Dismissal by Settlement Agreement: What Does This Mean for Outplacement?

Dismissal by settlement agreement means that employee and employer voluntarily agree to end the employment contract, recorded in a legal agreement. This differs from unilateral dismissal and allows space to negotiate conditions, financial arrangements and support, such as outplacement. This article explains what dismissal by settlement agreement entails, the rights and obligations involved, and how outplacement can support a fresh start.

What Is a Settlement Agreement and How Does This Dismissal Route Work?

A settlement agreement (vaststellingsovereenkomst, VSO) is an official document in which both parties agree in writing to terminate employment. Instead of a UWV (Dutch Employee Insurance Agency) or subdistrict court procedure, employer and employee jointly decide on the terms of departure, end date and any additional arrangements. This process allows for tailored solutions in cases of reorganisation, redundancy or personal conflict.

Once the employee consents to dismissal by settlement agreement, the employment ends by mutual consent. The agreement covers topics such as the end date, notice period, transition compensation, any extra payments, return of company property and the statement that the initiative did not come from the employee (which is crucial for unemployment benefit eligibility).

Practical example: an employee becomes redundant due to a reorganisation. The HR department prepares a settlement agreement, which includes a clause allowing the employee to follow an outplacement programme. Both parties sign the agreement, and the employment ends on the agreed date.

Why Choose Dismissal by Settlement Agreement?

This form of dismissal offers advantages for both employee and employer. Employees gain negotiation space for financial terms, job search support and the timing of dismissal. Employers avoid lengthy procedures and can provide clarity to the team more quickly.

According to Dutch labor law, this form is valid only if both parties agree and the agreement meets legal requirements. It is crucial for the agreement to state that the initiative did not come from the employee, otherwise, unemployment benefit rights may be at risk. Outplacement arrangements are often included to facilitate a smooth transition to new employment.

Unlike the standard dismissal via UWV or subdistrict court, the settlement agreement offers flexibility for sensitive situations or when both parties wish to customize the process. For more on differences, see dismissal situations and outplacement.

Legal Framework: Rights and Obligations When Using a Settlement Agreement

Signing a settlement agreement brings specific legal rights and duties. Dutch Civil Law requires clear, written and understandable terms. The agreement details the notice period, end date, transition compensation and possible additional compensation or provisions.

The employee has a statutory reflection period of fourteen days after signing. During this period, the agreement can be revoked in writing without giving reasons. The employer must mention this period in the agreement; if omitted, the period automatically extends to three weeks.

To retain unemployment benefit rights, the reason for dismissal must be neutral or due to reorganisation and not due to culpable behavior. See Settlement agreement and safeguarding unemployment benefits: essential insights for the exact requirements.

Key Components of a Settlement Agreement: What to Watch For?

A proper settlement agreement contains several important components. These include the end date, reason for dismissal and the right to transition compensation. It should also specify payment of outstanding leave, any bonuses, return of company property and a reference letter.

The inclusion of a fictitious notice period is vital. This means using the legal or contractual notice period for calculating unemployment benefit entitlement. Learn more at the role of the fictitious notice period in a settlement agreement.

Practical example: in a VSO, it is agreed that employment will end in two months, respecting the statutory notice period. The employee is also entitled to outplacement support, and the employer covers the cost.

The Role of Outplacement in Dismissal by Settlement Agreement

Outplacement is professional support towards new employment after dismissal. Many employees are uncertain about their future after contract termination. Outplacement programmes provide guidance for processing the dismissal, exploring new opportunities and securing new employment.

Employers often include an outplacement programme in the settlement agreement, as an extra arrangement alongside transition compensation. Usually, the employer pays for this support. Employees benefit from expert guidance in reorienting their careers, which lowers the threshold for finding new work. Discover more about the value of outplacement on the Care4Careers website.

Practical example: a healthcare worker receives a settlement agreement due to reorganisation. The agreement specifies six months of job search guidance, including help with applications and networking.

Outplacement Programmes: Types, Duration and Content

An outplacement programme usually includes personal coaching, career exploration, application training and job search support. The content is tailored to the individual's needs and situation.

The duration typically ranges from three to six months but can be longer or shorter depending on what is agreed in the settlement agreement. Programmes may include competency tests, CV and cover letter advice, networking training and, if needed, psychological support. A detailed overview of steps can be found at how does an outplacement programme work.

There are also specialised programmes for employees aged fifty-plus or for those dealing with burnout. See outplacement for 50-plus and outplacement after burnout.

Dismissal by Settlement Agreement in Specific Situations

Some situations require additional attention in the settlement agreement. These include dismissal due to long-term illness, reorganisation or the redundancy of a position. In such cases, extra rules apply regarding reintegration and dismissal protection.

In case of illness, employer and employee may only sign a VSO if it is clear that employment cannot continue and the employee is not disadvantaged for WIA (Work and Income according to Labor Capacity Act) or unemployment benefits. Learn more at dismissal during illness.

When a job disappears due to reorganisation, it is crucial to respect the redundancy selection rules (afspiegelingsbeginsel) and employee rights. In such cases, a VSO with outplacement can provide both legal and practical support. See Dismissal due to reorganisation: what does it mean and what next?.

Practical Tips for Negotiating the Settlement Agreement

It is wise to seek legal advice or have an expert review the VSO. This helps avoid mistakes leading to loss of unemployment benefit rights or insufficient compensation. Pay close attention to the wording of the dismissal reasons, the fictitious notice period and the level of compensation.

Ask for outplacement support if it is not standard in the agreement. This can ease the transition to new work. Indicate your wish for guidance from a certified outplacement coach and ensure these arrangements are clearly included in the VSO. For more tips, visit how to discuss outplacement.

Summary: Dismissal by Settlement Agreement and Outplacement as a New Start

Dismissal by settlement agreement is a route in which both parties agree on ending the employment contract and all related terms. A well-crafted agreement protects the employee's legal and financial position and allows for support such as outplacement. By carefully negotiating the content and support, employees gain perspective for a successful new career step.