Dutch lawyer Amsterdam: Termination Agreement and Separation Agreement
Our Amsterdam lawyer Labour and Employment Law is specialist employment solicitor advising foreign employers and employees on Dutch Labour Law: Termination Agreements (Settlement Agreements, Employment Exit Agreement, Compromise Agreement, Employment Separation Agreement) in The Netherlands.
The Amsterdam team of specialist Dutch Employment Law solicitors of our law firm have a vast amount of experience in advising expats and companies on all Dutch (redundancy) situations. In many cases a mutual agreement to end the employment relationship with a termination agreement (exit package, redundancy package or compromise agreement) or court settlement is reached in or out of court. We specialize in Dutch and international Employment and Labour Law.
A termination agreement or separation agreement means that employer and employee have reached an amicable end to the working relationship. A termination agreement is, according to Dutch Law, a legally binding agreement between employer and employee. The termination of employment relationships by a settlement agreement is required to be in written form to be valid. Exit agreements are offered in The Netherlands to employees when they are being made redundant or in case of involuntarily unemployment. A Termination agreement outlines the terms of this deal. No two employee separation agreements will be identical. Our independent Amsterdam Employment Solicitor (attorney) can assist you with termination agreements to terminate an employment agreement by mutual consent.
Dutch Labour Law: unemployment benefits
The employee must be involuntarily unemployed in order to receive unemployment benefit under the Dutch Unemployment Insurance Act (WW), Since 2006, the unemployment benefit will be granted by the UWV (Employee Insurance Agency), as long as the employment agreement is:
- on request of the employer
- not terminated based on urgent reasons (if the employee is grossly to blame for the dismissal).
We recommend that parties lay down their mutual consent about the deal in a valid termination agreement to obtain unemployment benefit by the UWV. A provision is a.o. that the correct notice time is applicable for the employer and that the settlement agreement is drafted properly.
Notice period in The Netherlands
When terminating the employment relationship, the employer must observe the applicable notice period. If not, problems may arise if the employee applies for unemployment benefit in The Netherlands. 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 longer than 5 years 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.
The duration of the period of notice is often stated in the employment agreement. In a written labour agreement the parties concerned can make an exception to this rule.
The maximum duration of unemployment benefit is 36 months in The Netherlands and will be gradually shortened between January 1, 2016 and April 1, 2019 up to a maximum of 24 months.
Severance payment / transition compensation in The Netherlands
An important provision in the Dutch termination agreement relates to the transition compensation (redundancy compensation, statutory severance payment or dismissal compensation). The transition severance payment should compensate employees for costs such as costs for scholing or outplacement and their loss of earnings. This is available to all employees who have an employment contract. The amount of a transition compensation is calculated using a formula based on:
- how long the employee has worked for the employer;
- monthly pay.
The transition compensation is considered to be wage subject to wage tax/national insurance contributions and the income-related healthcare insurance contribution. The transition payment is calculated on the basis of length of service, the current gross monthly salary and age. The transition payment in The Netherlands 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 legal expert advises that the compensation offered is insufficient, we will negotiate on your behalf to ensure a fair compensation is paid.
Termination agreement for expats: negotiations and legal advice
In case of a settlement agreement, some employers will be prepared to pay more than just the statutory severance payment; a payment of the separation, severance, or settlement amount. This may vary depending on the individual circumstances of the case. Outplacement costs may be deducted from the transition compensation. A termination agreement can contain the following information:
- Severance pay
- Release from work duties
- Date of termination
- Continued payment of remuneration up to the end of the employment relationship
- Post-contractual items
Termination agreement and legal expenses
Our Amsterdam lawyers always try to cover our fees by seeking payment from your employer rather than from you. You are entitled to legal consultation 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.
Consideration after signing settlement agreement
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. Once the agreement is signed, an employee can not bring any employment claims against the employer in connection with the employment or its termination.
Other provisions in settlement agreement
Other provisions may include:
- discharge, and release and waiver by the employee of all claims against the employer
- secrecy clauses (a confidentiality provision);
- a non-disparagement clause.
A separation agreement sets out the terms of an employee’s separation of employment and includes a.o. a release of claims against the company. 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. 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.
Sickness Benefits Act in The Netherlands
We do not recommended 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
Our Amsterdam lawyers will advise you fully on all the implications of signing the Settlement Agreement. You can have your termination agreement checked by our experienced Dutch solicitor (lawyer) Employment and Labour Law in Amsterdam.
Please contact our specialised and experienced lawyer Dutch Labour and Employment Law in Amsterdam, The Netherlands, mr. P.Chr. Snijders for further information about your termination agreement or settlement agreement: 0031 20 5221999.
A settlement agreement is a dismissal agreement: a way of terminating an employment contract between employer and employee by mutual agreement. This often happens after a reorganisation or a labour dispute. The settlement agreement is legally regulated and contains all components of the dismissal regulations, such as the termination date, severance pay and final settlement.
You are only entitled to unemployment benefit in the event of involuntary dismissal if the settlement agreement meets the requirements set by the Dutch UWV. You may not be culpably unemployed, nor may you initiate dismissal. You must also be cautious in the event of illness and in the event of a temporary contract. Finally, you must have worked as an employee for a certain period, at least 26 weeks before the dismissal. You should therefore first obtain legal information before agreeing to regular dismissal.
Employers almost always reimburse at least part of the legal costs to the employee to get the dismissal arranged. In most cases, the advice of a lawyer who checks the contract is therefore free of charge for the employee.
A settlement agreement is free of form, so there are no real rules for it. In practice, however, it is customary for the employer, depending on the reason for the dismissal, to pay at least a severance payment, for example the legal transition allowance. The amount depends on what the employer and employee negotiate or agree with each other.