Navigating employment termination in the Netherlands requires a thorough understanding of the country's specific labor laws, which are designed to provide significant protection to employees. Unlike some jurisdictions where "at-will" employment is common, Dutch law mandates specific grounds and procedures for ending an employment relationship. Employers must adhere strictly to these regulations to ensure a lawful and defensible termination process.
The legal framework governing dismissal in the Netherlands is primarily found in the Dutch Civil Code and various implementing regulations. This framework outlines the acceptable reasons for termination, the required procedural steps, and the entitlements employees may have, such as notice periods and severance pay. Understanding these elements is crucial for employers operating in the Dutch market to avoid potential legal challenges and financial penalties.
Notice Period Requirements
The statutory notice period in the Netherlands depends on the length of the employee's service with the company. These periods are designed to give employees time to find new employment. The notice period for the employer is typically longer than that for the employee.
The statutory notice periods for the employer are as follows:
| Length of Employment | Notice Period for Employer |
|---|---|
| Less than 5 years | 1 month |
| 5 to 10 years | 2 months |
| 10 to 15 years | 3 months |
| 15 years or more | 4 months |
The statutory notice period for the employee is generally one month, regardless of the length of service, unless otherwise agreed upon in writing or specified in a Collective Bargaining Agreement (CBA).
It is important to note that a CBA may stipulate different notice periods than the statutory minimums. If a CBA applies, its provisions regarding notice periods generally override the statutory rules, provided they meet certain conditions. Employment contracts can also agree on different notice periods, but the employee's notice period cannot be longer than the employer's notice period.
Severance Pay (Transition Payment)
In the Netherlands, employees are typically entitled to a statutory severance payment, known as the "transition payment" (transitievergoeding), when their employment contract is terminated by the employer or is not renewed. This payment is intended to compensate the employee for the dismissal and help them transition to new employment.
Eligibility for the transition payment generally applies if the employee has been employed for two years or longer. However, since January 1, 2020, the two-year threshold was removed, meaning employees are entitled to the transition payment from their first day of employment if the termination is initiated by the employer or the fixed-term contract ends.
The calculation of the transition payment is based on a simple formula:
- For each full year of service, the employee accrues 1/3 of a monthly salary.
- For the remaining part of the employment period, the payment is calculated proportionally based on the number of days.
The monthly salary used for calculation includes the gross monthly salary, holiday allowance, and any fixed allowances (like a fixed 13th month payment or shift allowance). The maximum amount of the transition payment is capped annually; for 2024, the maximum is €94,000 gross, or a year's gross salary if that is higher. This cap is adjusted annually.
There are limited circumstances where an employer may not be required to pay the transition payment, such as in cases of serious culpable conduct by the employee or if the employee is under 18 and working less than 12 hours per week.
Grounds for Termination
Dutch law requires a "reasonable ground" for termination. The law specifies a list of acceptable grounds (often referred to as the 'e' grounds), and the employer must demonstrate that one or more of these grounds apply and that reinstatement is not reasonably possible.
The statutory grounds for dismissal include:
- a-ground: Termination due to business economic reasons (e.g., restructuring, financial difficulties).
- b-ground: Termination due to long-term incapacity for work (typically after 2 years of illness).
- c-ground: Termination due to frequent absence with unacceptable consequences for the business.
- d-ground: Termination due to inadequate performance (unless due to insufficient care by the employer or illness).
- e-ground: Termination due to culpable conduct by the employee.
- f-ground: Termination due to refusal to work based on conscientious objection, which cannot be reasonably accommodated.
- g-ground: Termination due to a disturbed working relationship.
- h-ground: Termination due to other circumstances that make the continuation of the employment contract unreasonable.
- i-ground: A combination of two or more of the grounds a through h, which is insufficient on its own, but when combined, constitutes a reasonable ground for termination.
Termination without a reasonable ground is generally not permitted and can lead to the dismissal being deemed unlawful.
