that prevents employees from making an irreversible decision under pressure.
The cooling-off period can only be invoked once every six months. If you withdraw within the cooling-off period, the employment contract is revived as if no agreement had been concluded.
Protecting your WW eligibility
A settlement agreement must be carefully drafted to protect your right to unemployment benefits (WW-uitkering). After the end of your employment, UWV will assess whether you qualify for benefits.
To protect your WW eligibility, the agreement must clearly state that the initiative for termination came from the employer and that there is no culpable unemployment. The grounds for termination must be neutrally formulated. There must be no urgent cause or culpable unemployment.
The so-called fictitious notice period is also important. The end date in the VSO must take into account the applicable notice period. If the end date is set too early, UWV may delay your WW benefits until after the fictitious notice period has elapsed, leaving you without income for a period.
Key components of a settlement agreement
Severance payment
The transition payment (transitievergoeding) often serves as the starting point for negotiations. It amounts in principle to one-third of a gross monthly salary per year of service, with partial years calculated on a pro rata basis. Depending on the circumstances — such as a social plan, procedural risk for the employer, your seniority or labor market position — there may be room for additional arrangements or a higher payment.
End date and notice period
The end date is a critical component. It must account for the applicable notice period to protect your unemployment benefit eligibility. The statutory notice period for employers ranges from one to four months, depending on the length of your employment.
Final discharge clause
Most settlement agreements include a final discharge clause (finale kwijting), whereby both parties declare they have no further claims against each other. It is important to verify exactly what falls under this discharge. Entitlements you wish to preserve — such as outstanding bonuses or accrued holiday days — must be explicitly excluded.
Non-compete and non-solicitation
A settlement agreement provides an opportunity to have a non-compete clause (concurrentiebeding) or non-solicitation clause (relatiebeding) waived or limited. The wording of a final discharge clause can affect the interpretation and enforceability of post-contractual restrictions. It is important to explicitly record which post-contractual clauses remain in force. Ensure that clear arrangements are made on this point in the agreement.
Garden leave
In many settlement agreements, the employee is placed on garden leave (vrijstelling van werk) during the notice period. You are no longer required to work but continue to receive your salary. This period can be used to search for a new position or pursue training.
Additional terms
Beyond severance, there are often other items that can be negotiated: outplacement, reference letter, internal and external communication about your departure, continuation of certain group insurance policies, and a contribution towards legal costs. In practice, a legal costs contribution is included in most settlement agreements.
Common pitfalls for expats
Signing too quickly
Employers sometimes create urgency to get you to sign. Do not sign any documents without legal advice. In most cases you have the right to a statutory cooling-off period, but it is wiser to seek expert advice before signing rather than relying on the option to withdraw afterwards.
Not assessing WW risk
An error in the wording of the VSO can jeopardize your unemployment benefit rights. If the agreement does not clearly state that the initiative came from the employer, this may have consequences for your WW eligibility. This risk is easily prevented with the correct wording.
Ignoring the end date
If the end date does not align with the applicable notice period, you may face a gap without income. UWV applies a fictitious notice period: your WW benefits only start after this period has fictitiously elapsed.
Overlooking expat-specific issues
As an expat, you may have additional concerns that a standard VSO does not address: the impact on your 30% ruling, residence permit implications, relocation costs, international tax consequences, and equity or RSU vesting schedules. These require specialized attention.
Why get legal guidance on your VSO?
A settlement agreement is a legal document with significant financial and employment law consequences. Without expert review, you risk giving up important rights or accepting terms that are not in your interest.
ReorgLegal reviews your VSO on all relevant points: severance, end date, notice period, WW eligibility, final discharge, non-compete clauses, garden leave and other provisions. We advise you on the room for negotiation and, if desired, conduct the negotiation on your behalf.
Our goal is for you to make an informed decision, with full insight into your rights and the possibilities available to you.
The transition payment as a starting point
The statutory transition payment amounts in principle to one-third of a gross monthly salary per year of service, with partial years calculated on a pro rata basis. For an employee with ten years of service, this amounts to roughly three gross monthly salaries. Whether there is room for a higher payment depends on the specific circumstances: the procedural risk for the employer, the existence of a social plan, your age, years of service and position in the labor market. We assess what is reasonable and achievable in your situation.
Frequently asked questions
Am I obligated to sign?
No. A VSO is an offer. You are not obligated to sign and can negotiate better terms. If you do not sign, the employer will need to initiate a formal dismissal procedure.
Can I still withdraw after signing?
Yes, you have a statutory 14-day cooling-off period after signing (21 days if your employer did not inform you in writing about the cooling-off period).
Does my employer pay for legal advice?
In most cases, a contribution towards legal costs is included in the VSO. This is a standard negotiation point.
What if I disagree with the offer?
You can always make a counter-proposal. The employer has an interest in reaching agreement — a formal dismissal procedure generally takes more time and involves procedural risks.
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