8 June 2022

What is a redundancy scheme?

By Amber Willemsen

There are various options for terminating an employment contract if the employer and employee no longer wish to continue working together.

Depending on the reason for the termination, the employer has the option of requesting the redundancy from the Employee Insurance Agency (Uitvoeringsinstituut Werknemersverzekeringen, UWV) or the courts. It is also possible to agree on a redundancy scheme. What is a redundancy scheme? In this case, the employer and employee record the arrangements concerning the termination in an employment agreement in a termination agreement or a settlement agreement. The advantage of a redundancy scheme is that the parties have considerable discretion in determining the conditions for termination. This can prevent lengthy legal proceedings at the courts or the UWV. In any case, it is advisable to agree on a number of conditions.


Eligibility for unemployment benefit

The settlement agreement must include a number of conditions for an employee to be entitled to unemployment benefit from the UWV. It must show, for example, that the initiative to terminate the employment contract comes from the employer. It is also important that the employment contract does not end due to serious imputable acts or omissions of the employee.

Although the parties may deviate from the statutory or contractual notice period, this is not wise for the employee in the context of his/her unemployment benefit. This is because the aforementioned notice period must be observed in order to be entitled to unemployment benefit. It is also often the case that notice must be given by the end of the month.


Transition payment

In addition, it is possible to make arrangements about granting severance pay in the redundancy scheme. The employee then receives this severance pay at the end of his/her employment. This may be an amount equal to the statutory transitional allowance, but may also be higher or lower. The statutory transitional allowance is calculated as follows:

1/3rd of the gross monthly salary times the number of years of employment.

It is not compulsory to grant severance pay in a settlement agreement. However, severance pay does make the proposed termination of employment more attractive to an employee.


Negotiating a redundancy scheme

A settlement agreement is an agreement that only exists when both parties agree to its conditions. Usually one party, often the employer, makes the offer of the redundancy scheme. The other party, often the employee, is then at liberty to make a counter-offer. Please note that by making a counter-offer, the earlier offer is rejected. This means that you cannot revert to the first offer unless the other party agrees.


Two week reflection period

Since 2015, employees have been entitled to dissolve the redundancy scheme within two or three weeks of agreeing to it. And thereby effectively undoing it. Whether an employee has this right for two or three weeks depends on whether he/she was granted the right to terminate the employment contract in the redundancy scheme. If the employment contract states that he/she has two weeks within which to terminate the employment contract, then a two-week period applies. If this right is not included, the employee has three weeks to terminate the employment contract.


In conclusion

The redundancy scheme may also include arrangements about the settlement of holidays, non-compete clauses, completion of the work, whether or not the employee is exempted from work, company property and compensation for legal assistance.


Have you received a settlement agreement or do you want to agree on a redundancy scheme with an employee? Please do not hesitate to contact me.

Amber Willemsen

Amber Willemsen


Amber Willemsen is a lawyer within the Employment law section.

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