Check the settlement agreement: what should you pay attention to?

Have you received a settlement agreement and are you unsure whether everything is correct? That is very understandable. When fired, a lot comes at you, so important details are quickly overlooked. That is why it is important to check your settlement agreement carefully before you sign.

In this article, you'll read:

• why you should never sign directly
• what to do if you've already signed
• why checking a settlement agreement is so important
• which points you should always check
• how to do a first check step by step
• when it is wise to get help

Never sign directly

It is possible that your employer is in a hurry and wants you to agree quickly. Don't let that put you under pressure. Always accept the agreement calmly and indicate that you want to review it first.

In most cases, a good employer gives you time to think. Use that time too. A settlement agreement has consequences for your income, your unemployment rights and the conditions under which you will leave employment.

If you want to understand the basics of this document first, read also what a settlement agreement is.

Already signed? You can still do this

Have you already signed the settlement agreement without checking it properly? Then there is not always a definitive situation right away.

A settlement agreement usually has a cooling-off period of 14 days. Within that period, you can cancel the agreement. You don't have to give a substantive reason for this. However, it is wise to do this in writing and clearly, so that there is no misunderstanding about your decision.

That is why it is smart to act quickly if you have doubts afterwards.

Why checking a settlement agreement is important

The interests in a settlement agreement are high. For the employer, it is often a quick and relatively easy way to say goodbye, without proceedings before the UWV or the subdistrict court.

For you, it is important that the agreement is legally correct and does not pose a risk to your income or rights. If the agreement is not properly drafted, this may mean that:

• your unemployment benefit starts later
• your unemployment benefit is denied
• your compensation is lower than possible
• important financial agreements are missing
• you are stuck with unfavorable clauses

If you want to better understand when that can go wrong, check out WW rights under a settlement agreement.

Check key points in a settlement agreement

When you check a settlement agreement, don't just look at the severance pay. The entire content must be correct.

1. The dismissal initiative

The agreement must clearly state that the initiative to terminate employment lies with the employer. This is important for your right to unemployment benefits.

2. The reason for dismissal

The reason for dismissal must be formulated in a neutral way. The text should not show that the dismissal is your fault. Formulations that indicate serious culpable behavior or an urgent reason can have major consequences.

3. The notice period

The notice period must be properly processed. If the end date is chosen too early, the UWV may assume that you first have to bridge a fictitious period without benefits.

You can read more about this in the notice period in a settlement agreement and the fictitious notice period.

4. Compensation

Check that the fee is reasonable and that there is room to negotiate. In many cases, the statutory transition payment is considered as a lower limit, but that does not mean that this is automatically the best outcome.

Read also the compensation under a settlement agreement and the transition payment.

5. Final financial agreements

Check that all financial agreements are properly included, such as:

• outstanding vacation days
• vacation pay
• bonus or thirteenth month
• expense allowances
• other outstanding amounts

In addition, there is also the final settlement in case of dismissal relevant.

6. Final discharge

Many agreements contain a provision on final discharge. By doing so, you declare that employer and employee have nothing to claim from each other after execution of the agreements. This component is often underestimated and should be carefully reviewed.

7. Extra clauses

Also take a good look at agreements about:

• competition clause
• relationship clause
• secrecy
• exemption from work
• references
• additional terms or reservations

Sometimes guidance to new work is also part of the agreements, for example via an outplacement process.

Check your settlement agreement step by step

Use this list as the first quick check of your agreement:

• does it state that the employer takes the initiative to resign?
• is the reason for dismissal in a neutral way?
• is the notice period correct?
• is there a reasonable severance package included?
• are the final financial agreements fully and correctly included?
• is it clear how vacation days, bonuses and other outstanding amounts are dealt with?
• aren't there any unfavorable clauses that you overlooked?

If you are unsure about one or more of these points, it is wise not to sign immediately.

If you want to know when restraint is extra important, read also when it's better not to sign a settlement agreement.

When is extra help wise?

Sometimes you can already see for yourself that something is not right. In other cases, the agreement seems tidy at first glance, while the risks only become visible when someone takes a legal look at it.

Extra help is wise if:

• you are ill or have recently been ill
• you are unsure about your unemployment rights
• the notice period is not clear
• the compensation feels lower than expected
• there is a competition clause or relationship clause
• the final financial agreements are not complete
• your employer is pressuring you to sign quickly

In such cases, it makes sense not only to read information, but also to have your own agreement assessed.

To do so, you can go ahead and have the settlement agreement checked.

What to expect when having your VSO checked?

When you have your VSO checked, you don't just want a general opinion, but clarity about your situation.

During an audit, it is important to look at:

• whether your unemployment rights are properly secured
• whether the notice period has been processed correctly
• whether the remuneration is in line with the market and negotiable
• whether the final financial agreements are complete
• whether final discharge, competition clause and other clauses involve risks
• which textual adjustments are wise
• whether drawing is currently wise or not

Example of a settlement agreement

Many employees want to compare their agreement with an example, so that it becomes clear more quickly which parts are common and what may be missing.

An example can help you better see if the basis is correct, but it does not replace an assessment of your own situation. It is precisely the details that determine whether an agreement is beneficial or unfavorable.

Conclusion

Checking a settlement agreement is essential if you want to prevent your income, unemployment rights or negotiating position from being unnecessarily harmed.

Therefore, always check:

• who takes the initiative to resign
• how the reason for dismissal is worded
• whether the notice period is correct
• whether the compensation is reasonable
• whether all financial agreements have been fully included
• whether additional clauses do not pose unnecessary risks

Do you have doubts? Then it is wiser not to sign immediately and seek good advice first.

Need help?

Do you want certainty about your situation and whether your agreement has been properly drawn up? Then it may be wise to have your VSO professionally assessed.

More information can be found at have a settlement agreement checked.