The Netherlands is known for its progressive policies. The country is the first to make working from home a legal right. A leader in IT and telecommunications, the Netherlands stands out as one of the most dynamic economies in the European Union. With the 17th largest economy in the world, the country is home to over 17 million people.
End of employment is handled with caution in the Netherlands. At-will employment and terminating an employment relationship without a valid reason and authorization from the UWV (Dutch Employment Agency) usually results in fines for employers.
Unless both parties agree to a mutual termination of the employment contract, employers must ensure that they meet the qualifications to end an indefinite (full-time) employment.
In this guide, we’ll explore how the end of employment is handled in the Netherlands, including when employment can be terminated, Dutch laws surrounding termination, what severance looks like, and the notice period that must be given during termination.
There are only certain situations in which employers can terminate a full-time employee.
During the probationary period
Through notice after receiving the go-ahead from the UWV
Dissolution by a court ruling
In cases of gross misconduct, fraud, theft, incompetence, and insubordination that could endanger others (these situations don’t require the employer to pay the employee severance–illness or general performance issues don’t justify termination)
Mutual consent between both parties
If the employer has exhausted all options or doesn’t have the desire to retrain the employee, certain situations do allow termination, including:
A-ground: Redundancy (requires dismissal permit from the UWV)
B-ground: Disability for more than 2 years where work cannot be performed or made with reasonable accommodation (requires dismissal permit from the UWV)
C-ground: Frequent and disruptive absences due to illness (requires court decision)
D-ground: Underperformance where the employer has taken steps to train and work through the performance issues with the worker (requires a court decision where the employer must file a petition showing the reason for termination)
E-ground: Serious behavioral issues or misconduct (requires a court decision)
F-ground: Refusal to perform contractual obligations (requires court decision)
G-ground: Deterioration of the working relationship (requires court decision)
H-ground: Other reasonable decisions that prove the employer cannot continue the working relationship (requires court decision)
I-ground: Combination of circumstances from 2 or more of the reasons above besides A and B
Employers need to file a petition with the court or a request with the Dutch Employment agency which proves the above actions are necessary under one of the stated grounds.
After receiving permission, employers must notify the employee the next day and inform them of when their last day of employment will land.
Unfair dismissals in the eyes of the workers can be challenged in the court or by the UWV. During this process, the dismissal can either be 1) annulled or 2) lead to compensation, to be determined by the court.
Notice periods in the Netherlands depend on the employee’s length of service:
Less than 5 years: 1 month
5-10 years: 2 months
10-15 years: 3 months
Over 15 months: 4 months
Under urgent circumstances, employers can dismiss an employee with no notice.
Employees that resign need to give at least 1-month's notice of their intention to resign. Employer’s notice periods should always be twice as long as the employee’s.
Both parties can agree to payment in lieu of notice.
Termination of employment with a mutual agreement requires a written settlement agreement that states the reason for termination. Employees have the right to withdraw their agreement to the settlement for up to 2 weeks. Employees must have this agreement to collect unemployment benefits.
Before an employer jumps to termination of employment, they have to follow a specific procedure in the Netherlands.
If they want to terminate a worker's employment for inadequate performance, the employer must prove that they have given the employee:
Performance reviews (the work through the issue)
Coaching through the improvement points
A reasonable chance to improve performance. Employers should try to work through the performance problems and keep track of any points that haven’t been met on the worker’s end
In certain situations, unfair dismissal will be reviewed through the courts of the UWV.
Protected employees can’t be dismissed for the following reasons:
Membership to a trade union
Membership to a work council
Transfer of business
Mandated leave under the Work and Care Act
Not working on Sundays
Redundancy, also known as "collective dismissal" or "restructuring," is handled through a specific legal process in the Netherlands.
When an employer needs to make a certain number of employees redundant due to organizational changes, economic difficulties, or technological advancements, they are required to follow a set of rules and procedures to ensure fairness and protection for the affected employees.
Here's a general outline of how redundancy works in the Netherlands:
Notification to Employee Representatives: Before initiating any redundancy process, the employer must inform and consult with the works council or employee representatives, providing them with details about the reasons for the intended redundancies, the number of employees affected, and the proposed measures to mitigate the impact.
Selection Criteria: When selecting employees for redundancy, objective and non-discriminatory criteria are used. These might include factors like job performance, skills, experience, and seniority. The goal is to ensure transparency and prevent unfair selection practices.
Notice Periods: Employees selected for redundancy are typically entitled to a notice period based on their length of service. The notice periods can range from one to four months, depending on the employee's years of employment.
Severance Pay: In addition to the notice period, employees who are made redundant are entitled some type of severance payment. This payment is calculated based on the employee's years of service and salary, following a specific formula set by law.
Collective Dismissal Application: If the employer plans to dismiss 20 or more employees within a three-month period at a single establishment, a "collective dismissal" application must be submitted to the UWV. The application should outline the reasons for the redundancies, the number of employees affected, and the measures taken to minimize the impact.
UWV Assessment: The UWV assesses the collective dismissal application and reviews whether the redundancies are justified based on economic or business-related reasons. If approved, the employer can proceed with the dismissals after the statutory waiting period has passed.
Appeals and Legal Proceedings: If employees disagree with the redundancy decision or believe their dismissal was unfair, they have the right to appeal to the courts. Dutch labor law provides a legal avenue for employees to challenge the redundancy process
Severance pay in the Netherlands, known as a "transition payment," is a significant aspect of the employment termination process. It is intended to provide financial support to employees who are dismissed due to reasons such as redundancy, long-term illness, or the expiration of a fixed-term contract.
Here's how severance pay is handled in the Netherlands:
Eligibility: Employees are generally entitled to a transition payment if their employment has lasted for at least 24 months. This includes both temporary and permanent contracts.
Calculation of Transition Payment: The transition payment is calculated based on the employee's length of service and their gross monthly salary. The formula is as follows:
1/3 of the monthly salary for each full year of employment for the first ten years.
1/2 of the monthly salary for each full year of employment beyond ten years. Note that the maximum gross annual salary taken into account for calculation purposes is capped at a specific amount, which is adjusted annually.
Exceptions and Special Situations: There are exceptions and special rules for specific circumstances, such as employees who are close to retirement age or employees of small businesses with less than 25 employees.
Payment Timing: The transition payment is typically paid to the employee at the end of the employment relationship. However, employers and employees may agree to other arrangements, such as spreading the payment over time or using it for training or education purposes.
Employer's Responsibility: It is the employer's responsibility to calculate and pay the transition payment accurately and in a timely manner. Failure to do so may result in legal consequences.
Taxation: The transition payment is subject to taxation, but special tax rules apply to this payment. It is generally taxed at a lower rate compared to regular income.
Collective Agreements: In some cases, collective labor agreements or individual employment contracts may stipulate different severance arrangements. However, these arrangements cannot be less favorable than the statutory transition payment.
In order to qualify for unemployment funds through the Netherlands social security system, employees must:
Have not reached the statutory age for retirement
Have lost at least 5 hours of work hours per week
Be able to work
Be looking for a job
Have worked for at least 26 weeks in the last 26 weeks before requesting unemployment
Become unemployed through no fault of their own
Those who receive disability or illness benefits through the Dutch government are not eligible to apply for unemployment.
Unemployment pay is 75% of the individual's last daily salary (capped at $227.78 EUR daily or $4,845.47 EUR monthly), during the first two months and 70% after that. If the individual worked 26 of the 36 preceding weeks, they are entitled to the basic 3-month benefit package. Extended benefits depend on how many years the individual has worked.
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