A high level outline of the obligations that apply in relation to termination of employment in the Netherlands.
Dutch law gives employees fairly extensive job security. Once entered into, an employment contract can only be terminated unilaterally if one of the statutory grounds is applicable, certain conditions are met and certain formalities are complied with. Employers may not terminate an employment agreement by just giving notice. Although the rules are rather restrictive, it is not the intention of the law to impose unreasonable restrictions on the employer where dismissals are justified.
An employee does not have to have any grounds for terminating an employment contract and there are no formal rules which must be followed for an employee to resign from employment under an indefinite term contract, except that this should be "clear and unequivocal". The only requirements are that the employee complies with the statutory requirement to serve the statutory or contractual notice period and any other formalities in the contract of employment relating to notice, if any. Furthermore, the party giving notice must state their reasons for termination in writing, should the other party make such a request.
A trial period can only be agreed upon with a new employee or in case of consecutive employment contract’s if the new employment contract requires clearly other skills or responsibilities than the previous employment contract. The length of the trial period depends on the length of the employment contract. In contracts not exceeding six months, no trial period can be agreed upon. In contracts for a period longer than six months but not exceeding two years, no longer than one month. In contracts for a period of two years or more, no longer than two months and in fixed term contracts not coinciding with calendar dates (eg for the duration of a project or to replace a sick employee), no longer than one month.
Indefinite term contracts
Minimum notice periods must be observed in terminating an employment contract. Parties can agree to apply the statutory notice period or a different notice period. The statutory notice period for an employee is one month and the notice period for the employer depends upon the years of service of the employee, being: one month of notice for the first five years of service and for each subsequent five years of service, the notice period is increased by one month (up to a maximum of four months’ notice). These terms may be extended further by written agreement and may be reduced by collective labour agreement (CLA). If an alternative period is agreed, the length of notice to be given by the employer must be at least double the length of notice to be served by the employee (which may not exceed six months). If this is not the case, the notice period for the Employee may be reduced to one month.
The dismissal method depends upon the grounds for the dismissal.
Employee Insurance Agency (UWV)
Applications for dismissal on account of business economic reasons or long term disability are to be sent to the Employee Insurance Agency (UWV) for review. The UWV is in principle required to process applications for dismissal within four weeks, provided that the matter does not require further consideration by the UWV. The UWV shall verify whether the (intended) dismissal is reasonable and the employer’s reasons for dismissal justify the termination of the employment agreement, the UWV shall furthermore check whether the employer has applied the statutory rules and whether there is a prohibition to terminate the employment agreement. If the UWV rejects the application, the employer may submit a request for termination of the employment agreement to the Court. Employers’ associations and trade unions may agree in a CLA on a mandatory review of the dismissal by a sector committee, to be established by employer associations and trade unions, rather than by the UWV. Once such committee has been established, the employers’ associations and trade unions may decide to set aside the balancing principle (afspiegelingsbeginsel).
Applications for dismissal on account of frequent sickness absence, a damaged working relationship or poor performance (personal reasons) are to be sent to the Court. These applications for dismissal will then be subject to judicial review. The Court shall then examine if the particular criteria as established by the law are met. The decision of the Court is open to appeal in conformity with regular procedural law.
Termination by mutual consent
The methods for dismissal, either the UWV or the Court procedure, do not need to be followed if the employee agrees – in writing – to the termination of their employment agreement. Statutory rules apply to such agreements. It is also possible to achieve finality in arranging for the consequences of the termination of the employment agreement. The employer will not be under any statutory obligation to pay the transition payment as explained below. After signing the settlement agreement, the employee is granted a two week reflection period, during which the employee may retract his/her consent without having to fear any negative consequences. If the two-week reflection period is not included in the settlement agreement, the reflection period will automatically be three weeks.
The time it took the UWV to process the application may be set off against the (agreed) notice period, provided that the minimal notice period is one month. When the Court dissolves the employment contract the applicable notice period to be taken into account may be set off against the duration of the proceedings, also provided that the minimal notice period is one month.
As per 01 July 2015, the transition payment, a statutory severance payment, has been introduced. Employees who have been in service for a total of two years or more will receive compensation in the form of a transition budget payable by the employer, unless the dismissal was prompted by seriously imputable conduct on the part of the employee. The amount of the transition payment is composed as follows: 1/3 monthly salary for each year of service over the first 10 years of service and from 10 years of service onwards 1/2 monthly salary for each year of service, up to a maximum of €77,000 gross or one year’s salary if this is more than €77,000 gross.
Exceptions to the rules for the transition payment can be made in collective labour agreements.
Fixed term contracts
Parties are free to enter into consecutive fixed term employment contracts. However, there is a limit on the number of fixed term contracts and the total duration. In a chain of consecutive fixed term employment contracts with intervals of six months or less, the last contract is automatically converted into a contract for an indefinite period if i) the last contract is the fourth contract in the chain or ii) the aggregate duration of the chain of fixed term contracts exceeds two years. Consecutive fixed term agreements with different employers, who can be considered to be each other’s successors in respect of the work performed, form links in the same chain. Exceptions to these rules can be made in a CLA, if the nature of the work makes it necessary to deviate from the rules, in which case the maximum number of consecutive contracts is set at six contracts in four years.
Prior to the termination by operation of law employers are required to give employees whose fixed-term employment contracts of six months or longer are about to end, one month’s advance prior notification whether or not the contract will be renewed and in case of an extension, the conditions upon which the employment contract may be renewed. Failure to do so will cause the employer to forfeit one (prorated) month’s salary to the employee.
Further information on termination in the Netherlands is available from our International Employment Issues microsite here.
This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.