Can you mutually agree to terminate employment in the Netherlands?
Termination of employment by mutual consent (beeindiging met wederzijds goedvinden) is one of the most common ways to end an employment relationship in the Netherlands. Employers and employees can mutually agree to terminate their employment contract. As an employment lawyer in the Netherlands, I provide practical information on this topic so that employers and employees are aware of their rights and obligations under Dutch law.
In this article, we'll discuss how termination of employment works under Dutch law via mutual agreement between employer and employee. We will review the steps involved in such a process, including the formalities for both parties to be mindful of before signing any documents or agreements related to ending the employment arrangement. Additionally, we'll explore potential remedies available should either party breach their contractual duties during the termination process.
By understanding these key elements associated with termination by mutual consent under Dutch labor laws, employers and employees can abide by all relevant regulations while also protecting their interests throughout the transition period.
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What Is Termination of Employment by Mutual Consent under Dutch Law?
Termination by mutual consent (beëindiging met wederzijds goedvinden) is the voluntary agreement between an employer and employee to end their employment relationship, usually with a severance payment or other financial arrangement agreed between the parties. No statutory dismissal ground is required, which is why this route is used so widely: it avoids the UWV permit procedure or subdistrict court dissolution proceedings that a unilateral dismissal would require.
This is a viable alternative to termination on grounds of misconduct or poor performance, and can be beneficial for both employer and employee. For a broader overview of how contracts can be ended, see our guide on the termination of employment.
What Are the Eligibility Requirements for Termination by Mutual Consent?
For a termination by mutual consent to be valid, both employer and employee must give their consent voluntarily: an agreement reached under coercion or duress is invalid. The employee may also request an explanation from the employer as to why the employer wants to end the contract.
The agreement must be documented in a settlement agreement (vaststellingsovereenkomst) and must include a stipulation on the notice period (opzegtermijn), usually no less than one month. The employee also has a statutory reflection period (bedenktermijn) of fourteen days from signing the agreement within which the employee may revoke consent. The employer must mention this right in the agreement; if the employer fails to do so, the reflection period is extended to twenty-one days.
There should never be any doubts about whether both parties entered into the agreement voluntarily. Both parties must also ensure that all applicable laws and regulations are adhered to, including those related to pension funds, severance payouts and notice periods.
What Are the Benefits of Termination by Mutual Consent?
Terminating employment by mutual consent offers employers and employees several practical advantages: it avoids lengthy legal proceedings, allows both sides to avoid a contentious dispute before a judge, and typically remains confidential under the terms the parties agree between themselves.
- Time saving - by avoiding lengthy legal proceedings, both parties save time and money associated with court costs.
- Avoidance of conflict - both employer and employee avoid having to face each other in a contentious dispute before an impartial third party such as a judge or arbitrator.
- Financial compensation - employees may receive financial compensation, including severance pay, for lost wages or benefits when they mutually agree to end their contract.
- Confidentiality - terminations conducted through mutual consent are typically kept confidential between the parties under the terms of their agreement, helping preserve the reputation of both sides.
What Negotiations and Processes Are Involved in a Termination by Mutual Consent?
Reaching a termination by mutual consent requires open, honest negotiation between employer and employee: both sides must first agree that ending the employment relationship is the right course, after which they typically negotiate the severance package, benefits entitlements, and other compensation arrangements.
All documents relating to the termination should be properly drafted and signed by both parties, including notice periods, the effective date, payment terms, and any outplacement services, before further steps are taken, so that each party knows exactly what they are agreeing to.
What Documentation Is Needed for a Termination by Mutual Consent?
The central document in a termination by mutual consent is the settlement agreement (vaststellingsovereenkomst), which must set out any severance payment or other compensation, the notice period to be observed, and confirmation that both parties agree to end the employment relationship, together with a clause releasing each party from further obligations toward the other.
The process must also comply with any applicable collective labour agreement or individual employment contract provisions relating to termination, including matters such as unused vacation time and outstanding bonuses. These documents should be reviewed before drafting a mutually agreeable settlement.
Can an Employee Get Unemployment Insurance After a Termination by Mutual Consent?
Employees terminated by mutual consent may be eligible for unemployment insurance (WW-uitkering), since no fault lies with either party for the termination itself. The conditions set out in the settlement agreement must not affect the employee's ability to receive this benefit, so both parties should check this before signing.
The amount received depends on factors such as previous income level and length of service. It does not replace salary or wages, is separate from severance pay, and remains subject to tax. Rights and obligations regarding payments and deadlines are set out in the Employment Insurance Act (Werkloosheidswet, WW).
What Other Considerations Apply During a Termination by Mutual Consent?
Beyond the settlement agreement itself, employers must ensure that any severance pay or assistance with finding alternative employment is properly documented, and should comply with all applicable regulations when managing the transition for the employees involved.
Employers should also take necessary steps to maintain a positive working relationship with affected staff during this period, since the termination process affects more than the two contracting parties alone.
What Are the Final Steps in a Termination by Mutual Consent?
The final stage of a termination by mutual consent requires both parties to confirm that they understand the agreement and that all legal requirements have been met, before finalising, signing and storing the settlement agreement.
- Discussing and agreeing on the terms for terminating the employment contract: the termination date, severance package amount (if applicable), and other conditions.
- Drafting an agreement reflecting these terms, including the notice period and the information relevant to unemployment benefits eligibility.
- Both employee and employer signing the agreement.
- The employee returning any company property or equipment before their last day of work.
- Finalising and storing the signed agreement.
Key legal sources
- Werkloosheidswet (Unemployment Insurance Act) - governs eligibility for WW-uitkering after termination by mutual consent
- UWV: situations you will not need permission - official confirmation that mutual consent does not require a UWV dismissal permit
- UWV: if you agree to your dismissal or redundancy - official employee-facing guidance on the reflection period and settlement agreement requirements