What is a normal severance payment under a settlement agreement?

There is no standard amount. Discover what constitutes a reasonable starting point and which factors may justify a higher payment.

What is a normal severance payment under a settlement agreement?

In brief: a normal severance payment is not a fixed number of monthly salaries. The statutory transition payment is usually the minimum mathematical starting point. The final amount depends on the grounds for dismissal, the employer’s file, litigation risks and the arrangements made in addition to the payment.

If the employer has strong grounds for dismissal and a carefully prepared file, an amount around the transition payment will more often be appropriate. If dismissal without your consent is uncertain or insufficiently substantiated, an additional payment may be reasonable.

Never compare only the gross amount. A favourable termination date, release from work duties, payment for unused holiday, bonus, legal costs and the lapse of restrictive covenants may make the overall settlement considerably more valuable.

No standard subdistrict-court formula

An arbitrary multiplier or a fixed number of monthly salaries is not a reliable benchmark. Proper justification must reflect your specific legal and financial position.

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Assessing the payment in a settlement agreement

Factors that determine the payment:

the legal strength of the grounds for dismissal
the quality of the employer’s dismissal file
length of service and salary
expected loss of income and labour-market position
any culpable conduct by the employer
the value of all additional arrangements

Look beyond the amount alone

A high payment may still be disadvantageous if other entitlements disappear or the termination date jeopardises Dutch unemployment benefits (WW).

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When can a higher payment be justified?

The grounds for dismissal or the employer’s file are weak

If the employer is unlikely to succeed in formal dismissal proceedings, your consent gives the employer certainty. That certainty has negotiating value.

The employer has acted culpably

Examples include deliberately escalating the employment relationship, discrimination, ignoring reintegration obligations or other seriously careless conduct.

Your financial disadvantage is greater

Expected long-term unemployment, loss of a bonus or shares, pension loss or a weaker labour-market position may justify requesting a higher payment.

Negotiating a normal payment on dismissal

Practical conclusion: start with the statutory transition payment, but substantiate every increase with specific legal risks or demonstrable financial loss.

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More about severance payments

Severance pay overview

Entitlement to a transition payment

Transition payment in a settlement agreement

Settlement agreement and severance pay

Transition payment at state pension age

Transition payment shortly before state pension age

Which arrangements determine the total value?

The payment is only one part of the termination package. Check the points below as well.

Termination date

Preferably choose a date after the expiry of the notice period applicable to the employer.

Reason for termination

To avoid problems obtaining Dutch unemployment benefits (WW), the agreement should state a neutral reason, such as redundancy or a damaged employment relationship for which the employee is not to blame.

Severance payment

This is usually an important point. Is the employee entitled to the statutory transition payment, or possibly a higher amount? Ask our specialists about the options.

Will the employee be released from work duties?

This may be particularly important where the employment relationship has broken down or work disappears during a reorganisation.

Will unused holiday be paid?

If the employee is released from work duties for a longer period, the parties sometimes agree that unused holiday will lapse.

Must the employee return company property such as a laptop or telephone?

This may be negotiable. The parties sometimes agree that the employee may keep the laptop or telephone.

Non-compete and non-solicitation clauses

Will these clauses remain in force or lapse? The lapse of a non-compete clause is particularly important if the employee wishes to continue working in the same sector.

Will the employee receive a positive reference letter?

A positive reference letter may be useful when looking for new work.

Will the parties agree full and final discharge?

If the parties agree full and final discharge, they cannot subsequently claim items other than those preserved in the settlement agreement.

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How to assess a reasonable proposal

1. Calculate the statutory starting point

Calculate the transition payment using the full gross monthly salary and the correct length of service.

2. Assess the dismissal position

Establish whether the employer has valid grounds for dismissal, a carefully prepared file and a realistic alternative to obtaining your consent.

3. Value the entire settlement

Treat the payment, salary period, release from duties, unused holiday, bonus, costs contribution and lapse of contractual clauses as one complete package.