With more and more companies investing in the Netherlands, we have the opportunity to guide businesses through the process of onboarding staff in the country. However, while the focus is often on starting new roles, there inevitably comes a time when contracts need to be terminated. It is easy to overlook this aspect at the outset, but the Netherlands has a well-structured and regulated system for ending employment contracts, with a strong emphasis on employee protection. Whether you are an employer or an employee, understanding the rules around termination is crucial to ensure compliance with Dutch labor laws and to avoid potential disputes. In this blog, we will go through the process of terminating employment contracts in the Netherlands.
Legal Grounds for Termination
In the Netherlands, employment contracts can be terminated on specific legal grounds, such as:
- Mutual Agreement (Beëindiging met Wederzijds Goedvinden)
Both employer and employee can agree to terminate the contract. This is typically formalized in a termination agreement specifying the conditions, including severance pay if applicable. - Voluntary Resignation
An employee may choose to resign, following the agreed notice period stated in the contract. - Termination During Probation Period
During the probation period, either party can terminate the employment without providing a reason, provided this is outlined in the employment contract. - Employer-Initiated Termination
Employers can terminate employment only if they have valid grounds, such as:- Economic reasons (e.g., restructuring or financial difficulties).
- Long-term illness (minimum two years).
- Poor performance, provided sufficient improvement opportunities were offered.
- Serious misconduct, such as fraud or harassment.
- Fixed-Term Contracts
Fixed-term contracts end automatically at the agreed-upon date unless renewed. Employers must notify employees at least one month in advance if they do not intend to renew the contract.
Notice Periods
The notice period in the Netherlands varies depending on the length of employment and what is stipulated in the contract:
- Employees: The statutory notice period is typically one month, unless otherwise agreed.
- Employers: The statutory notice period normally depends 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 years: 4 months
Employers and employees can agree on longer or shorter notice periods, but they must adhere to the statutory minimum notice for employees.
Employer-Initiated Termination
When an employer wants to terminate a contract, specific procedures must be followed:
- Approval for Termination
Employers must seek approval from:- UWV (Employee Insurance Agency) for economic or long-term illness-related terminations.
- Court for dismissals due to misconduct or poor performance.
- Severance Pay (Transition Payment)
Employees who have worked for at least two years are entitled to severance pay. The amount is based on the employee’s monthly salary and the duration of employment. - Fair Process
Employers must follow a fair and transparent process, such as offering performance improvement plans or issuing warnings for misconduct. Failing to do so can lead to disputes or additional compensation claims.
Protection Against Unfair Dismissal
Dutch labor law provides strong protections against unfair dismissal. If an employee believes their termination is unjustified, they can challenge it in court. Possible outcomes include:
- Reinstatement of employment.
- Financial compensation.
- Additional damages.
Key Considerations
- Collective Dismissals
If 20 or more employees are dismissed within a three-month period, the employer must follow specific rules under the Collective Redundancy Act. This includes notifying unions, UWV, and consulting with employee representatives. - Protected Employees
Certain employees are granted additional protections against dismissal, such as:- Pregnant employees.
- Union representatives.
- Employees on sick leave (with some exceptions).
Summary
- Employment contracts in the Netherlands can only be terminated on legal grounds and by following the correct procedures.
- Notice periods and severance pay are central elements of the termination process.
- Employers must adhere to fair practices to avoid legal disputes or penalties.
By understanding these rules, both employers and employees can manage terminations efficiently and fairly.
For more insights, check out our other blogs about the Netherlands, including:
- Employee allowances and WKR
- Understanding the dutch payslip
- Payroll updates 2025
- Understanding the Dutch pension system
Need Help with Dutch Employment Law?
Understanding and applying employment regulations in the Netherlands can be complex, but Internago is here to assist. We offer expert advice on employment contracts, payroll, and compliance, helping you to focus on growing your business.
Contact us today at info@internago.com to learn more about our services in the Netherlands and across Europe!