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Settlement agreement, transition allowance, dismissal

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Settlement agreement with a fixed-term contract

A fixed-term contract may end early under a settlement agreement, but the termination date, any interim termination clause and your WW benefit position require particular attention.

Early termination is possible, but review the contract first

A fixed-term employment contract normally ends automatically on the agreed end date. During its term, employer and employee may agree in writing to end it earlier.

This does not mean that every chosen termination date is without consequences. First review the employment contract and any applicable CAO, then assess the effects on salary, compensation and WW benefits.

Have your proposal reviewed
1check the end date, CAO and any interim termination clause
2calculate salary, compensation and any WW gap before signing
Discussing a fixed-term employment contract and settlement agreement

Does the contract contain an interim termination clause?

An interim termination clause permits the fixed-term contract to be terminated before its agreed end date. If there is no such clause, UWV may take the position that WW benefits cannot start until after the original end date when the contract is ended early.

Even where the clause exists, the employer’s initiative, a neutral ground for termination and the notice period applicable to the employer must be recorded correctly.

Read about WW benefits

Which terms should the settlement agreement contain?

Record at least that the employer initiated the termination and that it is not based on an urgent reason or culpable conduct by the employee. Also address the correct termination date, compensation, garden leave, accrued leave, holiday allowance, bonus, pension, company property, full and final discharge and legal costs.

For a fixed-term contract of six months or longer, the employer also has a written notification duty concerning renewal. This is separate from early termination but may have financial consequences.

No interim termination clause: take particular care

Without an interim termination option, an employee often has a strong negotiating position because the employer cannot simply give ordinary notice before the fixed end date.

Do not automatically agree to give up the remaining salary. Assess whether the compensation genuinely covers the income loss and WW risk. A different assessment may be appropriate if other employment is already available.

View dismissal situations

Further reading about WW and severance pay

Read the detailed pages about WW benefits, the statutory transition payment and other relevant dismissal situations.

Settlement agreement and WW benefits
Entitlement to the statutory transition payment
When are you entitled to WW benefits?
About the author

Mr. Edwin van Jaarsveld

Edwin van Jaarsveld has over 20 years of experience with dismissal cases and regularly publishes about them.

Edwin’s expertise can also be found on:

Read more about Edwin

Have the proposal reviewed before signing

Have both your fixed-term employment contract and the termination proposal reviewed. This makes it possible to assess whether the chosen termination date and wording are compatible with your WW position.

Have your agreement reviewed
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