When your employer becomes insolvent while a settlement agreement is already on the table or has already been signed, everything changes quite suddenly. The rules surrounding a Settlement agreement Do not simply apply as normal when insolvency is involved. Even so, that does not mean you are left empty-handed: there are concrete steps you can take to salvage what can be salvaged.
What changes when your employer becomes insolvent
As soon as the court declares insolvency, a liquidator is appointed. That person takes over from your employer. The liquidator decides whether existing employment contracts are continued or terminated. In most cases, the liquidator opts for swift termination of all employment relationships, even where arrangements had already been made in a settlement agreement.
It is important to understand that insolvency in practice takes precedence over any individual arrangements you may have made with your employer. Does your settlement agreement include a redundancy payment or a statutory redundancy payment? That claim then becomes part of the insolvency estate, and payment is far from certain.
Statutory redundancy pay in insolvency: the legal position
Section 7:673c(1) of the Dutch Civil Code addresses this explicitly: where an employer has been declared bankrupt, the statutory redundancy payment is no longer owed. The same applies in the event of a moratorium on payments. The liquidator may therefore dismiss you without paying a statutory redundancy payment.
Did you sign a settlement agreement before the insolvency, including an agreed payment? In that case, the situation is more nuanced. A settlement agreement concluded earlier does not automatically fall under Section 7:673c of the Dutch Civil Code. The payment obligation remains in principle, but whether that payment is actually made depends on what remains in the estate. Your claim then has unsecured status, meaning that preferential creditors such as the Dutch Tax Authority and wage claims take priority.
What the UWV's wage guarantee scheme covers
Here's the good news: you're not entirely on your own. The UWV (Dutch Employee Insurance Agency) has a wage guarantee scheme for employees whose employer has become insolvent. Through this scheme, the UWV takes over a portion of the financial obligations the employer can no longer fulfil.
Specifically, the wage guarantee scheme covers the following items:
- Arrears of wages for a maximum of the last 13 weeks before dismissal
- Wages during the notice period, up to a maximum of six weeks
- Arrears of holiday pay and outstanding annual leave accrued over a maximum of the past year
- Pension contributions for a maximum of the past year
The UWV explicitly does Not The payment made through the wage guarantee scheme is the statutory redundancy payment or any previously agreed severance payment from a settlement agreement. For those, you are reliant on the liquidator as an unsecured creditor.
Settlement agreement signed before insolvency: what now?
It can happen that you have already signed a settlement agreement and your employer subsequently runs into financial difficulties. In that case, the agreed payment remains in principle an enforceable claim. However, because this is an unsecured claim, creditors with preferential status — such as the Dutch Tax Authority — take priority. In practice, little tends to remain for unsecured creditors once insolvency proceedings have been concluded.
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Plan a conversationEven so, it is always worthwhile to formally submit your claim to the liquidator. Do this in writing and by recorded delivery, so that your claim is officially on record. The chances of payment may be slim, but if you submit nothing, the chances are zero.
Imminent insolvency and a settlement agreement offered: what should you do?
Sometimes an employer offers a settlement agreement when the business is not yet officially insolvent but is in serious financial difficulty. In that case, caution is warranted. Signing a settlement agreement when insolvency is imminent does not automatically offer greater security. In such a situation, you could equally choose to wait for the insolvency and then make a claim under the UWV's wage guarantee scheme.
Where a company has not yet formally applied for insolvency but it appears likely, the options available to you are materially different from those available once a court has already appointed a liquidator. Always seek advice before signing anything in that situation.
Practical steps when your employer becomes insolvent
Not sure where to begin? This checklist will help get you started:
- Consult the insolvency register (rechtspraak.nl) to confirm if insolvency has officially been declared and to identify the liquidator.
- Gather all your documents immediately: employment contract, payslips, the settlement agreement, and any emails relating to agreed arrangements.
- Send a recorded delivery letter to the liquidator detailing all outstanding amounts.
- Apply to the UWV for your insolvency benefit promptly — preferably within one week of your employment contract being terminated.
- Thereafter, apply for jobseeker's allowance (WW) once the insolvency benefit ends
- Consult an employment lawyer if there is any uncertainty about your rights or if the liquidator disputes what you are owed.
When is legal assistance truly necessary?
In most insolvency situations, the steps above will suffice. However, there are circumstances in which legal advice is not a luxury but a necessity. Consider cases where your settlement agreement was concluded before the insolvency and the liquidator disputes the payment. Or situations where you suspect the insolvency was deliberately engineered to avoid paying statutory redundancy. Abuse of insolvency law is not permitted, and in such cases additional claims may be possible.
