End of Employment in Netherlands

End of Employment Procedures & Guidelines in Netherlands

At-will employment termination is not a recognised concept in the Netherlands. Employment relationships can only end after prior approval from relevant employment offices. If the employment is ending by mutual agreement, it does not require authorisation. However, some form of documentation is useful to prove compliance with elements of the collective agreement, such as the notice period or the pay of outstanding wages.

The following scenarios permit an employer to end an indefinite employment agreement:

• During the probationary period, where it takes immediate effect, does not require prior approval or grounds for termination. The employee may request a written explanation
• By giving notice after having consent from the Dutch Employment Agency (UWV)
• By dissolution of the competent court
• In case of an urgent cause - gross misconduct, theft, fraud, serious incompetence, refusal to obey reasonable instructions or situations endangering others. An employee's conduct must be sufficiently serious to justify the immediate dismissal, which if valid, strips employees from unemployment benefits. Performance issues or illness do not justify an urgent cause termination
• By mutual consent, if the two parties sign a settlement agreement that outlines the conditions of termination. This safeguards the employee to the unemployment benefits entitlement
• On a reasonable ground or due to no option to retrain. It requires permission from the UWV. The law recognises nine reasonable grounds:
  • A-ground: Redundancy (requires a dismissal permit from the UWV)
  • B-ground: Disability for more than two years where work cannot be performed in an adapted form (requires a dismissal permit from the UWV)
  • C-ground: Frequent and disruptive absence due to sickness (by court decision)
  • D-ground: Underperformance. The employer must have informed the employee of the issue and have taken sufficient steps to enable the employee to improve their performance. In addition, the underperformance should not be due to insufficient training efforts or poor working conditions (by a court decision, where the employer needs to file a petition and prove that the termination is necessary)
  • E-ground: Serious misbehaviour (by a court decision)
  • F-ground: Refusal to perform contractual duties for reasons of conscience, provided that the contractually agreed work cannot be performed in an adapted form (by court decision)
  • G-ground: The working relationship has deteriorated to the extent that the employer cannot reasonably be required to continue it (by court decision)
  • H-ground: Other reasons that are of such nature that it cannot reasonably be expected that the employer should continue the employment relationship (by court decision).
  • I-ground: A combination of circumstances from two or more of above (except from the first 2) that makes it reasonable not to require the employer to continue the employment agreement

To obtain permission to dismiss an employee, the employer will need to file a petition with the court or the Employee Insurance Agency (UWV), and prove they took the above actions and that the termination is still necessary.

Once UWV grants permission, the employer may notify the employee about the termination the following workday and observe the notice period.

Employee dismissal is not possible for Termination, except under the following circumstances:

• The employee agrees to the dismissal in writing
• The employment contract is terminated for urgent causes or during the probation period
• The dismissal is not a violation of the regulation for protected employees as the cause is something else entirely. This can be the case if, for example, the enterprise is terminating all or part of the activities, where the employee's work is.

For dismissals that either do not have the employee's consent, a dismissal permit from UWV or are in breach of a dismissal prohibition, employees may ask the court to annul it or to award a reasonable compensation. An employee is also entitled to appeal a UWV or court termination permit.

To put an employee on garden leave, both the employer and employee need to agree. Dismissed employees are entitled to any unused holiday, holiday allowance, pro-rate bonus payments (if applicable) and severance pay. Final salary payments for leavers need to be made on the next pay date at the latest.

Termination by mutual consent

Termination by mutual consent requires a written settlement agreement, stating the reason for termination. The employee can withdraw their acceptance of it within two weeks (or three weeks when the employer did not inform the employee about that period). The employee needs the agreement to be able to collect unemployment benefits.

Procedure guidelines

Inadequate performance as a reasonable ground

Before an employee can be dismissed for inadequate performance, the employer must show thoroughly documented proof that they have given the employee:

• Performance reviews (including critical improvement points)
• Offer help on the improvement points (coaching and a performance improvement plan)
• A chance to improve performance. The employer should work with the employee on their performance and keep track of points thаt have not been met

To obtain permission to dismiss an employee, the employer will need to file a petition with the court or the Employee Insurance Agency (UWV) and prove that they took the above actions and that termination is still necessary.

Once the UWV grants permission, the employer can notify the employee about the termination, the following workday and observe the notice period.

