Dutch employment law offers a high degree of protection to employees working in the Netherlands. Such protection comes to the fore in the event that an employer wishes to terminate an employee’s employment contract. An employer who intends to dismiss an employee is required, by law, to comply with several strict rules and regulations.
Below we have put together a concise overview of a number of important statutory regulations concerning dismissal and redundance.
Dismissal and Redundancy (2022)
Paragraphs 1. – 5. of this overview provide an overview of six alternative methods by which an employment contract may – legally – be terminated:
- Giving notice during a probation period
- Giving notice with immediate effect (summary dismissal for‘ urgent reasons’)
- Termination based on reasonable grounds
- 3.1 Notice given with permission from the UWV, a government agency
- 3.2 Dissolution of the employment contract by the courts
- Termination by mutual consent
- The agreed period of time for a fixed-term contract elapses
The rules concerning the transition payment and the severance pay are discussed in paragraph 6.
1. Giving notice during a trial (probation) period
An employer and employee may choose to include a probation period in an employment contract at the time that the contract is drawn up. The maximum probation period depends upon the duration of the employment contract:
|Duration of employment contract||Maximum probation period *|
|Indefinite contract||2 months|
|Contract of 2 years or longer||2 months|
|Contract of less than 2 years||1 month|
|Contract of 6 months or less than 6 months||No probation period allowed|
|Contract for the duration of a project||1 month|
* The provisions of a Collective Labour Agreement may deviate from the given maximum probation periods.
During the probation period both parties may terminate the employment contract with immediate effect. Should the employee ask to be provided with reasons for the termination the employer is required to confirm such reasons in writing. Termination during the probation period must not be discriminatory.
2. Giving notice with immediate effect
Both parties may terminate the employment contract with immediate effect for ‘urgent reasons’ (dringende redenen). The reason, or reasons, for the dismissal must be specified immediately. Examples of ‘urgent reasons’ include: theft, refusal to work, misrepresentation on a job application or grossly neglecting duties in any other way.
The validity of a summary dismissal depends on: the seriousness and nature of the circumstances leading to the dismissal and the personal circumstances of the employee. When summarily dismissing an employee the employer should be aware that – if the employee disputes the dismissal – the employer will be required to prove that the immediate dismissal was justified.
3. Termination based on ‘reasonable’ grounds
The employer may terminate the employment contract if there are (a) reasonable grounds for termination and (b) re-employment in another suitable position is impossible within a reasonable time, with or without the aid of training, or re-employment cannot be reasonably expected from the employer. Depending on the reasons for dismissal, the employer should (a) gain permission from the UWV or (b) request dissolution of the employment contract by the courts – for further details see paragraph 3.1 and 3.2 below.
3.1 Notice given with permission from the UWV, a government agency
In the event of redundancy or long-term disability of the employee the employer must gain permission to give notice from the UWV.
- If employees with interchangeable positions are made redundant the so-called ‘principle of reflection’ applies. According to this principle the employer must first divide the company’s employees into age groups for each category of interchangeable positions. Subsequently, the employee who has served the shortest period of employment in each age group and category must be nominated for dismissal. In the event of a ‘collective redundancy’ concerning twenty or more workers the Employment Office will not examine the financial and economic reasons if the employer is able to provide the UWV with a consenting statement from the relevant workers’ union. More detailed criteria are included in the UWV Regulations on Dismissal (Ontslagregeling). Please note that specific rules prevent the employer from giving notice to employees during an employee’s pregnancy or maternity leave, or during an employee’s sick leave. However, such employees are not always protected against termination of employment on the basis of redundancy.
- In the event that an employee is dismissed for reasons relating to long-term illness or disability which has lasted at least two years, the UWV examines whether the employer is able to find a position for the employee elsewhere in the organization. The employer must demonstrate that it is not possible to modify a position or find a suitable alternative position for the employee (if necessary with appropriate training) within 26 weeks.
Upon termination of the employment with permission from the UWV, the employer will be required to pay the employee a transition payment – for further details see paragraph 6 below.
The employee may appeal against the decision of the UWV. If there are no reasonable grounds for dismissal the court can decide to restore the employment contract or, in the event that restoration is not possible due to culpable acts or omissions by the employer, the court may grant a fair compensation to the employee on top of the transition payment.
