You receive a redundancy payment via a settlement agreement (vaststellingsovereenkomst, VSO) — and then it turns out that the tax authorities claim a substantial portion of it. This article explains exactly how this works, what rate you can expect, and what you might be able to do to reduce the tax burden. For your own situation, it is always advisable to seek legal and tax advice.
The redundancy payment is always a gross amount
Whether you leave employment via the UWV, the cantonal court, or through a VSO: the payment stated in the agreement is always gross. Your employer is required to withhold payroll tax before the amount reaches your account. What you ultimately receive net depends on your total annual income in the year of payment.
The redundancy payment is treated by the tax authorities as income from previous employment. This means that the amount is added to your regular annual income and taxed under the progressive income tax system. The higher your combined income, the heavier the tax rate.
Which tax rate applies in 2026?
The redundancy payment falls under the so-called special remuneration table (groene tabel). This table does not include the employment tax credit, which means the effective rate is often higher than you might expect based on your regular salary.
For employees below state pension age (AOW), the following percentages apply in 2026 (depending on combined income including the payment):
- Up to approximately €29,737: around 35.75% payroll tax
- Between approximately €29,737 and €78,427: approximately 37.56% (when the tax credit offset percentage is applied, this rises to approximately 43.96%)
- Above approximately €78,427: 49.50%
Because your employer does not always know your total annual income precisely, they will often withhold at the higher rate to avoid an underpayment. When you file your income tax return, it is then determined whether you have overpaid — and are therefore due a refund — or whether you owe additional tax.
The VSO and the payment level
In a standard redundancy procedure via the UWV or the cantonal court, a statutory maximum of €102,000 gross applies in 2026 (or one gross annual salary if that is higher). Within a Settlement Agreement, This maximum does not apply; you may agree a higher payment with your employer. In practice, the statutory redundancy payment serves as the starting point for negotiation, but there is often room for more – particularly if you know your position well.
One important point to bear in mind: because the payment is made in a single lump sum, your income in that year may temporarily fall into a higher tax bracket. This is a direct consequence of progressive taxation and is something to take into account when negotiating the level of the payment.
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Plan a conversationWays to reduce the tax burden
There are a few legally recognised ways to limit or reduce the tax on your redundancy payment. These are not loopholes, but genuine fiscal instruments. Do seek personal advice on these, as the options depend heavily on your individual circumstances.
- For training or outplacement use. If your employer pays the costs of a training course or outplacement programme directly to the provider or agency — that is, before the payment is made to you — you pay no tax on that portion. If you receive the money first and then pay for the course yourself, the amount is taxable. This must be properly documented, ideally in the VSO itself.
- Contribution to an annuity If you have a pension shortfall, you may contribute (part of) the net payment into an annuity insurance policy or a banking annuity. Within your annual allowance, that contribution is deductible in box 1, reducing your taxable income. At the same time, you build up pension capital that falls outside box 3. Consult a financial adviser for this.
- Payment spread over two calendar years If the payment is spread across two years, the disadvantage of progressive taxation can be reduced. This must be explicitly stipulated in the VSO.
- Check the withholding after the fact: Has your employer withheld too much payroll tax? You can then reclaim the overpaid amount when you file your income tax return. Always check this.
- Be mindful of benefits and allowances. The redundancy payment counts as income for means-tested benefits such as the healthcare allowance (zorgtoeslag) and housing benefit (huurtoeslag). A large payment may result in your entitlement to these benefits being (partially) lost in the year of payment.
The income averaging scheme has been abolished
Up to and including the 2024 tax year, the income averaging scheme (middelingsregeling) existed: a scheme that allowed you to spread the tax burden over three years in cases of strongly fluctuating income. As of 1 January 2025, this scheme has been permanently abolished. For a redundancy payment made in 2025 or later, averaging is therefore no longer an option. This makes it all the more important to consider the tax implications and any alternatives in advance.
Why Arbeidsjurist Eindhoven?
Signing a VSO without knowing precisely what net amount you will be left with? That's a waste. At Arbeidsjurist Eindhoven, we help you not only with reviewing and negotiating your settlement agreement, but also with identifying the key considerations surrounding the payment – so that you can sign with confidence. We work with clients in Eindhoven and the wider Brabant region. Get in touch with us for a no-obligation initial consultation.
Frequently asked questions
Do I pay tax on the redundancy payment in my VSO?
Yes. The tax authorities treat the redundancy payment as income from previous employment. Your employer withholds payroll tax before paying out the amount. The exact rate depends on your total annual income, including the payment. When you file your income tax return, it is then determined whether you have paid too much or too little tax.
Can I use my redundancy payment tax-free?
Yes, in part. If your employer pays the costs of training or an outplacement programme directly to the provider – that is, before the payment is made to you – that portion is exempt from tax. If you receive the money first and then pay for the course yourself, the amount is taxable. This must be arranged in advance, ideally in the VSO itself.
Is there a cap on the redundancy payment in a VSO?
In a formal redundancy procedure via the UWV or the cantonal court, a statutory maximum of €102,000 gross applies in 2026 (or one gross annual salary if that is higher). With a settlement agreement, this maximum does not apply – meaning you can agree a higher payment. This makes negotiation particularly worthwhile.
Yes, you can use your redundancy payment to pay less tax by contributing to an annuity.
You can, provided you have a pension shortfall (annual allowance). Within that allowance, a contribution towards an annuity insurance policy or a banking annuity is deductible in box 1, reducing your taxable income. The accumulated capital also falls outside the deemed return tax in box 3. This is a tax decision that depends on your personal circumstances; always seek advice from a financial adviser.
Is the income averaging scheme still an option for saving tax on my redundancy payment?
No. The income averaging scheme, which allowed you to spread the tax on fluctuating income over three years, was permanently abolished on 1 January 2025. For redundancy payments made from 2025 onwards, this option is no longer available.
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.
