If the parties have mutually agreed to terminate the employment agreement, the agreements in this respect are often laid down in a settlement agreement.

A settlement agreement can be concluded both in case of individual grounds for dismissal (such as unsatisfactory performance and a damaged working relationship) and in case of collective grounds for dismissal (such as reorganisation and business closure).

Agreeing to a settlement agreement does in principle not constitute a ground for the UWV to refuse unemployment benefits.

The settlement agreement must, however, be worded carefully.

Various matters can be arranged in the settlement agreement. These include as to whether the employee is entitled to compensation, the end date of the employment agreement, whether the employee will be released from the obligation to perform activities, whether an employee will be bound by post-contractual clauses (like a non-solicitation or a non-competition clause and a penalty clause) and any contribution towards the costs of outplacement and legal fees.

Often, the agreements in the settlement agreement are worded in such a way that the parties also grant each other full and final discharge.