Settlement Agreement according to Dutch Law
Our Dutch lawyer Labour and Employment Law in Amsterdam, The Netherlands, is specialist employment solicitor advising foreign employees and expats on settlement agreements (Compromise Agreement, Employment Exit Agreement, Employment Separation Agreement or Termination Agreement) according to Dutch Labour Law. We specialize in international and Dutch Labour & Employment law. The Amsterdam team of specialist Dutch Employment Law Solicitors have a vast amount of experience in advising expats on all Dutch (redundancy) situations. In many cases a mutual agreement to end the employment relationship with a termination agreement (exit package or compromise agreement, often including a severance payment) or court settlement is reached in or out of court.
Settlement agreement in The Netherlands
A settlement agreement means that both parties have reached an amicable end to the working relationship. It is a legally binding agreement between employer and employee. The termination of employment relationships by a termination agreement is required to be in written form to be valid. Settlement agreements are offered in The Netherlands to employees when they are being made redundant and in case of involuntarily unemployment.
The settlement agreement outlines the terms of the deal. Our independent Amsterdam Employment Solicitor (attorney or lawyer) can assist expats with an termination agreement to terminate your employment agreement by mutual consent.
A termination agreement can contain the following information:
- Severance pay (transition fee)
- Date of termination
- Continued payment of remuneration up to the end of the employment relationship
- Release from work duties
- Post-contractual items
- Final discharge.
Unemployment benefits according to Dutch Labour Law
In order to receive unemployment benefits under the Dutch Unemployment Insurance Act (WW), the expat must be involuntarily unemployed. Since 2006, the unemployment benefits will be granted by the Employee Insurance Agency of The Netherlands, UWV (Employee Insurance Agency), as long as the employment agreement is:
- not terminated based on urgent reasons (if the employee is grossly to blame for the dismissal)
- on request of the employer.
Our lawyer recommends that parties lay down their mutual consent about the termination in a valid settlement agreement to obtain unemployment benefits. A provision is a.o. that the settlement agreement is drafted properly, and that the correct notice time applicable for the employer is taken into consideration.
Notice period in The Netherlands
The employer must observe the applicable notice period when terminating the employment relationship. If not, problems may arise if the expat applies for Dutch unemployment benefits. The duration of the period of notice is often stated in the labour agreement. The period of notice depends on the duration of the employee’s employment and is as follows:
- 1 month if the employment lasted less than 5 years;
- 2 months if the employment lasted 5 years or longer but shorter than 10 years;
- 3 months if the employment lasted 10 years or longer but shorter than 15 years;
- 4 months if the employment lasted 15 years or longer.
In a written labour agreement the parties concerned can make an exception to the above rules.
The maximum duration of unemployment benefits (36 months) in The Netherlands will be gradually shortened between January 1, 2016 and April 1, 2019 up to a maximum of 24 months.
Transition compensation: severance payment
An important provision in the Dutch settlement agreement relates to the ‘transition compensation’ (statutory severance payment, redundancy compensation or dismissal compensation). The transition compensation should compensate employees for their loss of earnings and costs such as costs for scholing or outplacement. Effective 1 January 2020, a transition payment is mandatory whenever an employer terminates or fail to renew a temporary employment contract. The duration of the employment contract makes no difference. The amount of a transition compensation is calculated using a formula based on:
- how long the employee has worked for the employer (length of service)
- monthly pay (gross monthly salary) including holiday allowance.
The transition payment is capped at € 77,000, unless the employee’s salary exceeds that amount. Our Dutch attorney in Amsterdam can calculate your transition compensation (financial package). If our lawyer advises that the money offered is insufficient, we will negotiate on your behalf to ensure a fair compensation is paid. The transition compensation is considered to be wage subject to wage tax/national insurance contributions and the income-related healthcare insurance contribution.
Employees over fifty who have been working for more than 10 years for an employer, are entitled to deviant transitional regulation.
Negotiations and legal advice on Dutch termination agreement for expats
Some employers will be prepared to pay more than just the statutory severance payment in case of a settlement agreement. This may vary depending on the individual circumstances of the case. Outplacement costs may be deducted from the transition compensation.
You are entitled to legal consultation by our lawyer regarding your settlement agreement in order to prevent subsequent discussions and legal proceedings.
The employee may at a later stage claim that he did not fully appreciate the legal consequences of the settlement agreement. To avoid later discussion about the mutual consent of the termination, most employers offer an allowance for legal expenses.
Our Amsterdam lawyer always tries to cover our fees by seeking payment from your employer rather than from you.
Consideration after signing settlement agreement
Once the agreement is signed, an expat can not bring any employment claims against the employer in connection with the employment or its termination. The employer has the obligation to inform the employee in written of his right to rescind the agreement within14 days from signing, without specifying his reasons. If the employer does not comply with his obligation to inform the employee, the period is extended to three weeks.
Other provisions in settlement agreements
A settlement agreement will be considered as the final arrangement of all the issues between the parties in relation to the employment, since the contract prevents or limits future disputes. The agreement will ensure finality in the ending of the relationship and will avoid a future employment dispute in court. It is a legally binding contract enforceable in a court of law.
Sickness Benefits Act in The Netherlands for expats
Our lawyer does not recommend to enter into a settlement agreement when you are sick (arbeidsongeschikt). Benefits under the Dutch Sickness Benefits Act are not possible in that case.
Legal advice for employees and expats in Amsterdam
You can have your termination agreement checked by our experienced Dutch solicitor (lawyer) Employment and Labour Law in Amsterdam. Our Amsterdam lawyer will advise you fully on all the implications of signing the Settlement Agreement.
Please contact our specialised and experienced lawyer Dutch Labour and Employment Law in Amsterdam, The Netherlands, mr. P.Chr. Snijders for further information about settlement agreements and termination agreements for expats: 0031 20 5221999.