In the Netherlands, sick employees enjoy strong protection under labour law. Nevertheless, a proposal for a settlement agreement (or termination agreement) during illness may seem tempting – especially if an employer exerts pressure. But signing a settlement agreement before the end of the waiting period (usually 104 weeks) can pose significant risks to income, benefits and your negotiating position.

In this column, you will read: how the dismissal prohibition works, when dismissal after long-term illness is possible, what the consequences are for Sickness Benefit, Unemployment Benefit and WIA, what self-insured status means, and which practical steps you can take to avoid pitfalls.

The Dismissal Prohibition and Conditions for Dismissal

During the first 104 weeks (2 years) of illness, a statutory dismissal prohibition applies in principle. This means that your employer cannot simply dismiss you. There are exceptions (such as summary dismissal under strict conditions or dismissal during the probationary period), and termination can also occur if you agree via a settlement agreement. The purpose of this protection is for the employer to continue paying wages and to promote reintegration.

In case of illness, the employer must pay wages for a maximum of 2 years. By law, this is at least 70% (in the first year also at least the minimum wage). In many collective agreements/contracts, this is higher, for example 100% (for part of) the first year.

After (usually) 104 weeks, dismissal due to long-term incapacity for work is possible, but only if the UWV conditions are met. In short: you can no longer work due to illness/disability, recovery within 26 weeks is unlikely, the work cannot be made suitable with adjustments in that period, and there is no other suitable position (including with training) within the company or group. The employer can apply for a dismissal permit from the UWV (this is allowed from 3 weeks before the end of the dismissal prohibition).

Note: if the UWV finds that the employer has not done enough for reintegration, a wage penalty may follow. Then the employer must continue paying wages for longer and dismissal due to illness is generally not possible during that period as long as you are still incapacitated for work.

Risks of a settlement agreement During Illness

A settlement agreement during illness is often risky. The biggest direct disadvantage: you give up the right to wage continuation during illness (which normally lasts up to 104 weeks). If you are still incapacitated for work when signing, you also run a high risk of not receiving a Sickness Benefit afterwards. The UWV explicitly warns about this.

Unemployment Benefit is also usually not a safety net if you leave employment while sick: for Unemployment Benefit, you must be immediately available for work. If you are sick at the end of the employment, Unemployment Benefit is generally not possible.

For WIA (Work and Income (Capacity for Work) Act), a strict timeline applies. In the 88th week of illness, the UWV usually sends a letter; from that moment, you can apply for WIA and you usually have 6 weeks to do so. If you apply too late, this can create an income gap and the employer must wait longer with dismissal: the dismissal prohibition can be extended by the number of days the application was submitted late.

Important: if you become sick again within 4 weeks after (partial) recovery, the UWV can add up illness periods. This usually means: no "new" 104 weeks, but a continuation up to a maximum of 104 weeks in total over that combined period.

The financial consequences of an unwise settlement agreement can be significant: loss of wages, problems with Sickness Benefit/Unemployment Benefit, delay or complications towards WIA, and sometimes also disputes over the transition payment if it is not properly recorded. Therefore, always explicitly include which payment is made and on which dismissal ground the termination is based.

In the case of self-insured status (ERD), additional interests are at play. If an employer is self-insured for the WGA, that employer is responsible for 10 years for the WGA benefit and reintegration costs of (former) employees who enter the WGA. This can increase the pressure to reach a settlement agreement "quickly".

Exceptions exist, but are custom-made. Sometimes termination during illness can still be wise (for example in situational incapacity for work or if you are demonstrably fully recovered). But always have this legally and practically checked, as the benefit risks strongly depend on the facts and the wording of the settlement agreement.

Other pitfalls: pressure from the employer (often to limit costs), loss of reintegration support, and unclear agreements about sick reporting/benefits (which moreover cannot simply be "contracted away").

Probationary period or temporary contract? During the probationary period, dismissal may be possible, even in case of illness. With a temporary contract, the employer does not have to extend after the end of the contract; then you can go "sick out of service" and there may be a right to Sickness Benefit, depending on the circumstances.

After 104 Weeks: Rights and Options

After 104 weeks, you may be eligible for WIA (if you meet the conditions): IVA (fully and permanently incapacitated for work) or WGA (partially incapacitated for work). The UWV assesses this via a (insurance medical and labour expert) assessment.

If you remain in employment without wages (for example after 104 weeks, while you are still sick), a "dormant employment contract" may arise. In practice, termination with transition payment may be appropriate. The maximum transition payment is indexed annually; as of 1 January 2026, the maximum is €102,000 gross (or 1 annual salary if higher).

Dismissal after 104 weeks can be via the UWV or via a settlement agreement. If there is room to negotiate, pay attention to: correct dismissal ground/wording, (additional) payment, end date, exemption from work, final discharge, possible training/outplacement, neutral reference, and clear agreements about reintegration/medical processes where necessary.

Practical advice: document the course of reintegration, keep correspondence, and always have a proposal checked before signing. Also consider including agreements about what happens if your health situation changes (custom-made, depending on your situation).

Summary: do not sign a settlement agreement lightly during illness. The chance of loss of wages and problems with Sickness Benefit/Unemployment Benefit/WIA is real. Always seek advice and ensure that the agreements (and timing) match your medical and legal situation.