Settlement Agreement Termination: how does it work with outplacement?

Settlement agreement termination (VSO ontbinding) means ending an employment contract by mutual consent through a settlement agreement (Vaststellingsovereenkomst, VSO). This often occurs during reorganisations, redundancies, or prolonged illness. Understanding this process is crucial to safeguard rights and obligations. In this article, we explain how settlement agreement termination works, the legal and practical considerations involved, and the role of outplacement support.

What is settlement agreement termination (VSO ontbinding)?

Settlement agreement termination refers to ending an employment contract via a written agreement between employer and employee—the settlement agreement (VSO). This process takes place outside the courts or UWV (Dutch Employee Insurance Agency). The VSO details all terms: end date, transition compensation, notice period, and outplacement arrangements if applicable.

According to Dutch labour law, a VSO offers legal certainty for both sides if correctly drafted. Employees usually retain entitlement to unemployment benefits (WW) if the VSO complies with UWV requirements. Employers often favour this route for its speed, clarity, and reduced risk of conflict.

For example: after a reorganisation, an employee is declared redundant. The employer offers a VSO that includes not only an end date but also an outplacement programme to support a transition to new employment.

Settlement agreement termination vs. dismissal

Dismissal can occur in several ways. If initiated solely by the employer, permission from the UWV or a court is typically required. Settlement agreement termination, on the other hand, is always by mutual agreement, with both parties negotiating the terms.

The key distinction lies in mutual consent. Unilateral dismissal allows little room for negotiation and often leads to legal proceedings. A VSO allows for custom arrangements, including compensation, outplacement support, and a mutually agreed end date, making the transition smoother and less stressful.

For instance, an employee on long-term sick leave may be offered a VSO that includes outplacement support. This bypasses formal dismissal via UWV, creating a softer landing in the labour market.

Legal considerations for settlement agreement termination

It is vital to understand the legal context and terminology when negotiating a VSO. Key elements are based on the Dutch Civil Code, the Work and Security Act (WWZ), and UWV eligibility requirements.

A settlement agreement must meet certain criteria: a clear notice period (fictitious notice), correct end date, and agreements regarding compensation and unemployment benefit (WW). Employees have a statutory 14-day reflection period after signing, during which they can withdraw without reason.

Note: an incorrectly drafted VSO can jeopardise unemployment benefit rights. The UWV checks whether the agreement meets its requirements, such as the absence of dismissals for cause (e.g., misconduct) and observance of the correct notice period. For more on these requirements, see the explanation of settlement agreements.

The role of outplacement in settlement agreement termination

Outplacement provides practical and psychological support for employees seeking new work after dismissal. In cases of settlement agreement termination, outplacement is often included, especially in situations such as reorganisation, redundancy, or an unresolved conflict.

Outplacement can include career coaching, job application training, networking support, and retraining. Care4Careers guides individuals throughout the outplacement process, focusing on personal needs and labour market opportunities. A well-structured outplacement arrangement increases the chance of finding suitable employment quickly.

Example: an employee whose position disappears after a reorganisation receives both a transition payment and an outplacement budget. This provides new perspective and support, making the transition easier and faster.

What agreements are set in a settlement agreement?

The content of a VSO is always customised. Common items included are:

• The official termination date
• Any transition compensation and other payments
• The (fictitious or standard) notice period
• Agreements on outstanding vacation days and final settlement
• Outplacement budget and arrangements
• Repayment of study costs or waiving those obligations
• Non-compete or non-solicitation agreements
• Reference or testimonial arrangements

Such agreements are crucial not only for legal clarity but also to provide reassurance for those seeking new opportunities. Individual circumstances vary. For example, an older employee may benefit from extra support, as in outplacement for over-50s, while a younger worker might need additional job application training.

Step-by-step: from settlement agreement termination to outplacement

The process of terminating employment by settlement agreement and initiating outplacement usually follows these steps:

• Proposal and negotiation: The employer makes a termination proposal (VSO). The employee reviews it and seeks legal advice.
• Signing and reflection period: Once agreed, both sides sign. The employee then has a 14-day statutory reflection period.
• Starting outplacement: If arranged, outplacement begins immediately after termination or even during the notice period.
• Practical administration: Tasks include handover, vacation payout, final settlement, and references.
• Active job search: The employee works with a coach to find new employment.

This process is common in Dutch organisations, ensuring careful handling of both legal and emotional issues. For a detailed overview, see the stages of an outplacement process.

Examples from practice: VSO and outplacement in different scenarios

VSO terminations occur in various scenarios: organisational restructuring, long-term illness, or when a working relationship has irretrievably broken down.

After a reorganisation, a VSO can be coupled with outplacement to prevent employees being left without prospects. In long-term illness, a VSO combined with a second track re-integration plan (re-integratie tweede spoor) may focus on external job placement.

Example: a company’s new structure means an entire team becomes redundant. They receive a VSO plus an outplacement coaching budget, supporting them with applications, networking, and career decisions.

Legal points of attention for a VSO

Not all settlement agreements are equally safe or favourable. Key legal aspects to watch for:

• Dismissal reason must not be misconduct, otherwise unemployment benefits may be denied
• The end date must respect the (fictitious) notice period
• Clearly specify any transition payment
• State that the employer initiated the termination
• Detail outplacement arrangements and budget in writing

Consulting a labour lawyer is recommended, especially in complex situations. For more on the impact of a VSO on unemployment benefits and your rights, see the role of the fictitious notice period in a settlement agreement.

Settlement agreement termination and outplacement: opportunities and considerations

Combining settlement agreement termination with outplacement support offers opportunities for sustainable employability. Tailored guidance eases the transition to new work. Employees benefit not just from practical job search help, but also emotional support and labour market orientation.

It is important to discuss outplacement early, so employees quickly gain new perspective. Some employers always include outplacement in the VSO, while others do not. This leaves room for negotiation. For more on initiating such discussions, see the article on how to bring up outplacement.

Summary

Settlement agreement termination (VSO ontbinding) is a common way to end employment by mutual consent, with a strong legal foundation and often outplacement support. A careful VSO protects rights and provides clarity on compensation, timelines, and support for finding new work. Including outplacement in agreements helps both employees and organisations achieve a smooth transition. Proper preparation and legal advice are essential to avoid unpleasant surprises.