Termination of Dutch employment contracts

Overview of employment protection in the Netherlands

The Netherlands offers one of the most comprehensive and employee-friendly employment protection systems in Europe. While the Dutch employment law provides solid safeguards for workers, it also provides clear ways for employers to terminate employment contracts when necessary. The law strictly ensures that dismissals must be justified, properly documented, and follow rigorous procedural requirements.

At the core of Dutch employment termination law are the fundamental principles of proportionality(fairness) and reasonable grounds. Employers must demonstrate strong reasons for dismissal, supported by proper documentation in accordance with legal standards. The law consistently emphasises that termination should be a measure of last resort, requiring employers to first explore and consider alternatives such as retraining, reassignment to a different role, or other reasonable accommodations before proceeding with dismissal.

Unfair dismissal: Employee rights and protections

Before explaining the various ways an employee can be dismissed, let’s first clarify what constitutes an unfair dismissal.

Under Dutch law, unfair dismissals are defined as actions deemed “obviously unreasonable” and are strictly prohibited. The Netherlands maintains robust protections against discriminatory and arbitrary dismissals, with certain categories of employees receiving enhanced protection.

Protected categories:

• Discrimination: Dismissals based on religion, race, age, sex, disability, or other protected characteristics are strictly prohibited.
• Illness or disability: Dismissing an employee during the first two years of illness or labour disability is considered unfair.
• Pregnancy and maternity leave: Employers cannot terminate employees due to pregnancy or during maternity leave.
• Parental leave: Employees have the right to parental leave without facing termination.
• Union and council membership: Dismissing employees for being members of works councils, personnel associations, trade unions, or political parties is unjust.

Legal recourse:
Employees who believe they have experienced unfair dismissal can file a claim with Dutch labour authorities. The legal system offers clear ways to challenge a dismissal, including tribunals and mediation to help resolve disputes. Employees can seek either reinstatement to their position or monetary compensation for financial losses incurred due to wrongful termination.

Legal grounds for dismissal

Under Article 7:669 of the Dutch Civil Code, there are 9 exhaustive statutory grounds for dismissal:

1. Economic grounds (business reasons, restructuring, bankruptcy)
2. Long-term illness or disability (2+ years incapacity)
3. Frequent inability to perform work due to illness
4. Underperformance (not doing their job properly)
5. Culpable acts or omissions (misconduct, unacceptable behaviour)
6. Conscientious objection (for religious, moral, or ethical reasons)
7. Disturbed working relationship
8. Other grounds (specific circumstances like illegal stay, imprisonment)
9. Cumulated dismissal grounds (combination of 2 or more grounds from the above, except for the first 2)

Methods of termination

In the Netherlands, there are 6 ways an employment relationship can be terminated:

1. Dismissal during the probationary period
2. Expiration of a temporary contract
3. Termination by mutual consent
4. Summary dismissal (immediate termination in cases of gross misconduct)
5. UWV (Employee Insurance Agency) permission-based dismissal
6. Court-ordered dissolution of employment contract

Dismissal during a probationary period

A probationary period must be agreed upon in writing as part of the employment contract or through an applicable collective labour agreement. The maximum duration depends on the contract type: one month for temporary contracts lasting more than six months but less than two years, and two months for permanent contracts or temporary contracts exceeding two years.

During the probationary period, either party can terminate the employment contract without needing to provide specific grounds or observe notice periods. Employers can dismiss employees even if they are ill, provided the illness itself is not the reason for dismissal. However, dismissals must not be discriminatory, and employers cannot abuse their authority to dismiss without reasonable justification. If either party requests the grounds for dismissal, there is an obligation to provide written reasons.

Expiration of a temporary contract

Temporary or fixed-term contracts automatically terminate upon reaching their specified end date or project completion. Employers must notify employees at least one month before the contract expires whether it will be extended and, if so, under what conditions. Temporary contracts cannot be extended indefinitely. An employee must receive a permanent contract after either 3 consecutive temporary contracts or a total of 3 years of temporary contracts.

Termination by mutual consent

Termination by mutual consent enables employers and employees to voluntarily agree to end their working relationship via direct negotiation, bypassing the need for court approval or UWV (Employee Insurance Agency) permission. Such agreements are formalised in a termination or settlement agreement. This document must confirm the dismissal was employer-initiated, state the absence of gross misconduct, and detail the final pay date. Employees are then granted a mandatory 14-day reflection period to reconsider their decision, extending to 21 days if this period is not explicitly mentioned in the agreement.

If the employee does not agree to the dismissal, the employer must obtain termination permission from either the Employee Insurance Agency (UWV) or the district court.

Summary dismissal (immediate termination in cases of gross misconduct)

Summary dismissal allows immediate contract termination without notice periods for severe misconduct such as theft, fraud, workplace violence, or persistent refusal to follow reasonable orders. However, it requires demonstrating urgent cause and providing immediate written notice with detailed explanations.

The dismissal must occur immediately after the misconduct is discovered. Courts scrutinise these cases carefully, considering the severity of the misconduct alongside the employee’s circumstances and history. Invalid summary dismissals expose employers to significant financial penalties, including compensation equal to at least three months’ salary. Employees dismissed summarily are not entitled to unemployment benefits.

UWV permission-based dismissal

UWV permission-based dismissal applies specifically to economic grounds and long-term illness situations, requiring formal approval from the Employee Insurance Agency after employers demonstrate that alternatives like retraining or reassignment are not viable.

The application process involves submitting detailed forms, followed by a written procedure where employees can file objections to this request.