Unfair Dismissal in Netherlands

Employee termination protection

Protected employees cannot be dismissed under the following circumstances:

• Illness (at the time the consent is requested)
• Pregnancy
• Employees on maternity leave or after the six weeks following it
• Marriage
• Parental leave
• Membership in a trade union
• Membership in a works council
• Business transfer
• Work and Care Act 2001 mandated leave
• Not consenting to work on Sundays

There can be exemptions from this statutory protection if the employer can prove the termination is either not related to the employee illness or they are closing the business.

Redundancy Pay & Entitlement in Netherlands

Employers need to clarify the reasons for making a position redundant due to reorganisation, whether that is part of a mass redundancy or not. They also need to show they considered alternative measures to redundancy, making it the ultimate remedy.

After the employer has decided where redundancies and how many positions will lapse, they should use legal principles when selecting which roles will be terminated, starting with the "reflection principle." Under this principle, the employer must first categorise all interchangeable positions. Then they must divide the employees within a category into the following age groups: 15 to 25 years, 25 to 35 years, 35 to 45 years, 45 to 55 years and 55 years and older.

Subsequently, the employer must apply the last-in-first-out principle to every age group. The employee who entered into the service of the employer last should be dismissed first. This does not apply when a unique position is made redundant or when an entire category of interchangeable roles disappears.

Once the employer determines the role that they will make redundant, they must explain what will happen to the current responsibilities of this employee. They must be able to prove that it is not possible to reassign the employee within the company in another suitable position.

Collective redundancy

Mass redundancy occurs when a company dismisses 20 or more employees within one UWV district in three months. Before an employer makes an employee redundant, they must notify, consult and listen to the relevant trade union, work council or employee representative committee (if any) based on the Collective Dismissal Act. They should explain why there is a sufficient cause for dismissal and provide explanatory documents. There is a one-month waiting period after that, which allows the company to negotiate a social plan and formally ask the works council for advice. This period does not apply, however, if the trade unions have declared that there is sufficient cause for dismissal.

Afterwards, the employer must also obtain a dismissal permit from the UWV as described above, if parties do not reach a settlement agreement for the termination. If they do not give permission, the employer cannot end employment contracts.

If, however, the UWV approves, employers should notify employees within the applicable notice period (minus the duration of the UWV proceedings, as long as one month remains).

Resignation Procedure in the Netherlands

Employees have a right to terminate their employment, and no formal rules have to be followed; however, sending a resignation letter is encouraged. If the employment agreement doesn't specify a notice period, the one-month statutory minimum applies. The notice can be shortened or lengthened in writing, but it can never be longer than six months.

Other End of Employment Guidelines

Notice period

Employers dismissing an employee should give notice by the end of the month unless otherwise indicated in the employment agreement.

The notice period depends on the duration of employment as follows:

• Less than five years: one month
• Between 5-10 years: two months
• Between 10-15 years: three months
• More than 15 years: four months

For urgent causes or during trial periods, employers can dismiss employees without notice.

Employees need to give one month notice period when resigning. If a longer notice period is required of them, it must be indicated in the contract. The employer's notice has to be at least double the employee's. 

Employers and employees can agree to provide the employee with pay in lieu of serving their notice period.

Severance

In the Netherlands, severance is defined as a 'transition budget' to ease the search and transition to a new role. Employees are entitled to it if either the employer initiated the termination, or in the case of a fixed-term contract, decided not to extend it. The only exception is if they did so due to seriously culpable employee actions. 

This severance pay is a 1/3 of the gross monthly salary for every year of service. It's currently capped at €89,000 gross or the employee's full year's salary, whichever is higher.

If the parties reach an agreement to terminate the employment contract amicably, the employee is not entitled to severance pay. Employees are often not inclined to sign an amicable settlement if the offer reflected in it is less favourable than what they would get without it. Consequently, the agreement will almost always include severance for a higher amount than the transition payment.

If the employer terminated the employment agreement in a damaging to the employee way, the employee could make a "fair payment" claim (billijke vergoeding). There is no standard formula for calculating the compensation, and instead, it's evaluated based on the severity of the damages. If it turns out that the employer isn't at fault, then severance will be calculated through the standard formula based on years of service.

Unemployment funds

To qualify for unemployment benefits employees must satisfy the following conditions:

• They have not reached the statutory retirement age
• They have lost at least five work hours a week and the associated pay
• They are available for work
• They must be seeking a job
• They have worked for at least 26 weeks in the past 36 weeks
• They have become unemployed through no fault of their own

People receiving a government benefit due to illness or disability cannot apply for the unemployment benefit.

The benefit is 75% of the individual's WW monthly salary (with a cap) 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.