Have you been offered a settlement agreement (VSO) as an employee on a fixed-term contract? If so, you find yourself in a particular legal situation that differs from a permanent employment contract in several respects. Your position is sometimes stronger than you might think, but the pitfalls are equally real. In this article, you will learn what your rights are and what to look out for before you sign anything.
When might you receive a settlement agreement on a fixed-term contract?
A fixed-term contract normally comes to an end on the agreed expiry date. No settlement agreement is required for this. The situation changes when your employer wants to end the contract early, or when you yourself wish to leave sooner. In that case, a settlement agreement can be the solution for parting ways by mutual consent and setting out clear arrangements regarding compensation, release from work duties, and other practical matters.
Some employers also offer a settlement agreement precisely before the point at which a succession of fixed-term contracts would automatically convert into a permanent contract. This makes your negotiating position particularly strong in such circumstances: the employer has a clear interest in obtaining your agreement.
The interim termination clause is crucial
The single most important thing to check when a settlement agreement is proposed during a current fixed-term contract is whether your employment contract contains an interim termination clause. This clause largely determines what you can do legally and whether you retain your entitlement to unemployment benefit.
Is such a clause included? Then your fixed-term contract can be brought to an end early, provided your employer also has a valid reason, such as redundancy or underperformance. Is the clause absent? Then your position is actually strong: in principle, your employer may not terminate the contract early and is essentially obliged to continue paying you until the agreed end date.
You should also be aware that when a fixed-term contract is renewed, the interim termination clause must be expressly confirmed or enclosed as an attachment. If a clear reference is missing, the clause may be invalid in a subsequent contract.
Your unemployment benefit entitlement with a settlement agreement and a fixed-term contract
Entitlement to unemployment benefit is one of the most risky aspects of a settlement agreement combined with a fixed-term contract. Pay attention to the following points:
- No interim termination clause in place? Then you risk the DWP (UWV) deciding that your entitlement to unemployment benefit only begins from the original end date of your contract, not before.
- Employer’s initiative: The settlement agreement must clearly state that the initiative to end the employment relationship lies with the employer. If this is not included, the UWV may refuse your unemployment benefit claim.
- Correct notice period: The end date in the settlement agreement must take the statutory notice period into account. If the end date has been set too early, the point from which you can receive unemployment benefit will be pushed back.
- Weeks requirement: To qualify for unemployment benefit, you must have worked for at least 26 weeks out of the 36 weeks prior to becoming unemployed. Periods of release from work during which you continue to receive your salary count towards this requirement.
Statutory redundancy pay also applies to fixed-term contracts
Many employees are unaware that they are also entitled to statutory redundancy pay (transitievergoeding) on a fixed-term contract. This entitlement exists from the very first day of employment. The payment amounts to one third of a gross monthly salary for each year of service; for shorter periods, this is calculated on a pro-rata basis. The statutory maximum from 1 January 2026 is €102,000 gross, or one gross annual salary if that amount is higher.
Plan een vrijblijvend gesprek en ontdek wat we voor je kunnen betekenen.
Plan een gesprekWith a settlement agreement, the employer is not automatically required by law to pay the statutory redundancy payment, but it is customary and reasonable to use this figure as a starting point in negotiations. If you sign a settlement agreement without any compensation, you may inadvertently waive money to which you are legally entitled. Moreover, the remaining contract duration can be an additional argument for negotiating a higher payment: the more months remaining, the stronger your position.
Your employer failing to comply with the notification obligation
Do you have a fixed-term contract of six months or longer? Then your employer is required to inform you in writing no later than one month before the end date whether the contract will be renewed or not. If your employer forgets to do this, or does so too late, you are entitled to a notification compensation of up to one gross monthly salary. This is a separate right that is independent of the statutory redundancy payment and can be included in your negotiations.
