Disadvantages of a Dutch settlement agreement (VSO)

A Dutch settlement agreement, or vaststellingsovereenkomst (VSO), is a written agreement in which employer and employee agree on the termination of the employment contract without prior involvement of the court or the Employee Insurance Agency (UWV). This route offers flexibility and speed, but it also carries several disadvantages if you sign without proper understanding. In this English section we summarise the key risks and explain how they relate to outplacement and your next career step.

How a settlement agreement differs from regular dismissal

Under Dutch labour law, a settlement agreement is an alternative to dismissal via the UWV or the subdistrict court. In regular dismissal procedures, an external authority checks whether the dismissal ground is valid and whether the legal rules have been followed. With a VSO, that prior check is absent. The content of the agreement itself determines your rights and obligations after termination.

This means that the risks are shifted towards the employee. If the text is incomplete or incorrectly formulated, you may lose benefits or end up with a weaker financial and legal position than you would have had in a formal dismissal procedure. It is therefore essential to view a VSO not just as an administrative formality, but as a crucial legal document.

• No prior review by court or UWV; the text itself is decisive.
• Employee must safeguard their own unemployment benefit rights.
• Errors in wording can cause loss of income or benefits.
• Legal clauses may limit your options on the labour market.

Main disadvantages of a settlement agreement in the Dutch context

The most important disadvantages of a Dutch settlement agreement revolve around four themes: unemployment benefits, severance payment, legal restrictions and lack of support for finding new work. Each of these themes can strongly influence how secure the transition to a new job will be.

Care4Careers regularly encounters employees who only realise during an outplacement programme that their settlement agreement is unfavourable. Sometimes the payment is lower than the statutory transition payment, sometimes the notice period has been set incorrectly, or a non-compete clause is still fully applicable. At that stage, there is usually little room left to adjust the agreement.

• Risk of losing or delaying unemployment benefits.
• Severance payment below the statutory transition payment.
• Non-compete and non-solicitation clauses that restrict future employment.
• No budget for outplacement or career coaching.

Unemployment benefit risks: initiative and fictitious notice period

The UWV will only grant Dutch unemployment benefits (WW) if specific conditions are met. Two elements are particularly important in a settlement agreement: the party that took the initiative to terminate the contract, and the fictitious notice period. The agreement must clearly state that the employer initiated the termination and that the employee is not to blame for the dismissal.

If the wording suggests that you wanted to leave or that you are mainly responsible for the situation, the UWV may treat the case as voluntary resignation and deny your benefits. In addition, the end date in the agreement must respect the fictitious notice period, which is the notice period the employer would have had to observe in a regular dismissal. If the actual end date is earlier, the UWV will shift the start of your benefits, creating an income gap.

• The employer must be clearly identified as the initiating party.
• The reason for dismissal must fit within the legal dismissal grounds.
• The fictitious notice period must match the contractual notice period.
• Any suggestion of voluntary resignation can jeopardise benefits.

Severance payment and missed opportunities for support

In practice, the severance payment in a settlement agreement is often the result of negotiation. However, employees sometimes accept an offer that is significantly lower than the statutory transition payment, simply because they do not know how to calculate that minimum amount. Furthermore, many agreements do not include additional budgets for education, coaching or a structured outplacement programme.

From a career perspective, this can be a missed opportunity. A slightly lower cash payment combined with a well-designed outplacement trajectory can lead to faster re-employment and more sustainable career choices. Without such support, you may end up spending the severance payment on living expenses while you search for work without a clear strategy.

• Offered amount may be below the statutory transition payment.
• No budget reserved for education or career transition.
• Short-term financial focus can undermine long-term employability.
• Outplacement can transform severance into a concrete new opportunity.

Non-compete clauses and their impact on your next job

Another underestimated disadvantage of a settlement agreement is the continuation or even reinforcement of non-compete and non-solicitation clauses. These clauses, originally included in your employment contract, can be confirmed in the VSO without much discussion. As a result, they may seriously limit your options when looking for a new position in the same industry.

Especially in specialised sectors or smaller regions, a strict non-compete clause can mean that many potential employers are off limits. In such cases, negotiating a relaxation or partial waiver of the clause can be more valuable than a modest increase in the severance payment. An experienced outplacement coach can help you assess the practical impact of these clauses on your job search.

• Non-compete clauses may remain fully in force after termination.
• Non-solicitation clauses can block access to key clients or networks.
• Penalties for breach are often high and strictly enforceable.
• Adjusting the scope or duration can significantly improve your prospects.

Outplacement: often missing, but crucial for a safe transition

Many settlement agreements focus on the financial aspects and the end date, while saying little about support in finding a new job. Outplacement is a structured programme in which a specialist guides you through processing the dismissal, exploring your strengths and ambitions, and actively positioning yourself in the labour market. When no such support is included, you have to organise and finance everything yourself.

In the Dutch labour market, employers increasingly recognise the value of offering outplacement guidance, especially in reorganisations or when a function disappears. If this is arranged in the settlement agreement, the costs are usually borne by the employer. Without such an arrangement, you may face a longer and more uncertain search process, even if the severance payment seems reasonable at first glance.

• Many VSOs do not include structured career transition support.
• Outplacement can shorten the period of unemployment.
• Coaching strengthens self-confidence and labour market skills.
• An explicit outplacement budget can be part of the total package.

Special situations: sickness, reintegration and WIA

When you are ill or partially disabled, the disadvantages of a settlement agreement can be even more serious. Under Dutch law, employer and employee have a shared duty to work on reintegration during the first two years of sickness. Ending the contract prematurely through a VSO may interrupt this process and complicate a future application for a WIA benefit (Work and Income according to Labour Capacity Act).

The UWV will assess whether sufficient reintegration efforts have been made. If you sign a settlement agreement while the reintegration track has not been properly completed, you may weaken your legal position. Moreover, your chances on the labour market may be smaller if your health has not yet stabilised, which makes dedicated guidance, for instance through outplacement in case of sickness, even more important.

• Premature termination can disrupt reintegration obligations.
• Your WIA application may be more difficult to substantiate.
• Health limitations require tailored job search strategies.
• Combining legal and career advice is essential in these cases.

Limiting the disadvantages: combining legal and career perspectives

To limit the disadvantages of a Dutch settlement agreement, it is not enough to focus solely on the legal text. The agreement should also be assessed in terms of your future career, employability and financial planning. This means looking beyond the gross amount of the severance payment and asking how the package helps you move towards sustainable work.

In practice, this often leads to a more balanced negotiation: clear wording to safeguard unemployment benefits, a realistic end date that respects the fictitious notice period, and explicit arrangements regarding outplacement or career coaching. Used in this way, a VSO can be more than a termination tool; it becomes a structured starting point for your next professional chapter.

• Always have the agreement reviewed by a legal expert.
• Compare the offered amount with the statutory transition payment.
• Check the impact of non-compete and non-solicitation clauses.
• Negotiate for outplacement support as part of the overall package.

Care4Careers specialises in outplacement, second-track reintegration and career guidance within the Dutch legal and UWV framework. By connecting the settlement agreement with a realistic outplacement strategy, the disadvantages can be mitigated and the step towards new work becomes more manageable and future-proof.