Settlement agreement compensation
Are you entitled to compensation in a settlement agreement (vso)? No, in a mutual agreement dismissal, you will not get a transition allowance. You negotiate your own severance pay, if any, with your settlement agreement. Your employer is not legally obliged to pay any compensation to you in case of mutual agreement dismissal.
Transition compensation is lower than severance pay
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What is a settlement agreement?
A settlement agreement is a written agreement between an employer and an employee to terminate employment. This agreement contains all the terms of the dismissal, such as the termination date, severance pay and other agreements. Both parties must agree on the content and sign the agreement.
When is a settlement agreement used?
A settlement agreement is often used when both the employer and the employee want the employment to end without the intervention of the court or the UWV. This can happen, for example, in the case of a reorganisation, a conflict in the workplace or when the employee is no longer performing well. A VSO allows both parties to part ways by mutual agreement, without a lengthy dismissal procedure.
Severance pay with a settlement agreement (VSO)
Does your dismissal go through the UWV or the subdistrict court? Then the employer does have an obligation to pay you a transition allowance. Therefore, it is in your best interest to negotiate well on the amount of your compensation. This is the most important part of the settlement agreement and the negotiations About this. Severance pay under settlement agreement is higher than a transition payment.
What is the difference between severance pay and transition pay?
A common question is: which is better? A severance payment or transition payment? A severance payment is often higher than the transition compensation. If you are dismissed via UWV or subdistrict court, you are entitled to a severance payment. If your employer does not go to the subdistrict court or the UWV (dismissal by mutual agreement), you may be entitled to severance pay.
Difference between transitional compensation and severance pay
A transition allowance and a severance payment are both allowances you can receive upon dismissal, but there are differences between the two.
Transition allowance: This is a legal compensation you are entitled to if your employer fires you or does not renew your temporary contract. The amount of the transition compensation is one-third of your monthly salary per year worked.
- The advantage is that you are always entitled to this in case of dismissal through the courts or the UWV. The disadvantage is that the amount is usually lower than with severance pay.
Severance pay: This is a compensation you can get if you conclude a settlement agreement (VSO) with your employer. This compensation is often higher than the transition compensation. You have to negotiate this yourself with your employer, as he is not obliged to pay it.
- The advantage is that this compensation is often higher than the transitional compensation. The disadvantage is that you have to negotiate this and it is not certain you will get it.
Negotiating the VSO without severance pay
Your employer makes you a proposal in case of dismissal by mutual agreement. You will receive a draft settlement agreement (vso). At this point, negotiations will start on the final agreements you will make. Especially the amount of severance pay is subject to negotiation.
Tips for negotiating the settlement agreement (VSO)
Employers can put quite a lot of pressure on employees. Especially when it comes to closing your vso. Therefore, let your check vso. Tips on the negotiating your settlement agreement (vso):
- Be calm and patient
- Don't be pressured during settlement agreement negotiations
- Don't bet too high on a counter-proposal
- Be aware of risks and consequences
- Like to stay employed
- Walking away from negotiating your settlement agreement is allowed
What are the most common mistakes during the negotiation process?
A common mistake is being ill-prepared. Without knowing what constitutes reasonable compensation, an employee may be too quick to agree to a low offer. Employers sometimes want a quick agreement, but it is important to take the time to read everything carefully. Reacting emotionally is also a mistake. It is important to remain calm and professional.
What do successful negotiations look like?
Successful negotiations start with good preparation. An employee needs to know what he or she can ask for. For example, if someone has worked for five years, he may try to get compensation of six months' salary or more.
It is important to stay calm and not immediately accept the employer's first offer. By listening carefully and coming up with strong reasons of your own, the employee can often get more.
How much severance pay is reasonable with settlement agreement?
How many months you get this with depends very much on the situation. The statutory transitional compensation is 1/3 monthly salary per year worked. When a dismissal is done via a settlement agreement, the compensation is easily 1/2 a month's salary or more per year worked. It also depends on how strong the employer is. For many people, this is one of the reasons to hire a lawyer, because all the facts and circumstances weigh up.
What are common practices and outcomes?
It is normal for employees to ask for more than the legal compensation. Employers often want a quick fix, so they sometimes offer more. Compensation can vary.
Sometimes employees can also negotiate for other benefits, such as a longer notice period or a good reference.
Kantonrechtersformule versus transitievergoeding
The subdistrict court formula, as the basis for severance pay in vso, is not used much anymore. It was used in cases of dismissal through the subdistrict court to determine the amount of the transitional compensation. If your employer does use this formula, in most cases the proposal will be half, one-and-a-half or two-and-a-half months per year worked.
The transition compensation, which the employer is obliged to pay in case of dismissal through the subdistrict court, uses 1/3 of the monthly salary per year worked as a determination of the compensation.
The two outcomes are not equal. The subdistrict court formula favours the employee; this is what an employment lawyer will bet on. The transition compensation is more favourable to the employer as this amount is lower.
What are the benefits of legal aid?
An employment lawyer helps get fair compensation. Lawyers are experienced and know what reasons work in negotiations. They are also quick to spot mistakes in the agreement that could hurt the employee. With the help of a lawyer, the employee feels more confident and can sign the agreement with peace of mind.
Have you received a settlement agreement and want to have it checked that everything is correct? Please contact us via WhatsApp, call 085 080 5482 or send a email; our employment lawyer will be happy to talk to you. And provide the answers to all your questions.
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The average "transition compensation" included in a settlement agreement (VSO) is 0.57 gross monthly salary per year worked. This is therefore 0.24 gross monthly salary higher than the legal calculation. The compensation is therefore higher on average when a lawyer negotiates a VSO.
In theory, there is no right to a transition fee in the case of a settlement agreement (VSO). The employer only owes a transition fee when a dismissal via the UWV or dissolution via the subdistrict court takes place. However, it is common for the VSO to include a severance payment that is as high or higher than the statutory transitional compensation.
You have no entitled to a transition allowance if you resign yourself (except if employer has acted seriously culpable), you are seriously culpable for the dismissal and if the employer has been declared bankrupt or has a suspension of payments. This also means that if you decide not to extend the fixed-term employment contract you will no entitled to a transitional payment.
You are entitled to a transition allowance when the employer takes the initiative to terminate the employment contract through the UWV or Cantonal Court. The conditions herein are that you do not serious culpable dismissal, such as in cases of theft or fraud, among others. This means that you are also entitled to a transition allowance if the employer decides not to extend your fixed-term employment contract.