The chain rule and your right to a permanent contract
One point that is sometimes overlooked in a settlement agreement involving a fixed-term contract is the so-called chain rule (ketenregeling). Under Article 7:668a of the Dutch Civil Code, a permanent contract arises automatically when an employee has had more than three fixed-term contracts with the same employer, or when the total duration of consecutive contracts exceeds three years, with gaps of no more than six months between them.
If you sign a settlement agreement at a point when you were already entitled to a permanent contract, you are waiving that right. Always have this checked before you put pen to paper.
Practical tips before you sign
- First and foremost, check whether a valid interim termination clause exists in your contract, including in any renewed contracts.
- Calculate the remaining duration of your contract: this partly determines what constitutes a reasonable level of compensation.
- Establish whether, under the chain rule, you may already be entitled to a permanent contract.
- Check that the settlement agreement is compatible with unemployment benefit requirements: the employer must be the initiating party, the correct notice period must be observed, and the reason for dismissal must be neutral.
- Pay attention to the notification obligation: if it has not been met, or was met too late, you are entitled to a notification compensation payment.
- Make use of the statutory cooling-off period of 14 days after signing: within this period you may revoke the settlement agreement in writing without giving any reason.
- Never sign without having the settlement agreement reviewed by an employment law specialist, particularly if you are ill or pregnant.
Would you like to know exactly what should be included in a Settlement Agreement to protect your rights? The page contains comprehensive information to help you enter the conversation fully prepared.
Why choose Arbeidsjurist Eindhoven?
At Arbeidsjurist Eindhoven, we understand that a settlement agreement involving a fixed-term contract in Eindhoven and the wider Brabant region requires particular attention. We not only assess whether the agreement is legally sound, but also whether you will be financially worse off and whether your unemployment benefit entitlement is protected. Would you like your settlement agreement reviewed, or would you like to know how strong your negotiating position is? Please do not hesitate to contact us with no obligation. We will help you quickly and on a personal basis.
Frequently asked questions
Do I need to sign a settlement agreement when my fixed-term contract simply expires?
No, that is not necessary. A fixed-term contract ends automatically on the agreed expiry date without any need for a settlement agreement. A settlement agreement only becomes relevant if your employer wishes to end the contract early, or if you wish to put additional arrangements in writing, such as a compensation payment or release from work duties.
Am I entitled to statutory redundancy pay as an employee on a fixed-term contract?
Yes. Since the introduction of the Labour Market in Balance Act (WAB) in 2020, you have been entitled to statutory redundancy pay from the very first day of your employment, including on a fixed-term contract. The payment amounts to one third of a gross monthly salary for each year of service. Please note: if you sign a settlement agreement that does not include the statutory redundancy payment, you may inadvertently waive this entitlement.
What is the risk to my unemployment benefit entitlement if I sign a settlement agreement on a fixed-term contract?
The greatest risk is that the UWV will reject your unemployment benefit claim if the settlement agreement has not been drawn up correctly. The key requirements are: the initiative for ending the employment must lie with the employer, a valid interim termination clause must be included in your contract, and the end date must take the statutory notice period into account. If the interim termination clause is absent, the UWV may determine that you are only entitled to unemployment benefit from the original contract end date.
What is the interim termination clause and why is it so important?
An interim termination clause is a provision in your fixed-term contract that gives both parties the right to terminate the contract before the end date. Without this clause, your employer is in principle obliged to continue paying you until the end date, which gives you a strong negotiating position. Furthermore, the clause is a prerequisite for retaining your unemployment benefit entitlement if you leave early via a settlement agreement.
Can I reverse a settlement agreement after I have signed it?
Yes, after signing you have a statutory cooling-off period of 14 days. Within this period, you may revoke the settlement agreement in writing without being required to give a reason. It is important that your employer is aware of this cooling-off period and that this right is stated in the agreement. If it is not, the cooling-off period is extended to 21 days.
We are happy to think along with you. For advice tailored to your situation we would gladly sit down with you. No rights can be derived from the content of this page and it may contain inaccuracies.
