Settlement Agreement During Incapacity for Work: What Changes to Your Benefits?

A settlement agreement when you are incapacitated for work can affect your benefit. Below you can read what changes and what to watch out for.

If you are ill and your employer puts a settlement agreement on the table, one of the first questions you ask yourself is: what happens to my benefit? That is a legitimate concern, because signing such an agreement has direct consequences for your entitlement to unemployment benefit (WW), Sickness Benefit, or WIA. Here you can read what may change for each type of benefit and what you need to pay particular attention to.

What is a settlement agreement in the context of incapacity for work?

A settlement agreement (also known as a VSO or termination agreement) is a written arrangement by which you and your employer jointly decide to end the employment relationship. That sounds straightforward, but if you are incapacitated for work at that moment, there is much more at play. Special rules apply in relation to benefits that differ from those in an 'ordinary' termination.

By signing a settlement agreement, you voluntarily consent to the dismissal. This has consequences for whether UWV will award you a benefit, and if so, which one.

What happens to your unemployment benefit (WW)?

The basic rule for unemployment benefit (WW) is that you must not be responsible for the loss of your job yourself. If you sign a settlement agreement, UWV may regard this as culpable unemployment. However, that is not automatically the case.

The UWV assesses whether you have carried out a so-called 'detrimental act'. This means: have you done something that has harmed your entitlement to benefit? Signing without good reason or without legal advice can in this context be interpreted as negligent conduct.

Bear the following points in mind if you wish to safeguard your unemployment benefit (WW):

• Ensure that the settlement agreement contains a neutral or non-culpable reason for dismissal.
• Check that the end date corresponds to the applicable notice period.
• Do not allow it to be recorded that you resigned of your own accord.
• Always ask for time to reflect and make use of it.

Sickness benefit (Ziektewet) after signing a settlement agreement

If you are ill at the time of signing, your right to continued salary payment by your employer lapses as soon as the employment ends. In that case you may be eligible for a Ziektewet benefit through the UWV — provided you meet the relevant conditions.

However, the UWV will not pay a Ziektewet benefit if you have unnecessarily worsened your own situation. It is therefore crucial that the settlement agreement does not imply that you terminated the employment on your own initiative. Furthermore, if the notice period is not observed (either by you or by the settlement agreement), the UWV may impose a waiting period before the benefit commences.

What will change about your WIA benefit?

Have you been ill for more than two years and are you expecting to apply for a WIA benefit? If so, it is important to know that the WIA benefit is calculated on the basis of your former salary. Signing a settlement agreement does not in itself have any direct effect on the amount of your WIA benefit, as this is linked to your employment history and your degree of incapacity for work.

Nevertheless, there are indirect risks:

• If your settlement agreement has an end date that is earlier than expected, this may affect the waiting period.
• Agreements on severance payments may be treated as income, which can temporarily affect benefits.
• VSOs sometimes contain clauses that oblige you to waive certain entitlements — always check this carefully.

Would you like to know more about the broader context of your rights during illness and upon termination of employment? If so, please also read our comprehensive page on the Settlement agreement during illness: everything you need to know.

The cooling-off period: your safety net

Once you have signed a settlement agreement, you have a statutory fourteen days in which to withdraw your decision without giving any reason. This cooling-off period exists for good reason. Use it to seek advice if you have not already done so.

If you did not make use of your cooling-off period within those fourteen days and you subsequently discover that your benefit entitlement is at risk, there is a strong chance you will no longer be able to undo the agreement. Never wait too long before consulting a specialist.

Practical steps you can take

In order to protect your benefit position as effectively as possible, it is advisable to arrange a number of matters before signing:

• Have the settlement agreement reviewed by an employment lawyer who also has expertise in benefit law.
• Ask your employer to formulate the reason for dismissal in neutral terms.
• Check that the notice period has been correctly reflected in the end date.
• Do not agree to any clause in which you waive certain benefit entitlements, unless you know exactly what you are signing.
• Ask about a pro forma dismissal procedure as an alternative, if that turns out to be more favourable for your benefit entitlement.

Why Employment Lawyer Eindhoven

At Arbeidsjurist Eindhoven we understand that being ill is already difficult enough — without you having to worry about your benefits on top of that. Together with you, we will look at the settlement agreement, the consequences for your specific benefit situation, and what you can do to protect your interests.

Are you based in the Eindhoven or Brabant region and would you like to know where you stand? Feel free to contact us with no obligation. We are happy to think things through with you.

Frequently asked questions

Will I lose my unemployment benefit (WW) if I sign a settlement agreement while I am off sick?

Not automatically, but the risk exists if the settlement agreement has been drafted incorrectly. Make sure the reason for dismissal is neutral and that the notice period has been correctly taken into account. Always have the agreement reviewed before you sign.

Am I entitled to a Sickness Benefit (Ziektewet) after signing a settlement agreement?

That depends on the circumstances. If you are incapacitated for work at the time of signing and the settlement agreement does not imply that you left of your own initiative, you may be eligible for a Sickness Benefit (Ziektewet). UWV assesses this on a case-by-case basis.

Does a settlement agreement affect my WIA benefit?

The level of a WIA benefit is primarily determined by your employment history and degree of incapacity for work. Nevertheless, certain clauses in a settlement agreement can have indirect consequences. Always have this assessed by a specialist.

How long do I have a cooling-off period after signing a Voluntary Settlement Agreement (VSO)?

You are legally entitled to a period of fourteen days in which you can revoke the settlement agreement without giving a reason. Use this period to obtain legal advice if you have not already done so.

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.