For economic dismissals, employers must prove genuine financial hardship or business restructuring needs. For long-term illness cases, the employee must have been unable to work for an extended period, and employers must show that accommodation or alternative placement is not feasible.

Court-ordered dissolution of employment contract

Court-ordered dissolution offers a judicial route for employment termination when employers have valid grounds but cannot obtain employee consent or UWV permission. Courts can dissolve contracts for reasons such as: frequent disruptive illness, underperformance, culpable employee acts, conscientious objection to work duties, severely impaired working relationships, or cumulative grounds combining multiple dismissal reasons.

The process involves filing a formal petition with the district court, followed by opportunities for the employee to present their defence and hearings where both parties present their cases before the court decides whether to grant the dissolution.

If the court rules in favour of the employer, notice is served, and the employment contract terminates at the end of that notice period. The employee may be entitled to transitional pay, depending on the specifics of their dismissal.

Notice periods in the Netherlands for regular employment contracts

Notice periods in the Netherlands are structured based on the length of employment and who initiates the termination. Notice must always be provided in writing to avoid disputes about timing.

For employee resignations:
When an employee resigns, the statutory notice period is generally one month. However, employment contracts may specify longer notice periods. Dutch law limits this, though, by requiring that if an employee must give more than one month’s notice, the employer’s notice period must be at least double the employee’s period.

For employer-initiated dismissals:
The statutory notice periods for employers depend on the employee’s length of service:

• Less than 5 years of employment: 1 month notice
• 5 to 10 years of employment: 2 months’ notice
• 10 to 15 years of employment: 3 months’ notice
• 15 years or longer: 4 months’ notice

Notice periods for temporary contracts with recruitment agencies

Temporary contracts with recruitment agencies in the Netherlands can be terminated early during the contract period, but this depends on the specific phase of employment and contract terms. The rules differ significantly from regular employment contracts and follow the ABU (General Association of Temporary Work Agencies) collective labor agreement (CLA) structure.

For employees:

• During Phase A contracts: Employees can terminate their work at any time, typically by providing one working day’s advance notice to the recruitment agency. The contract ends with the cessation of work due to the “agency clause” (uitzendbeding).
• Phase B (Fixed-term): If the fixed-term contract includes an early termination clause (tussentijds opzegbeding), the employee must observe the statutory notice period of one month. If no such clause is present, the contract generally runs to its specified end date.
• Phase C (Permanent): The employee must observe the statutory notice period of one month.

For recruitment agencies:

• For Phase A contracts: If the agency actively decides to terminate the employment contract (e.g., due to performance, or lack of assignments) and the worker has been employed for more than 26 weeks in Phase A, the agency must observe a 10 calendar days’ notice period. If the worker has been employed for 26 weeks or less, no notice period is typically required for active termination in Phase A.
• For Phase B contracts (Fixed-term): The agency can only terminate the contract prematurely if an early termination clause (tussentijds opzegbeding) is specifically included in the contract. If it is, the agency must observe the statutory notice periods based on the employee’s length of service. Without such a clause, early termination generally requires UWV permission or court dissolution.
• For Phase C contracts (Permanent): As these are indefinite contracts, the agency must follow standard Dutch employment law procedures for termination (e.g., via UWV permission or court dissolution), which are subject to the statutory notice periods based on the employee’s length of service.

Severance & transitional payment in the Netherlands

Depending on the specifics of their contract termination, employees dismissed in the Netherlands may qualify for transitional or severance payments.

Severance payment can be a broader term for compensation, particularly in cases of termination by mutual consent.

Transitional payment is a statutory entitlement, offered when an employment contract ends at the employer’s initiative.

Employees are legally entitled to a transitional payment in the following cases:

• Dismissal via UWV permission
• Dismissal via district court dissolution
• Non-renewal of temporary contracts by the employer
• Employee resignation due to serious employer misconduct

An employee is generally not entitled to a transitional payment if:

• The employment contract ended by mutual agreement
• The employee was dismissed due to serious culpability or gross negligence
• The employee is under 18 and worked, on average, less than 12 hours per week
• The company has declared bankruptcy
• The employee has reached retirement age

Transitional payment is calculated based on the employee’s age, years of service, and gross monthly salary. The general rule is one-third of the gross monthly salary per year of service, calculated proportionally for shorter periods. As of 2025, this payment is capped at a maximum of €98,000 (or one year’s salary if that is higher).

Applying for unemployment benefits

Employees who lose their jobs through no fault of their own could apply for an unemployment benefit. The benefit, administered by the UWV, provides temporary income replacement while individuals search for new employment.

To qualify for unemployment benefits, applicants must:

• Have worked at least 26 out of the last 36 weeks before unemployment
• Be available and willing to work
• Be under the state retirement age (retirement age in the Netherlands is 67 years)
• Have lost employment through circumstances beyond their control

The unemployment benefit is calculated based on the salary earned in the year prior to unemployment. For the first two months, recipients receive 75% of their calculated monthly wage, dropping to 70% from the third month onwards. The maximum daily wage for 2025 is set at €290.67 gross.

Applications must be submitted to UWV starting one week before and up to one week after the last day of work. The application can be completed online through the Mijn UWV website using DigiD, requiring recent payslips, employment contracts, and bank account details. Decisions are typically provided within four weeks of the first day of unemployment.

Conclusion

Ending an employment relationship in the Netherlands is rarely easy for either party. However, setting clear expectations, maintaining proper documentation, and following legal procedures can significantly reduce complications, ensuring fair outcomes for both employers and employees. Understanding your rights and obligations under Dutch law will help you navigate this challenging process with greater confidence and fewer disputes.

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