Termination of employment in the Netherlands

Dealing with a problem or conflict at work is always difficult. It can feel even more challenging when you're in a new country and you don't know what the correct procedures should be. Here are some guidelines for dealing with workplace conflicts and what you need to know about termination of employment in the Netherlands. 

Workplace conflicts

If you experience disagreements at work, either with a colleague or employer, and you cannot resolve the issue, then you may need an impartial third party to help mediate the situation. Workplace conflicts can include forms of inappropriate behaviour, harassment, sexual intimidation, discrimination or aggression.

The Working Conditions Act

Under the Working Conditions Act (Arbowet), companies in the Netherlands are obliged to protect their employees from such psychological stresses. Many companies therefore have a counsellor or confidant, known as a vertrouwenspersoon, who is specially trained to receive reports or complaints and to deal with them in a supportive and appropriate manner.

How to seek support

If there is no counsellor then you should get in contact with someone from the HR (P&O) department or the Works Council (OR, ondernemingsraad), which is a kind of employee representative committee in organisations with more than 50 people.

If you are a member of a union (vakbond) you can ask for guidance from a union representative. You can also seek external legal advice from an employment lawyer or from Het Juridisch Loket, a government service which provides free legal counselling.

Losing your job in the Netherlands: Layoff rules

Employers in the Netherlands may not dismiss an employee at random. They must have good cause for terminating an employment contract and they must follow fairly strict rules of dismissal. There are several different ways an employment relationship can be terminated in the Netherlands:

• Dismissal during the probationary period
• Expiration of a fixed-term employment contract
• Instant (summary) dismissal, e.g. in cases of gross misconduct
• By mutual consent, if both employer and employee agree to the termination
• Through the dissolution of an employment contract by the competent court, for instance if the employee’s performance is unsatisfactory
• With permission from the Employee Insurance Agency (UWV), for instance if the company is going bankrupt or restructuring, or if the employee has a long-term incapacity to work

Dismissal during probationary period

Dutch employment law does not contain any conditions for termination of employment during an employee’s probationary period. This means that both employer and employee are free to terminate the contract at any time without observing a notice period. The employee has the right to know the reason for the dismissal. 

Expiration of a temporary contract

Since a temporary work contract already has a predetermined end date, there is not much you can do if your employer does not want to renew it beyond that time.

A temporary contract cannot be terminated early unless you and your employer are in mutual agreement (see below), or if you have agreed otherwise in the contract. Most importantly, your employer must tell you at least a month in advance if your temporary contract will be renewed or not. If they are taking a long time to inform you then it is wise to remind them you are legally entitled to one month’s notice.

If you have had a series of three or more temporary contracts with the same employer, or you have had temporary contracts for two or more years, then your temporary contract automatically becomes permanent. If your employer wants to dismiss you in such a situation then you are entitled to the same dismissal procedure as for a permanent contract.

Instant (summary) dismissal

Instant dismissal is an exceptional form of dismissal in which an employer can fire an employee on the spot for serious cases of misconduct such as:

• Theft
• Embezzlement
• Physical violence
• Damage of property
• Gross negligence in the performance of duties

An employer must have a compelling reason for dismissing an employee this way and must act immediately, notifying the employee of their misconduct in writing. It is not uncommon for these types of dismissals to be challenged in court. 

If you are fired on the spot then you are not entitled to receive unemployment benefits.

Dismissal by mutual consent/termination with consent

A contract termination might also be mutually agreeable. If both the employer and the employee mutually agree to end the employment contract, this is known as dismissal by mutual consent or termination with consent. In dismissal by mutual consent, the employer and the employee agree to the dismissal and record this in a dismissal agreement (also known as a termination or settlement agreement). 

Termination agreement

This termination agreement must state that the employee agrees to the dismissal and that the employee is not at fault. The agreement should also set out what needs to be paid out. For instance, the employee might receive severance pay (see below). 

You should carefully read the termination agreement. The termination is not final until you agree and sign it. If you have strong reasons for disagreeing with the contract then do not sign it and instead seek legal advice.

Remember that there is no time limit for checking the contract. People usually need a few days to check the text and digest the news. If the situation is more complex, then this period can stretch out to weeks or longer.

Ask if the company will provide some money to cover your legal fees to have a lawyer check the contract with you, as this is fairly common practice.

When looking over the contract, you should check details such as:

• Reason for dismissal (if you are held responsible then you may not be eligible for unemployment benefits)
• Final salary and duration
• Payment of outstanding holiday leave, bonuses or other benefits
• Compensation payout/severance payment (if any)
• Non-competition clause (concurrentiebeding) which may restrict you from working for competitors for a certain period

Reconsideration period

As an employee, you get a two-week “cooling off period” after signing a dismissal agreement. This means that you get 14 days to reconsider the dismissal, and you may revoke your consent at any point without giving a reason. If your employer does not inform you about the reconsideration period, it is automatically extended to 21 days. 

What if I don’t agree to the termination?

If the employee does not agree to the dismissal, then the employer must go to the Employee Insurance Agency (UWV) or the district court to get permission to terminate the contract. 

Dismissal or redundancy with permission from the Employee Insurance Agency (UWV)

An employer can only dismiss an employee with the prior approval of the Employee Insurance Agency (UWV) if the dismissal is:

• For economic reasons, for instance if the business has suffered major financial losses, or restructuring (also known as redundancy)
• Due to the employee’s long-term incapacity to work, for instance if they have been on sick leave for more than two years and the return to work (reintegration) measures put in place by the employer have not succeeded

Without the UWV’s approval, an employee cannot be dismissed. The employee may file objections to this request, and it may take up to 12 weeks to get a decision. If the UWV agrees to the request, then the employee is served notice, and they may be entitled to transitional pay (see below). 

