SETTLEMENT AGREEMENT

Am I entitled to receive holiday pay with a settlement agreement?

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Read more about the right to holiday pay when terminating an employment contract with a settlement agreement here.

Your supervisor calls you for an interview and then the decision is made: ‘we want to terminate your employment’. You are presented with a settlement agreement and while your head overflows with questions, one specific question shoots through your mind: what happens to your holiday pay?

Holiday pay is an accrued right

It is good to know that holiday pay is an accrued right. This means that your employer is obliged to pay it, even if your employment contract ends due to a settlement agreement. Usually, holiday pay is paid in May or June, but if you leave earlier, you are entitled to the accrued amount until your last working day. This amount should be clearly stated in the settlement agreement.

Pay attention to the calculation of your holiday pay

Sometimes an employer makes a mistake or tries to save costs. Therefore, check carefully whether holiday pay has been calculated correctly. A few things to look out for:

Usually, holiday pay is 8% of your gross annual salary.
Holiday pay is calculated on your basic salary, but sometimes also on allowances or bonuses (check your employment contract or any collective agreement).
If you were paid holiday pay in parts (e.g. monthly), check that you received everything.

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Days off and holiday pay

Besides holiday pay, you might have outstanding vacation days. These are two different things. Unused vacation days must be paid out when you leave employment. This amount comes on top of your holiday pay.

Always get your settlement agreement reviewed

A settlement agreement is usually negotiable. Employers often put a standard proposal on paper, but that does not mean you should accept the first proposal blindly. Sometimes part of the holiday pay is missing, the calculation is unclear or you can negotiate better terms. An employment lawyer can help you check whether your settlement agreement is correct.

Know your rights

When signing a settlement agreement, it is important not only to look at the transitional allowance, but also at the smaller amounts such as holiday pay and vacation days. This may seem like a detail, but it can add up considerably. Make sure you get what you are entitled to and get good advice. That way, you will avoid surprises afterwards.

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