Settlement agreement in case of illness

Signing while on sick leave may affect your salary and benefit entitlements. First establish whether you will still be ill or will have recovered on the termination date, and which dismissal protection applies.

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Risks during illness

First two years of illness

After two years of illness

Four-step review

Why is a settlement agreement during illness risky?

During the first two years of illness, a statutory prohibition on dismissal usually applies and the employer has obligations concerning continued payment of wages and reintegration. By agreeing to termination, you may give up legal protection and income.

UWV therefore warns employees not to sign without careful consideration. The decisive distinction is often whether you are still unfit for work when employment ends or have demonstrably made a full recovery.

Have your situation assessed

Reviewing a settlement agreement during illness

Will you still be ill when employment ends?

If you are still ill on the termination date, you are not immediately available for work and will generally fail to meet an important condition for unemployment benefit (WW). Entitlement to a Dutch sickness benefit (Ziektewet) is not automatic either if you voluntarily agree to dismissal during the period in which your employer must continue paying your wages.

Do not rely on standard wording that purports to “guarantee” a benefit. UWV assesses the actual circumstances and the way in which employment ended.

The first two years of illness

An employer will generally be prohibited from dismissing an employee with a permanent contract during the first two years of illness. This protection may sometimes last longer, for example where UWV imposes an extended wage-payment obligation because the employer’s reintegration efforts were insufficient.

A settlement agreement is voluntary, but agreeing to it may end your entitlement to salary and further reintegration. Have the risks and realistic alternatives assessed first.

Will you have fully recovered before the termination date?

If you have genuinely recovered and are available for other work on the termination date, unemployment benefit (WW) may sometimes be possible. The other conditions must also be satisfied, including termination at the employer’s initiative, no culpable reason for dismissal and observance of the correct notice period.

A declaration of recovery on paper is not sufficient if the medical reality is different. Discuss your capacity for work with the occupational physician and avoid contradictory records.

Does a fixed-term contract expire during illness?

A fixed-term contract may expire automatically on the agreed date while the employee is ill. The employer must then report that the employee leaves employment while ill; entitlement to a Dutch sickness benefit (Ziektewet) may arise.

Ending a fixed-term contract by mutual consent before that date is different and may create benefit risks. Also check whether the contract permits early termination.

After two years of incapacity for work

After 104 weeks of illness, the employer may, subject to certain conditions, apply for permission to dismiss on the ground of long-term incapacity for work. Termination by mutual consent is also possible.

Check the WIA decision, any extended wage-payment obligation, redeployment opportunities and compensation. Dismissal after long-term incapacity will generally give rise to the statutory transition payment; under a settlement agreement, the compensation must be expressly agreed.

WIA, reintegration and redeployment

The settlement agreement must not inadvertently interfere with ongoing reintegration, suitable work or a WIA procedure. Record what is expected of the employer and employee until the termination date and what happens if the medical or benefit situation changes.

Which terms should the settlement agreement contain?

In addition to the termination date and compensation, check continued payment of wages, accrued holiday, reintegration, release from duties, pension, bonus, legal costs, full and final discharge and the statutory reflection period.

Do not include a medical diagnosis unless necessary. The stated reason for termination and the actual circumstances must, however, be accurate and mutually consistent.

Discussing reintegration and benefit consequences

Review a proposal during illness in four steps

1Establish your statusWill you be ill, partially recovered or fully recovered on the termination date?

2Check your protectionAssess the prohibition on dismissal, continued payment of wages, reintegration and the contract term.

3Calculate the consequencesReview WW, Ziektewet and WIA benefits, the termination date and compensation.

4Record the terms carefullyMake sure the wording and facts are correct and have the entire settlement agreement reviewed.

Read about termination after two years of illness

Burnout or an unhealthy working environment

In cases of burnout or workplace tension, recovery may sometimes benefit from distance from the workplace. This does not automatically make termination safe.

First investigate recovery, adjustments, mediation, suitable work and the occupational physician’s opinion. Only then assess whether termination is genuinely in your interests.

Detailed information about illness and dismissal

Read the separate pages about two years of illness, burnout and pregnancy. Each situation has its own legal and practical considerations and must not be treated as a standard case.

Settlement agreement in case of burnout

Pregnancy and a settlement agreement