Settlement agreement

When an employer and employee wish to terminate an employment contract by mutual agreement, arrangements must be made. These arrangements are recorded in a settlement agreement, also known as a termination agreement. What should you pay attention to when negotiating a settlement agreement, and what can GMW lawyers do for you?

What is a settlement agreement?

A settlement agreement is a legal document in which the reasons and conditions for the dismissal are recorded. This includes aspects such as the end date, the severance payment, and other arrangements, such as exemption from work, taking vacation days, and reimbursement for legal costs. Often, agreements regarding a reference letter, confidentiality, and the return of company property are also documented. Finally, a settlement agreement usually contains a clause about full and final discharge, meaning that both parties have no further claims against each other after the agreement is executed.

When is a settlement agreement appropriate?

A settlement agreement is only suitable when the employer and employee agree on the dismissal. The employment contract then ends by mutual consent, for example, in cases of reorganization, two years of incapacity for work, or a difference of opinion. The latter can relate to various situations, such as work related conflicts, underperformance, or misconduct by the employee.

If the employer and employee do not agree on the dismissal, a settlement agreement cannot be used. In practice, negotiations often occur, for example, if the employee agrees to the dismissal on the condition of a higher severance payment or a longer notice period. If the parties cannot reach an agreement, the employer may approach the UWV (Employee Insurance Agency) or the court for dismissal.

A settlement agreement is also not necessary if the employee resigns voluntarily.

What should you pay attention to?

It is important to pay attention to several matters. If the employee wishes to claim unemployment benefits, the reason for the dismissal must be included in the agreement. There should be no urgent reason or dismissal prohibition, and this must also be documented in the settlement agreement. Additionally, it is crucial that the correct notice period is observed, as the employee is only entitled to benefits after this period has elapsed. This is also known as the “fictitious notice period.”

Another important point is that the employee has a fourteen-day reflection period after signing the settlement agreement. The employer must inform the employee of this. Therefore, it is wise to include this period in the agreement.

Furthermore, it is essential that all agreements between the employer and employee are included in the settlement agreement. This prevents the need for changes later, which may require further negotiations.

Automatically draft a settlement agreement

For employers, GMW lawyers offer a free service: a special AI tool that generates a fully personalized settlement agreement based on a payslip. The VSO-tool also calculates the notice period and the statutory transition payment.

What can GMW lawyers do for you?

GMW lawyers have extensive experience in drafting and reviewing settlement agreements, both for employers and employees. We can advise you on your situation and, if desired, negotiate on your behalf regarding the content of the agreement. Our experience shows that many dismissal cases can be resolved by mutual consent. Usually, a settlement agreement is the most efficient and cost-effective way to end a dispute and focus on the future.

For advice and custom solutions you can contact one of the labor lawyers at GMW at +31 (0)70 3615048.

Meer arbeidsrecht-gerelateerde informatie >

Advocaten

Previous slide
Next slide

Amber Willemsen

Employment law Read more about this lawyer

Anja Blijham

Employment law Read more about this lawyer

Godelijn Boonman

Employment law Read more about this lawyer

Koen Vermeulen

Employment law, Pension law Read more about this lawyer

Mark Dijkstra

Employment law Read more about this lawyer

Roos van Zaltbommel

Employment law Read more about this lawyer

Seliz Demirci

Employment law Read more about this lawyer
All lawyers

Looking for an employment law lawyer in The Hague?

GMW lawyers will be happy to help you with all your employment law issues. Our lawyers assist both employers and employees.

Do you have a question? Please feel free to contact us.

"*" indicates required fields

Contact

You might also find this interesting

23 July 2025

Medical decision making in the employment relationship from the employer’s perspective

Employers often perceive sickness notifications and absenteeism as a significant burden. This is understandable. Employees on sick leave would also prefer to be at work rather than at home unable to work.

Read more

Read more about

16 July 2025

Business closure: what to do with employees?

The company is shutting down. This may be due to poor financial performance or because the sole owner is seriously ill or has passed away. However, ceasing operations and closing the doors does not mean that employment contracts with staff automatically end. So how does this work?

Read more

Read more about

10 July 2025

Implications of the Uber-ruling for companies employing freelancers

Is a freelancer an employee or a contractor? The distinction carries major implications for legal protection, as well as financial and tax consequences.

Read more

Read more about

3 July 2025

Definitely not good employment practice

The Amsterdam Cantonal Court recently issued a ruling that provides insight into court procedures for terminating an employment contract. The decision underscores the importance for employers to handle termination requests with care.

Read more

Read more about

23 June 2025

Can you dismiss a ‘benchwarmer’?

A "benchwarmer" is an employee who has little to no work and, as a result, is not productive enough.

Read more

Read more about

16 June 2025

When Embassy’s enter into an employment contract in the Netherlands

When an embassy in the Netherlands enters into an employment contract with an employee, it may expect that the laws of its home country will apply. However, this is often not the case.

Read more

Read more about

11 June 2025

Booking.com employee facing termination? We offer legal advice

Booking.com has announced a large-scale reorganisation, as a result of which many positions will become redundant.

Read more

Read more about

4 June 2025

Overtime can be a hot topic

Due to the tight labor market, many sectors are placing greater demands on employees than before. Overtime, meaning work performed outside the agreed-upon hours, has therefore become more common. This can lead to problems, as illustrated by a recent court case.

Read more

Read more about

28 May 2025

Web surfing on company time

Replying to a private message or quickly checking the news during work hours: most of us do it occasionally.

Read more

Read more about