Dutch employment law: Negotiating and ending an employment contract

If you work for a Dutch employer, or your contract is otherwise subject to Dutch employment law, there are a number of matters to think about when negotiating a contract.

Collective agreements (cao)

In many cases, employers are subject to collective agreements, or "cao’s", which cover working conditions and benefits. If a cao applies to the employer, an employee does not need to be a union member to have it apply to him or her as well, as long as an explicit article is incorporated in the employment contract making the cao applicable. If no cao is applicable, the employee will need to negotiate his or her own terms and conditions.

An employment contract must contain at least the following information: name / address of the employer and employee, work location, job title and description, start / end dates (open-ended in case of indefinite contracts), trial period (if any), hours of work, salary and other expenses, and a notice of termination clause for both parties.

Within the limits of the law, parties are free to decide what will be covered by the contract.

Temporary contracts and indefinite contracts

Temporary contracts have a clear start and end date. The contract ends by operation of law at the given date, without notice or an official dismissal procedure needed. Temporary contracts cannot be terminated without consequences - usually payment of salary until the end of the contract - unless they contain a specific clause allowing for an early ending, in which case both parties need to observe the statutory notice period.

If it is the employer who wishes to end the employment prematurely, they will have to obtain permission (either from the UWV or the court, see below). Indefinite contracts are always subject to official dismissal approval.

Zero-hour contracts

Pay attention when it comes to zero-hour contracts. Under these contracts the employee only gets paid for the shifts that he/she is asked to work. This could be, for example, only when there is incidental work available. There are limitations to the freedom that the employer has under these contracts.

For example, each time an employee is asked to work, even if it's for only one or two hours, a minimum of three hours salary has to be paid. After six months an obligation to continue salary payments arises and the employee may claim a fixed-hours salary, based on the average amount of hours the employee has been working over the past three or more months.

From temporary to indefinite - the "contract chain"

Dutch employment law aims to stimulate the transition from temporary into indefinite employment.

It does this by stipulating that an indefinite contract exists by operation of law after three contracts have been issued with interruption periods between contracts of no longer than six months - a fourth contract then automatically becomes indefinite. Or after three years of being in service - after which the employee is considered to be in indefinite service by operation of law.

Trial period

No probation period is allowed for contracts of less than six months. For contracts between six months and two years, a probation period of one month is allowed. For indefinite contracts or contracts of more than two years, a maximum probation period of two months is allowed.

Notice period

Notice is given per the end of the month. The length of notice an employee receives is dependent upon how long they have been working for the company. A one month notice period needs to be given to employees who have been in service for less than 5 years, two months for employment of 5-10 years, three months for 10-15 years and four months for an employment service of longer than 15 years.

For the employee, this is different. If an employee wishes to leave a job the notice period is usually one month. If that notice period is extended, which needs to be done in writing (in the contract) and for a period of no longer than six months, the notice period for the employer should be double the notice period of the employee.

Non-competition clause

Non-competition clauses are, in principle, no longer allowed in temporary contracts. If there is a need to incorporate one nonetheless, the rule of exception is that it has to be accompanied by a detailed explanation and tailored to the specific function. Due to the complexity of this rule, it is well advised to consult a legal specialist.

Sickness

Employers should be aware, that under Dutch law, an employee who becomes sick has the right to the continuation of their salary payment during sickness for a maximum of two years.

Ending a contract

A contract can be ended by mutual consent of both parties, usually through a termination agreement. Parties are, within the limits of the law, free to negotiate their termination conditions. Both parties should consult with a lawyer before entering into a termination agreement.

In case of temporary contracts with an early cancellation clause and indefinite contracts, employees may resign, observing the statutory notice period.

Employers may dismiss an employee for a range of reasons, but not without permission from the relevant authorities. In the case of reorganisations due to business economic reasons or after two years of sickness, permission to dismiss an employee needs to be requested from the employee insurance agency UWV.

If the reason to dismiss an employee is based on personal grounds (e.g. dysfunction, or a seriously disturbed employment relationship), then the employer needs to submit a request to the court to dissolve the employment contract.

Immediate dismissal, without the approval of these authorities, is only allowed in cases of gross misconduct of such a nature that the employer cannot be asked to continue the employment relationship. Courts are, however, very strict about accepting such dismissals. It is therefore advisable to contact a legal expert before doing so, or after receiving such a dismissal.

The notification obligation (aanzegtermijn)

Please note, regarding temporary contracts of six months or longer, an employer is obligated to inform the employee at least one month before the end date of their contract whether it will be extended or not. Not doing so is subject to a fine, payable to the employee, of a maximum of one month’s salary, or a pro rata part.

Severance pay (transitievergoeding)

Every employee whose employment service has lasted at least two years and whose employment contract is terminated by the employer, not due to certain reproachable behaviour of the employee, has the right to receive severance pay, the so-called "transitievergoeding", this is 1/6th of the monthly salary received per six months of service for the first 10 years and 1/4th for the years thereafter.

Certain exceptions exist, such as a limitation on the severance pay for small employers (less than 25 employees) and higher severance pay for employees aged 50+.

Please note, severance pay is capped at 75.000 euros.