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Final Settlement Upon Dismissal or Departure of Employee

When an employee leaves employment, you must prepare a final statement. When do you do that, what do you put in it and what should you pay attention to? A step-by-step plan for the final settlement.

When an employment contract is terminated, you as an employer must arrange a number of matters. Consider, for example, applying for a dismissal permit or drawing up a termination agreement .

In addition, as an employer you have a duty to make a final statement for your employee. It doesn't matter whether you have fired your employee or whether he will resign. A final statement is always part of it.

Final settlement, what is that?

The final statement is the last financial statement with your employee. You pay him the things he is still entitled to. For example, overdue wages, unused vacation days or a year-end bonus. If your employee still has debts with you, they will be settled with this.

The purpose of the final statement is that you and your employee settle all outstanding items with each other. In this way you prevent that you can demand or demand something from each other at a later stage on the basis of the employment contract.

Final settlement, when do you make it?

The law doesn't clearly state at what time you must prepare and pay the final statement. Many employers settle with the employee when he receives the wages for the last period of his employment. But this isn't mandatory.

You do have to pay the last wage on time, ie after the agreed wage period (usually a month). But you can only prepare and pay the final statement afterwards. This is possible up to a month after the end of the employment.

Do discuss this with your employee so that he knows where he stands. This prevents annoyances or - more annoying - the possible involvement of a lawyer.

Final statement, what's in it?

A final statement can contain various financial items, from wages that you still have to pay to your employee to training costs that you want to reclaim from him. All this depends on the agreements made in the employment contract of the employee concerned.

Upon termination of employment, the following items may appear on the final statement:

1. Pay

Of course you pay the employee the outstanding wage to which he is still entitled.

2. Holidays

Your employee is entitled to payment of all accumulated vacation days that he hasn't yet taken. This includes statutory and non-statutory vacation days.

The calculation of the value of a vacation day is usually based on the gross daily wage including holiday allowance and any thirteenth month, but excluding extra allowances and pension. Some judges use an even broader concept of wages.


It's advisable to inform your employee in advance about the outstanding balance of vacation days. Also record this in a possible termination agreement. This way you prevent discussions afterwards.

3. Holiday allowance

Your employee is entitled to a minimum of 8 percent holiday allowance. When terminating his employment contract, you must pay him the accumulated balance in holiday allowance.

4. Thirteenth month

Is your employee entitled to a thirteenth month or year-end bonus? Then it's customary to put a proportional part of this on the final settlement upon termination of the employment contract.

Pay attention:

Does the employment contract or collective agreement state that you only have to pay the thirteenth month if an employee is actually employed on 31 December? Then you can omit this item on the final statement.

5. Bonus and commission

Sometimes employees receive part of their salary as variable pay, for example on a commission basis or in a bonus system. Maybe your company also has a form of performance pay .

If you have clearly laid down in the conditions that employees will receive a proportionate share of their bonus or commission on dismissal, you must also include this item in the final statement.


Have you not recorded anything about the variable remuneration in the event of dismissal? Then consider including part of the performance wage in the final statement, as a sign of being a good employer .

6. Termination benefits

Has your employee been with you for more than two years and did he not resign himself? Then he is entitled to a severance payment. You also include this reimbursement in the final statement.

You must pay the dismissal or transition payment within one month after the end of the employment. Therefore always keep this period for the final settlement, then it can't go wrong.

If you pay the transition allowance too late, your employee can go to court to enforce the allowance. In that case you'll have to pay a statutory increase and statutory interest .

7. Expenses declarations

Has your employee submitted expense claims that you haven't yet paid, such as travel, parking or meal costs? Then put it on the final statement.

8. Reimbursement of legal costs

Sometimes an employee gets help from a lawyer during the dismissal procedure. As an employer you can agree with the employee that you reimburse the costs of legal assistance. If your employee has already advanced the bill for legal assistance, add this amount to the final statement.

9. Debts to be settled

It's possible that the employee still has to pay you money. For example, it's possible that he has taken up too many vacation days. Or maybe you have agreed with him that he will have to pay back the costs of a course if he leaves the company before a certain date.

Include such items in the final statement and deduct them from the grand total. For example, it may concern the following:

- an advance on the wage
- an advance on holiday allowance
- too many days taken in vacation
- compensation (for example, for damage to the lease car)
- training costs (because the employee left employment before a certain date)
- relocation costs that you as an employer have reimbursed
- a staff loan

10. Takeover lease car

It happens that an employee who leaves the company wants to take over his lease car. In such a case, he must pay the actual value of the car to your company. You can arrange this transaction in the final statement.

If the amount the employee pays (the actual value) is considerably lower than the book value of the car, you can ask him to pay this difference. Otherwise you run the risk that the tax authorities regard the value difference as a net wage. You then pay the highest final tax rate on this.

If your employee pays the difference, he may deduct this from the addition that he has already paid earlier in the year.

Final bill, extra tips

Keep a close eye on which items in the final statement you still have to withhold payroll taxes .

Inform your employee as well as possible about the final statement. Do this in time, preferably before the employment ends. Take a moment to clearly agree on what will be paid and settled with the final bill. This way you prevent problems afterwards.

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