Procedural Requirements for Lawful Termination
There are primarily two main routes for employers to lawfully terminate an employment contract in the Netherlands, in addition to termination by mutual consent (settlement agreement) or during the probationary period.
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Termination via the UWV (Employee Insurance Agency): This route is mandatory for dismissals based on business economic reasons (a-ground) or long-term incapacity for work (b-ground).
- The employer must submit a detailed application to the UWV, providing evidence for the stated ground.
- For business economic reasons, the employer must apply the 'last-in, first-out' (LIFO) principle or another approved selection method within comparable job roles.
- For long-term illness, the employer must demonstrate compliance with reintegration obligations over the past two years.
- The UWV assesses the application and the employee's defense.
- If the UWV grants permission, the employer can then terminate the contract, observing the applicable notice period (which is reduced by the UWV processing time, but must be at least one month).
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Termination via the Sub-district Court: This route is used for dismissals based on personal grounds, such as inadequate performance (d-ground), culpable conduct (e-ground), disturbed working relationship (g-ground), or other grounds (h-ground), or the cumulative ground (i-ground).
- The employer must submit a petition to the sub-district court, outlining the grounds for dismissal and providing supporting evidence.
- The employee has the opportunity to submit a statement of defense.
- The court holds a hearing where both parties present their case.
- The court assesses whether a reasonable ground for dismissal exists and if reinstatement is not reasonably possible.
- If the court grants the request, it issues a decision terminating the employment contract, often determining the amount of the transition payment and potentially additional fair compensation if the employer is found to have acted seriously culpably.
Termination by Mutual Consent (Settlement Agreement): Employers and employees can agree to terminate the employment contract by signing a settlement agreement (vaststellingsovereenkomst). This is often the preferred method as it avoids the formal procedures of the UWV or court. The agreement must be in writing and typically covers the termination date, transition payment (or a negotiated severance amount), notice period observance (important for unemployment benefit eligibility), and other relevant terms. The employee has a statutory reflection period of 14 days to withdraw from the agreement without giving a reason.
Termination during Probationary Period: If a probationary period was validly agreed upon in writing, either party can terminate the employment contract immediately during this period without needing a specific ground or following the formal procedures, provided the termination is not discriminatory.
Employee Protections and Wrongful Dismissal
Dutch labor law provides strong protections against unfair or wrongful dismissal. Employees have the right to challenge a termination if they believe it is not based on a reasonable ground or if the correct procedure was not followed.
Key protections include:
- Requirement of a Reasonable Ground: As mentioned, an employer must demonstrate a valid statutory ground for dismissal.
- Procedural Requirements: Strict adherence to the UWV or court procedure is mandatory unless termination is by mutual consent or during probation. Failure to follow the correct procedure can render the dismissal unlawful.
- Right to Challenge: Employees can challenge a UWV-approved dismissal or a court decision within specific time limits (typically two months). They can also challenge a termination by the employer without UWV/court approval (e.g., summary dismissal) or the validity of a settlement agreement.
- Reinstatement or Compensation: If a court finds a dismissal to be unlawful, it can order the employer to reinstate the employee or, more commonly, award the employee additional fair compensation on top of the transition payment. This additional compensation is determined by the court based on the circumstances, including the severity of the employer's culpability.
- Protection against Discriminatory Dismissal: Termination based on discriminatory grounds (e.g., age, gender, religion, origin, chronic illness, union membership) is strictly prohibited and considered null and void or unlawful.
- Protection for Specific Employee Groups: Certain employees have additional protection against dismissal, such as pregnant employees, employees on maternity leave, employees who are ill (during the first two years), members of the works council, and health and safety representatives.
Common pitfalls for employers include failing to adequately document performance issues before pursuing a dismissal for inadequate performance, not properly applying the LIFO principle in redundancy situations, failing to fulfill reintegration obligations for ill employees, or not having a truly 'reasonable ground' that can withstand scrutiny by the UWV or court. Careful preparation and adherence to legal requirements are essential for a lawful termination process in the Netherlands.
