Am I entitled to a transition payment under a settlement agreement?
In brief: termination by mutual consent does not automatically create the same statutory entitlement as termination by the employer. Nevertheless, the statutory transition payment is usually the logical starting point in negotiations.
An employee can often agree at least an amount equal to the statutory transition payment. If the grounds for dismissal are weak, the employer lacks a proper file or the employee has a strong negotiating position, a higher payment may be appropriate.
Do not consider the amount in isolation. The termination date, notice period, release from work duties, unused holiday, bonus, non-compete clause, legal costs and correct wording for Dutch unemployment benefits (WW) all determine the proposal’s true value.
Important to know
Do not sign until it is clear how the amount has been calculated and which rights will lapse under the full and final discharge. After signing, you can generally terminate the agreement in writing within fourteen days, but checking it beforehand prevents disputes and financial loss.
At a minimum, check the following:
The employer has strong grounds for dismissal
If the employer can properly substantiate the dismissal and formal proceedings are likely to succeed, a payment around the statutory transition payment will often be appropriate. Check that the calculation uses the correct salary, length of service and all fixed pay components.
Reorganisation or redundancy
In a reorganisation, a social plan, the order of selection for redundancy and redeployment opportunities may affect the assessment. The payment is only one part of the overall picture.
The employer does not have a convincing file
If underperformance, a damaged employment relationship or culpable conduct has not been properly substantiated, there is more room to negotiate. By consenting, the employee gives up job security and the possibility of defending formal proceedings. An additional payment above the transition payment may then be reasonable.
Other financial arrangements also matter
Record outstanding salary, unused holiday, bonus, commission, pension, share schemes and legal costs separately. Do not allow these items to disappear into one total amount or an overly broad full and final discharge.
Template settlement agreement
Use a template to see which arrangements are normally included in a settlement agreement. Always adapt a sample to the specific circumstances.
Sample letter: responding to the proposal
This sample letter helps you respond carefully to your employer’s initial proposal without immediately accepting the payment or other terms.
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:
