Dutch employment law differs greatly from other legal systems. In particular, the position of the employee with respect to dismissal. The employee is better protected than in many other countries.
Essentially, the employer requires prior permission by the work placement branch of the Employee Insurance Agency (UWV WERKbedrijf) or the subdistrict court before it can terminate the employment agreement.
In The Netherlands, the employer has generally five ways to terminate the employment agreement:
- termination by mutual consent – by means of a settlement agreement;
- termination proceedings before the UWV WERKbedrijf (Employee Insurance Agency);
- termination proceedings before the cantonal court.
- termination with consent of the employee
- Urgent dismissal
Termination of employment by mutual consent in the Netherlands
In the vast majority of the cases, employers first try to solve the dismissal amicably by mutual consent by means of a settlement agreement. In this case you do not need prior approval of a public authority and this could save time and money.
A settlement agreement contains among others the date on which the employment agreement ends and the severance to be paid out by the employer after this date. The settlement agreement should also contain supplementary arrangements about the termination of the employment.
Severance payment for the terminated employee under Dutch law
If an employer wishes to terminate an employment agreement that exists for two or more years, a mandatory transition fee (in Dutch: transitievergoeding) must be paid regardless of the applicable procedure of termination. The number of months of salary due is calculated based on the age of the employee and the number of service years.
- during the first 10 years of service, the transition payment amounts to 1/6 monthly salary per half year of employment
- after 10 years of service, the transition payment amounts to 1/4 monthly salary per half year of employment
- the total transition payment is maximized to EUR 75,000.–, or if the annual salary is higher than EUR 75,000.– the maximum amount equals the annual salary
- employees at age 50+ with more than 10 service years are entitled to one monthly salary per year of employment (transitional arrangement until 2020 that does not apply for small employers (less than 25 employees))
- no transition payment needs to be paid if an employee acted culpably
- collective labour agreements may deviate from this rule
- the subdistrict court may award an additional payment in case the termination of the employment amounts to culpable conduct or omission of the employer
As a result of this rule embedded in de Work & Security Act, the amount of compensation for termination of employment is no longer dependent on the choice of procedure.
Termination proceedings in the Netherlands
In case parties do not reach an agreement by mutual consent and if the employer would like to force on a termination of the employment agreement based on personal reason (such as underperformance) the employer can file a request for termination with the subdistrict court.
Termination proceedings before the UWV WERKbedrijf (Employee Insurance Agency)
In case parties do not reach an agreement by mutual consent and if the employer would like to force on a termination of the employment agreement based on business economic reasons the employer can file a request for termination with the UWV WERKbedrijf (Employee Insurance Agency).
Both proceedings require well-grounded reasons and evidence for terminating the employment agreement. The employer must substantiate these reasons with documentary evidence. Both proceedings will be (partially) in writing. For both authorities “Dutch” is the working language.
Please note that Dutch law provides that there is in principle a prohibition against termination of employment during an employee’s illness.
Termination with consent of the employee
The Work & Security Act introduces a new rule with regard to termination, the written consent of the employee after notice being given by the employer. It is still rather unclear what the added value is of this alternative option next to the available options such as the termination by mutual consent by means of a settlement agreement.
Dismissal and termination with immediate effect under Dutch law
An employer may also dismiss an employee for an urgent cause with immediate effect, in case of theft or any other serious misconduct. This requires a different protocol and in this case no prior permission by either the court of UWV is required. The employee must be notified as soon as possible about the dismissal and it might even be necessary to start conditional termination proceedings before the court to effectuate the termination of the employment agreement.
Further information regarding termination proceedings in The Netherlands
If you have any questions regarding employment termination under Dutch law, or relating to any other issue concerning employment law in The Netherlands, please contact: