Severance Compensation in a Settlement Agreement in The Hague
A **severance compensation settlement agreement** provides employees in The Hague with financial support at the end of their employment through a mutual arrangement. This agreement between employer and employee outlines the termination terms, including the compensation amount, offering more predictability than a unilateral dismissal. For Hague residents, this is a popular way to avoid conflicts and ensure a smooth transition to new employment, especially in a dynamic city like The Hague with its diverse economy.
What Does a Settlement Agreement Entail in The Hague?
A **settlement agreement (SA)** is a legally binding arrangement where employer and employee agree on how the employment contract will end, as outlined in **Article 7:900 of the Dutch Civil Code (DCC)**. Unlike termination through The Hague District Court or the Dutch Employee Insurance Agency (UWV), the employee voluntarily consents, meaning notice periods or transition payments are not always mandatory unless explicitly agreed. In practice, an SA often includes a **severance compensation** as compensation, particularly in cases of unjust dismissal. Residents of The Hague can seek advice on such agreements through the **Legal Helpdesk The Hague**, which offers free assistance in evaluating these contracts.
The SA must always be documented in writing, detailing the end date, neutrality clauses for benefits, and the payment of compensation. Since the **Wet Werk en Zekerheid (Employment Security Act, WWZ)** came into effect in 2015, this method has gained popularity because termination without court or UWV involvement is possible if both parties agree—ideal for The Hague’s labor market, which includes many government and service-sector jobs.
The Legal Basis of Severance Compensation
While a **severance compensation** in an SA is not mandatory, it often aligns with the **transition payment** under **Article 7:673 DCC**, capped at one month’s salary per year of service, with a maximum of €89,000 (2023, subject to indexing). For service exceeding two years, the payment increases to **one-third of a month’s salary per year** for the first ten years and **half a month’s salary** thereafter.
**Article 7:681 DCC** governs transition payments upon termination, but an SA allows negotiation for additional benefits, such as an **above-legal sum**, bonuses, or multiple months’ salary. Crucially, the SA must not compromise **WW rights**, in compliance with Dutch social security rules. If the agreement fails to meet these standards, The Hague District Court may declare it invalid (**Article 7:900(2) DCC**). In cases of restructuring or illness in The Hague—where the Municipality of The Hague may be involved in local arrangements—additional collective labor agreements (CAOs) or the **Wet Verbetering Poortwachter** (Improvement of Gatekeeper Act) may apply.
Practical Examples of Severance Compensation in The Hague
Consider an IT professional with five years of experience at a Hague-based tech firm facing redundancy due to restructuring. The employer proposes an SA with a transition payment of **5/3 months’ salary** (approximately 1.67 months) plus an additional month as a gesture, totaling around **2.67 months’ salary**, excluding vacation pay, paid within a month while preserving WW rights—a strategic choice in The Hague’s competitive job market.
Or a sales employee at a local business who underperforms after warnings; the SA may include one month’s salary, less than the transition payment, but with outstanding bonuses included. This saves time and costs compared to litigation at The Hague District Court, where the outcome remains uncertain.
In The Hague’s healthcare sector, with favorable CAOs, an SA might include **1.5 months’ salary per year**, plus pension compensation, accounting for local staffing shortages.
Rights and Obligations Regarding Severance Compensation in The Hague
Employee Rights:
- Right to fair compensation, at least the transition payment if the employer’s termination is lawful.
- Right to professional advice, such as through the **Legal Helpdesk The Hague** or a trade union (**Article 7:670b DCC**); without this, the SA may be invalid.
- Protection against unreasonable terms: compensation cannot fall below the legal minimum in cases of forced termination.
Employer Obligations:
- Pay the compensation within the agreed timeframe, typically within a month of termination.
- Provide a neutrality statement for the WW claim with the UWV.
- Not impose a non-compete clause without additional compensation (**Article 7:653 DCC**), relevant in The Hague’s professional networks.
Employee Obligations:
- Voluntarily sign the SA after seeking advice, preferably at the **Legal Helpdesk The Hague**.
- Refrain from filing further claims unless serious errors are present.
- Collaborate in the transfer of duties.
If payment is not made, the employee may pursue legal action at The Hague District Court to enforce the compensation.
Comparison: SA vs. Other Termination Methods in The Hague
| Aspect | SA with Compensation | Termination via The Hague District Court | Termination via UWV |
|---|---|---|---|
| Compensation | Negotiated, often transition + bonus | Transition + possible fair compensation | Transition only |
| Procedure Duration | Quick resolution if agreed | Several months, including hearings | Weeks, with appeal options |
| WW Rights | Preserved via neutrality | Preserved if termination approved | Preserved for urgent reasons |
| Costs | Low, no court fees | Court fees €85–€500 | None, lawyer optional |
Frequently Asked Questions About SAs in The Hague
Do I Always Have to Accept Severance Compensation in an SA?
No, you are not required to sign an SA. You have **14 days to reconsider** after signing (**Article 7:670b(3) DCC**) and should seek advice, for example, from the **Legal Helpdesk The Hague**. If in doubt, you may prefer litigation at The Hague District Court for a potentially higher outcome.