Dismissal with permission from the sub-district court

For other reasons for dismissal, the employer needs approval from the sub-district court before they can terminate an employee’s contract. Such reasons could include:

• Poor performance (known as insufficient functioning or “disfunctioneren”), for instance if the employee does not meet the job requirements
• Improper conduct, such as regularly arriving late, refusing to work, or stealing from your employer
• Failure to cooperate with reintegration measures, if the employee has been off sick long-term
• Frequent absences due to (different) illnesses
• Conscientious objection, for instance if the employee refuses to do certain work because of religious, ethical or political objections
• Disturbed employment relationship, if the relationship between the employer and employee has broken down and measures to repair it have not worked
• Cumulative reasons, for instance if there are various (multiple) reasons for a dismissal, which individually are not sufficient grounds for a termination, but when taken together could be

Performance improvement plan

An employer cannot simply dismiss an employee for poor performance. They must give formal feedback to the employee, for example during a performance review meeting.

They may also devise a performance improvement plan (verbetertraject), such as training or additional guidance, for the following weeks or months to help the employee overcome these issues. If the employee’s performance does not improve over time, then the employer may have reasonable grounds for dismissal.

Court’s decision

Should the performance improvement plan fail, the employer can approach the competent district court to receive approval to terminate the employment contract. The court will check if all relevant legal criteria have been met before granting permission for the dismissal. 

The employee is allowed to contest the decision in court. If the court sides with the employer, then notice is served and at the end of the notice period the employment contract is terminated. The employee may be entitled to transitional pay, depending on the circumstances of their dismissal. 

Dismissal without permission

In certain circumstances, an employer may dismiss the employee even when the employee doesn’t agree, and the UWV or the district court has not given their permission. These circumstances are: 

• If the employee has reached state pension age
• The employee works in a position where no permission for dismissal is required (for instance, specific categories of domestic workers) 
• The employee is dismissed due to bankruptcy

Notice period in the Netherlands

The notice period (opzegtermijn) your employer must give you before they can end your contract depends on how long you’ve been working at the company, and the type of employment contract you have. 

Notice period for fixed-term contracts

For fixed-term contracts that have a duration of six months or longer, the employer is obliged to inform the employee at least one month in advance if they do not intend to renew their contract. If the employer fails to do this, then the employee is entitled to compensation based on their salary and how late the employer was in giving notice. 

Statutory notice period for indefinite contracts

Otherwise, the statutory notice period applies. The statutory notice period in the Netherlands is related to the employee’s length of service in the company: 

• If they have worked for the company for five years or fewer: One month’s notice
• If they have worked for the company for between five and 10 years: Two months’ notice
• If they have worked for the company for between 10 and 14 years: Three months’ notice
• If they have worked for the company for 15 years or more: Four months’ notice

A shorter notice period is only allowed if it is contained in a collective agreement. Employers and employees can agree between themselves on a longer notice period, up to a maximum of 12 months. In this case, then the employer’s notice period (to terminate the contract) is always double the employee’s notice period (to resign).

During your notice period, you continue to receive your salary as normal. If the dismissal case was considered by the UWV or the court, this processing time can be offset against the notice period. 

When does the notice period not apply?

An employer does not have to give notice about a contract termination in the following circumstances: 

• If the employee is still in their probationary period
• If the employee is being summarily dismissed
• If the employee resigns with immediate effect, for instance following a breach of contract

Severance pay & transitional pay in the Netherlands

Employees who are dismissed in the Netherlands may be entitled to transitional pay or severance pay, depending on the circumstances of their contract termination. 

Transitional pay

Transitional pay - as the name suggests - provides an employee with a source of income while they transition to new employment. In order to be eligible for transitional pay, an employee must have worked at the company for at least two years. 

An employee is entitled to transitional pay if: 

• Their fixed-term contract has been terminated. 
• Their employment contract has been terminated with the approval of the district court or the UWV.
• They have terminated their employment contract due to gross misconduct by the employer. 

An employee is not entitled to transitional pay if: 

• The employment contract was terminated by mutual agreement. 
• The employee was dismissed on grounds of serious culpability or gross negligence. 
• The employee is under the age of 18 and worked fewer than 12 hours per week, on average. 
• The company has declared bankruptcy.
• The employee has reached retirement age. 

Transitional pay is calculated based on the employee’s age, their years of service, and their gross monthly salary. A typical rule of thumb is one-third of their monthly salary for each year of service, up to a maximum of 89.000 euros. Transitional pay is taxed as income.

Severance pay

In the Netherlands, severance pay is only usually granted in the event of a mutually agreed dismissal where the employer and employee sign a termination agreement (see above). 

This amount is often higher than what the employee would receive as transitional pay, in order to settle the contract termination amicably and without the involvement of the courts or UWV. There is no fixed amount for severance pay, as it often includes settlements for things like unused holiday days and bonuses.

Applying for unemployment benefit

Depending on how long you were working in your job, and the nature of your dismissal, you may be entitled to receive unemployment benefits (WW-uitkering). You must apply for unemployment allowance within a certain time frame of the end of your job, sometimes before the final date covered by your salary, so be sure to investigate the requirements as soon as possible.

Looking for a new job

Once you have recovered from the shock of losing your job, then you can start thinking about the future. You might first need a break to clear your mind, or you might immediately start looking for a new job. Whatever you choose to do, just remember that change, although daunting, also brings opportunity.