Similarly, if the UWV does not fully accept your claim, it is wise to have your legal position assessed before simply agreeing to a lesser amount.
Why Arbeidsjurist Eindhoven?
At Arbeidsjurist Eindhoven, we know the local employment market and understand precisely how to get the most out of your position in an insolvency situation. Whether you signed a settlement agreement before the insolvency, are in the middle of an ongoing process, or simply want to know where you stand: we are happy to think through your situation with you. Get in touch for a no-obligation initial consultation. Together, we will quickly get a clear picture of your position.
Frequently asked questions
Am I still entitled to a statutory redundancy payment if my employer becomes insolvent?
No. Section 7:673c(1) of the Dutch Civil Code explicitly states that the statutory redundancy payment is not owed where an employer has been declared bankrupt. The same applies in the event of a moratorium on payments. You may, however, make a claim under the UWV's wage guarantee scheme for arrears of wages, holiday pay, and pension contributions.
If you have already signed a settlement agreement and your employer subsequently becomes insolvent, the agreed payment will depend on a few factors. 1. Preferential Creditor Status: In the UK, employees are often considered preferential creditors in insolvency proceedings. This means that certain outstanding payments owed to you, such as unpaid wages and accrued holiday pay, may be paid out before other creditors. 2. The Redundancy Payments Service (RPS): The Insolvency Service, through the Redundancy Payments Service, can help employees recover certain monies owed to them when their employer becomes insolvent and cannot pay. This typically includes: Redundancy pay Outstanding wages (up to a statutory limit) Holiday pay Money owed under notice pay 3. The Settlement Agreement: The terms of your settlement agreement are crucial. If the agreement was to pay you a sum of money as compensation (e.g., for unfair dismissal, or as part of a severance package), and this payment was due *before* the insolvency, the RPS may be able to help you recover up to a certain limit. However, the RPS mainly covers statutory entitlements. They *may* cover payments due under a settlement agreement, but this can be more complex and might depend on the nature of the payment within the agreement. If the settlement agreement was to pay you in instalments, and some instalments were due after the employer became insolvent, the unpaid instalments may be treated as an unsecured debt. In summary: Your statutory entitlements (redundancy pay, wages, holiday pay, notice pay) are likely to be covered by the Redundancy Payments Service up to statutory limits. Payments specifically agreed in the settlement agreement, beyond statutory minimums, may be harder to recover in full and might be treated as an unsecured debt if the RPS doesn't cover them. It is highly advisable to seek advice from a qualified employment lawyer or a union representative as soon as possible. They can review your settlement agreement and advise you on the best course of action to recover the monies owed to you. They can also help you make the necessary claims to the Redundancy Payments Service.
A previously concluded settlement agreement does not automatically fall under the exception in Section 7:673c of the Dutch Civil Code. The payment obligation remains in principle, but your payment becomes an unsecured claim in the insolvency estate. This means that creditors with a higher ranking – such as the Dutch Tax Authority – are paid first. Always submit your claim to the liquidator in writing and by recorded delivery.
What does the UWV cover through the wage guarantee scheme in the event of insolvency?
Through the wage guarantee scheme, the UWV covers arrears of wages for the last 13 weeks, wages during the notice period (up to a maximum of six weeks), arrears of holiday pay and outstanding annual leave for the past year, and pension contributions for the past year. The statutory redundancy payment or any severance payment agreed in a settlement agreement is explicitly excluded.
Your employer is nearing insolvency and has presented you with a settlement agreement. Should you sign it?
Exercise caution and never sign immediately. Where insolvency is imminent but not yet officially declared, your rights and risks are materially different from those in a completed insolvency. Signing a settlement agreement can sometimes be advantageous, but it can also work against you if insolvency follows regardless. Always have your situation assessed by an employment lawyer before signing anything.
Yes, you can still claim Jobseeker's Allowance.
Yes, you can. Once the liquidator has terminated your employment contract, you are in principle entitled to jobseeker’s allowance (WW), provided you meet the standard conditions, such as the weeks-worked requirement. Losing your job through insolvency is not treated as blameworthy unemployment. Ideally, apply for the WW no later than one week after the end of your notice period.
We're happy to help you brainstorm ideas. For advice tailored to your specific situation, we'd be happy to sit down with you. No rights can be derived from the content of this page and it may contain inaccuracies.
