Paying Out Holiday Days in a Settlement Agreement

Paying out holiday days in a settlement agreement

The payment of your holiday days upon a settlement agreement raises questions. Below you can read what you are entitled to in your final settlement.

When you sign a settlement agreement, your employment ends by mutual consent. But what happens to the holiday days you still have outstanding? These cannot simply be allowed to lapse: the law gives you clear rights in this regard. It is essential that this is properly arranged before you put your signature to the agreement.

Statutory obligation at the end of employment

The starting point in law is clear: upon termination of the employment contract, all outstanding holiday days must be settled. This follows from Article 7:641 of the Dutch Civil Code. Both statutory and non-statutory holiday days that have not yet lapsed or become time-barred must be paid out if you are no longer able to take them. This therefore also applies in the event of a termination by means of a settlement agreement.

Please note: during an ongoing employment relationship, statutory holiday days may not be bought out. This prohibition on buying out holiday entitlement is laid down in Article 7:640 of the Dutch Civil Code. Payment is only permitted at the moment the employment contract actually ends. This makes the final settlement in a settlement agreement an important moment.

Statutory and non-statutory days are subject to different rules

There are two types of holiday days, and they are treated differently in a settlement agreement. The distinction is crucial for the amount of your final settlement.

Wettelijke vakantiedagen are the days to which you are entitled by law as a minimum: four times the number of hours you work per week. If you work five days a week, that amounts to a minimum of twenty days per year. These days lapse six months after the calendar year in which they were accrued. If you accrue days in 2025, they therefore lapse on 1 July 2026. An exception applies if you were reasonably unable to take the days, for example due to illness or because your employer did not alert you to the fact that the days were at risk of lapsing.

Non-statutory holiday days are the additional days agreed on top of the statutory minimum in your employment contract or collective labour agreement. These days have a much longer time limit: they only become time-barred after five years. Non-statutory days accrued in 2025 are therefore valid until 31 December 2030.

Taking or paying out: what is the sensible option?

With a settlement agreement you generally have a choice: you take your holiday days before the end date, or you have them paid out in the final settlement. Both options have advantages and disadvantages that you should carefully consider.

Als je de dagen opneemt before the end date, your salary continues as normal and during that period you also continue to accrue pension and new holiday days. A possible disadvantage is that this moves the end date further back, which may affect the start date of your unemployment benefit (WW).

Als je de dagen laat uitbetalen, you receive the gross daily wage directly as a sum in the final settlement. This is straightforward and clear-cut, but it is taxed as ordinary income. If a large number of days are paid out, this may result in a higher tax burden in that year.

There is also a middle ground: a partial arrangement whereby you take some of the days and have the remainder paid out. This can sometimes work out more favourably from a tax perspective.

Release from work and your holiday days

One issue that frequently gives rise to dispute in practice is the situation in which you are released from your duties. In such cases, employers regularly attempt to offset outstanding holiday entitlement against the period of release. The settlement agreement may then state that holiday days are 'deemed to have been taken' during that period. If you agree to this arrangement of your own accord, it may be reasonable. However, if the release was imposed unilaterally by your employer, it is not legally self-evident that you should forfeit holiday days as a result. Always read the wording of your settlement agreement carefully on this point.

Practical checklist for the final settlement

Before signing a settlement agreement, it is advisable to carefully check the following points:

• Request an up-to-date overview of your holiday balance, with a clear distinction between statutory and non-statutory days.
• Check which days are at risk of lapsing before or around the end date of the settlement agreement.
• Make sure the settlement agreement explicitly states how many days are outstanding and how these will be settled — paid out, taken as leave, or a combination of both.
• Check whether the text on exemption from work deals with the holiday days correctly and whether you agree with it.
• Do not forget the pro-rata holiday allowance either: this is also owed up to the end date.
• Check whether the collective labour agreement contains additional provisions regarding expiry periods or the buy-out of non-statutory days.
• Check whether the full and final settlement clause in the settlement agreement correctly covers the holiday day settlement — an error here can lead to disputes later on.

Holiday allowance is part of it

In addition to the holiday days themselves, you are also entitled to the accrued but not yet paid holiday allowance upon termination of your employment. This is calculated over the period from the last payment of holiday allowance up to the end date of the employment contract. This amount must also be included in the final settlement of the settlement agreement. Always check, therefore, whether this is stated separately in the agreement.

Full and final settlement and the importance of clear arrangements

Almost every settlement agreement contains a full and final settlement clause: once signed, neither party can make any further claims against the other. In practice, this means that if holiday days have not been correctly recorded in the settlement agreement, it will be difficult to claim payment afterwards. Legal practice shows that courts will award claims where the settlement agreement contains an explicit promise that has not been honoured. Prevention is better than cure, however: make sure everything is correct before signing.

Why Employment Lawyer Eindhoven

A settlement agreement often contains more complexities than are immediately apparent. Holiday days, holiday allowance, and exemption-from-work clauses are areas where employees in the Eindhoven and Brabant region regularly leave money on the table. At Arbeidsjurist Eindhoven, we thoroughly review your settlement agreement, check the final settlement, and help you negotiate the most favourable terms for you. Contact us without obligation — we are happy to think things through with you.

Frequently asked questions

Does my employer always have to pay out my holiday days in a settlement agreement?

Yes, in principle they do. Upon termination of the employment contract, outstanding holiday days that have not yet lapsed or become time-barred must be paid out (Article 7:641 of the Dutch Civil Code). This applies to both statutory and non-statutory days. Different arrangements can, however, be made in the settlement agreement — such as taking the days before the end date — but this must then have been expressly agreed.

What is the difference between statutory and non-statutory holiday days in a settlement agreement?

Statutory holiday days are the minimum days required by law (four times your weekly working hours). They lapse six months after the accrual year. Non-statutory holiday days are extra days agreed in your employment contract or collective labour agreement and do not expire until after five years. Different rules apply to each type when calculating the final settlement in a settlement agreement, which is why it is important to distinguish clearly between them in the agreement.

My employer is releasing me from my work duties. Is he allowed to offset my holiday days against that period?

That depends on the circumstances. If you agree to the release from duties and the holiday days are explicitly offset against that period, this can be reasonable. However, if the release from duties is at the employer's initiative, it is not legally self-evident that you must surrender holiday days for it. Always have the wording of the settlement agreement checked on this point by an employment lawyer.

What if my holiday days have not been paid out, or have been paid out incorrectly, while I have already signed a full and final settlement clause?

A full and final settlement clause means that after signing, neither party can claim anything further from the other. However, if the settlement agreement explicitly stipulated that holiday days would be paid out and this has not happened, you can still hold the employer to that. An agreed obligation remains in force, even after a full and final settlement clause. Legal practice shows that courts can uphold such claims. Consult an employment lawyer if you suspect that you are owed something.

Does the payment of holiday days affect my unemployment benefit (WW)?

It can, depending on how the payment is structured. The UWV assesses whether the end date in the settlement agreement aligns with the normal notice period. If a large number of holiday days are paid out in one go, the UWV may investigate whether this is in effect an additional severance payment intended to circumvent the notional notice period. It is therefore important to ensure that the arrangements in the settlement agreement properly align with the unemployment benefit (WW) rules. Seek guidance from an employment lawyer on this.

We are happy to think along with you. For advice tailored to your situation, we would be glad to talk. No rights can be derived from the content of this page and it may contain inaccuracies.