3.2 Dissolution by the courts
The employer may request the courts to terminate an employment contract for reasons other than redundancy or long-term disability. The reasonable causes for dismissal are listed in the statutory rules and include:
- Frequent sick leave,
- Non-performance on behalf of the employee,
- A culpable act or omission,
- Refusing to perform the stipulated work based on grounds of conscientious objections,
- The breakdown of the relationship between the employer and the employee,
- Other circumstances due to which the employer cannot be expected to continue the employment contract, or
- A combination of two or more causes referred to under 1, 2, 3, 5 or 6 above – in such case, however, the compensation to be paid to the employee may be up to 50% higher.
In the event that the employer requests permission to terminate the employment contract from the UWV and the UWV refuses to grant such permission, the employer may then petition the court to terminate the employment contract. The employee may also request that the courts terminate the employment contract. These courts decisions may be appealed by either party.
When the courts have terminated the employment contract, the employer may be obliged to pay to the employee a transition payment and/or severance pay based on statutory rules and/or the court’s decision in a specific case – for further details see paragraph 6 below.
4. Termination by mutual consent (amicable settlement)
Parties may terminate an employment contract by mutual consent. In such case both parties agree on the termination date, a possible severance pay and other settlement conditions. The employee may reconsider within two weeks after signing a termination agreement without giving any reasons for such reconsideration. Should this occur, the employment will continue. When consenting to the termination of employment it is important that the so-called ‘fictive notice period’ is respected. The fictive notice period is the notice period which would apply had notice been given. The fictive notice period can delay the date from which unemployment benefits may be paid to the unemployed employee.
5. The agreed period of time for a fixed-term contract elapses
In the event that an employment contract is entered into for a fixed period of time and such time period elapses the contract ends automatically. In such situation there is no need to give notice, dissolve the contract or terminate the contract by mutual consent. However, where the contract is a fixed-term contract for a minimum of six months, the employer is required to inform the employee in writing, at least one month before the end date, whether or not the contract will be continued (the so-called “notification obligation”). If this rule is not observed, the employer has to pay the employee a compensation equal to one month salary. If this rule is observed by the employer, however with delay, the employer has to pay the employee a pro rata compensation.
In the event of successive fixed-term contracts the so-called chain rule applies. According to the chain rule a contract for an indefinite period will come into existence (a) after 36 months or (b) as of the commencement of the fourth fixed-term contract, unless there is a break of more than six months between such successive contracts.
6. Transition payment and severance pay
Upon termination of the employment by the employer, the employer will be required to pay the employee a transition payment. This also applies if a fixed-term contract is not extended or in case of a termination during the probation period.
The calculation of the transition payment is based on the years of service. The employee is entitled to 1/3 of the monthly salary for each year of service from the first day of employment or a pro rata amount in the event of incomplete years of service. The transition payment is limited to € 86,000 (2022) or a maximum of one annual salary if the employee’s annual salary exceeds € 86,000. The transition payment is intended to assist the employee in finding a new job after dismissal, for example through education. It may be that an employer has incurred costs for education or outplacement prior to dismissal. These costs can be deducted from the transition payment under certain circumstances.
Several exceptions to these rules may apply:
- If the employer is declared bankrupt or if other insolvency proceedings apply the transition payment is no longer due and payable. Businesses undergoing financial distress may pay the transition payment in instalments;
- Part-time workers under 18 who are working 12 hours or less than 12 hours per week and workers reaching pensionable age are not entitled to receive a transition payment;
- Parties may stipulate other arrangements in the employment contract, deviating from the above. Collective Labour Agreements may also deviate from the statutory rules on the transition payment;
- The courts may decrease the transition payment where the employee has been negligent or committed a serious culpable act. In the event of serious culpable acts or negligence by the employer the court may grant an additional severance pay (also referred to as a “fair compensation”).
 For example, if the employment agreement started on January 1st 2022 and ends on August 31st 2022, the employee is entitled to 1/3 x monthly salary x 8/12. If the employment agreement started on 1 January 2021 and ends on June 30st 2022, the employee is entitled to 1/3 x monthly salary x 1.5.