Settlement agreement: what exactly is it?

The importance of a good settlement agreement is significant. Without a good settlement agreement, you risk not receiving unemployment benefits. We always advise employees to have the settlement agreement checked by our legal experts. This check is free of charge for members of De Horecabond.  

It is important that the settlement agreement does not jeopardise the entitlement to unemployment benefits. Additionally, whether the settlement agreement includes the compensations and provisions that it should contain based on the law, the employment contract, or the social plan. Below you can read what we pay attention to when checking a settlement agreement.

Reason for dismissal

We check, for example, whether the correct provisions are included in the settlement agreement regarding the reason for dismissal. A neutral reason for dismissal should be included, such as a difference of opinion or an economic reason, it should be clear that the employer has initiated the dismissal, it should be evident that there is no urgent reason for dismissal, and that there are no possibilities for redeployment within your employer's company. If these matters are mentioned in the settlement agreement, it is clear to the UWV that you are not to blame for the termination of your employment.

Salary and other details

It is also important that the correct details are included in the settlement agreement. Is the start date of employment correct? Is the gross salary correctly stated and is the termination date correct? The amount of your unemployment benefits is partly determined based on your gross salary, and we want to prevent any disputes about this. The amount of your gross salary and your start date of employment are also important for calculating the transition compensation you are entitled to.

Notice period

Another important point is the notice period. If a too short notice period is included, you will receive unemployment benefits later and will be without income for some time. According to the law, the notice period is 1 month if you have worked for your employer for less than 5 years, 2 months if you have worked for your employer between 5 and 10 years, 3 months if you have worked for your employer between 10 and 15 years, and 4 months if you have worked for your employer for 15 years or longer.

Exemption from work and continued salary payment

You can make arrangements about exemption from work with continued salary payment, for example, from the date of signing the settlement agreement until the end date. This gives you the time and space to look for another position.

Vacation days and holiday allowance

You can agree on how to handle the payment of accrued holiday allowance and unused holiday hours. This is often already agreed upon in a social plan.

Termination compensation

Upon the termination of employment at the employer's initiative, you are entitled to a transition compensation. It is often agreed in a social plan or settlement agreement that the transition compensation is increased by a certain factor. The termination compensation is then the transition compensation multiplied by the multiplication factor agreed in the social plan.

Non-compete and non-solicitation clause

In the settlement agreement, you can agree that any potential non-compete or non-solicitation clause will lapse. A non-compete and/or non-solicitation clause often prohibits you from working for a competitor or former clients of your previous employer and can hinder you in finding a new job later in your career. So be mindful of that.

No reimbursement of training costs

In many training agreements, it is agreed that training costs paid by the employer must be reimbursed if you leave employment within a certain number of months or years. We advise agreeing in the settlement agreement that you do not have to repay training costs.

Positive testimonial

The settlement agreement often includes that you will receive a positively worded testimonial upon leaving employment and that positive references will be provided.

Legal assistance costs

In many cases, your employer will want to contribute to the legal costs for having the settlement agreement checked. Invoices often need to be submitted to your employer within a certain period after signing the settlement agreement (for example, within two weeks). So be mindful of that!

Outplacement/training costs

In many cases, your employer will want to contribute to an outplacement programme or training to be undertaken. This reimbursement is often subject to conditions, so be mindful of that.