International Employment Law Guide

Analysis

The Netherlands

International Employment Law Guide

This page outlines country-level details about the onboarding process when hiring employees, and touches upon the applicable rules when terminating employment contracts.

Last updated: 31 January 2022

A. Hiring of employees (onboarding)

Mandatory employer requirements

When employing an individual in the Netherlands, the employer is required to provide specific information to the individual, in writing or electronically, concerning the applicable employment conditions. An exhaustive list of topics has been included in the Dutch Civil Code and for example includes the following topics: (i) the name and domicile of both parties; (ii) the place(s) the work has to be performed; (iii) the position of the employee or the kind of work to be performed by him/her; (iv) the wage amount; (v) whether or not the employee will participate in a pension scheme; and (vi) the applicable collective bargaining agreement (if any).

It is not required to establish a Dutch legal entity to hire someone to work in the Netherlands. Foreign entities can handle all employer formalities from their foreign domicile.

Probation periods

Probation periods are in most cases allowed under Dutch law. During the probation period, the employer and the employee may terminate the employment contract without notice. Termination may, however, not be discriminatory. Probation periods must be concluded in writing and are only possible in employment contracts of which the term is longer than six months.

Type of employment contract Duration probation period
Open ended and fixed-term of at least 2 years Maximum 2 months
Fixed-term > 6 months and < 2 years Maximum 1 month
Fixed term without an specified end date Maximum 1 month
Fixed-term ≤ 6 months No probation period allowed

Hiring checks

Medical examination
There is no legal requirement to conduct medical checks upon hiring, except in specific circumstances. Med-ical checks are only permissible in specific circumstances. Employment cannot be made conditional upon passing a medical exam, except in specific circumstances.

Criminal background check
Criminal background checks are permissible and can be legally required for specific functions. In practice, employers in those cases often ask for a certificate of good conduct (Verklaring Omtrent Gedrag). A copy of such certificate can be kept in the personnel file.

Reference and education checks
Reference and education checks are permissible with consent of the individual.

Diversity & inclusion

The law does not provide any specific diversity measures with focus on gender, race or disability.

Equal treatment legislation requires employers to provide employees with equal pay for equal work (and work of equal value). There is no reporting obligation, but employees who feel they are not treated equally can claim equal pay and damages in court. To determine if the legislation has been applied correctly, the court takes into account various factors such as job description, experience and past performance.

Types of employment contracts

When an employment contract is concluded without mentioning a time limit, it is considered to be an open-ended employment contract.

A fixed-term employment contract is an agreement mentioning a specific end date after which the parties are released from their mutual obligations. Successive fixed-term contracts are permitted to a certain ex-tent, with limitations based on the total duration and the number of successive contracts.

The employment contract for a clearly defined job does not specify the exact duration, but it must specify the work to be performed in such a way that it should be possible to determine when the job is done and thus the contract is terminated. This type of employment contract is considered a fixed-term employment contract if all requirements have been met. The most important requirement is that the end date can be objectively determined, without the employer and/or employee being able to have any influence on the end date.

The employment contract does not necessarily have to be concluded in writing, but certain employment conditions are not valid if not concluded in writing.

Specific rules for executives

There is an official category of executives under Dutch law whose rights, to some extent, deviate from the labor law rules applied to other employees. The deviating rights mainly relate to offboarding.

A statutory executive is appointed (and dismissed) by the general meeting of shareholders or the supervisory board of the company.

Language requirements

Dutch law does not prescribe that employment contracts have to be written in the Dutch language.
However, to confirm that employees know what they are signing and committing themselves to, it is im-portant to assess whether the employee has sufficient command of a (foreign) language. If not, then the employment contract should be written in the Dutch language or another language the employee has suffi-cient command of.

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B. Termination of employees (Offboarding)

Kinds of dismissal

In the Netherlands, different kinds of dismissal exist. The first is a dismissal by giving notice. In case of dis-missal for economic reasons (ground A) or because the employee has been sick for two years (ground B), the employer must request prior approval to give notice from the administrative body UWV (Uitvoeringsin-stituut werknemersverzekeringen).

In other individual situations, the employer must turn to the sub district court (kantonrechter) with a petition in which it requests dissolution of the employment contract based on a reasonable ground. The following exhaustive list summarizes these reasonable grounds:

c) Frequent sickness

d) Non-performance

e) Culpable behavior or omission

f) Conscientious objections

g) Disrupted employment relation

h) Other reasons

i) A combination of grounds c, d, e, g and/or h

Not only must the requirements for dismissal be fully met, the employer must also – prior to a dismissal and within a reasonable period – try to redeploy the employee in another position, if necessary by offering education. This obligation does not apply in case of culpable behavior by the employee.

An employment contract can also be terminated with immediate effect during the trial period.

In case of serious cause (dringende redenen) an employee can be dismissed with immediate effect (ontslag op staande voet). Dutch law then requires that, in all reasonableness, it cannot be expected from the em-ployer that the employment contract will be continued any longer. If that is the case, prior approval of the UWV or the court is not required and the notice period does not apply. The employer must inform the em-ployee of its decision without any delay (max 2/3 days or longer if further investigation is required), men-tioning the reasons for the dismissal with immediate effect. Deciding on a dismissal with immediate effect requires a very diligent decision-making process and often leads to court proceedings.

Besides these four kinds of unilateral dismissals, parties can also terminate the employment contract with mutual consent. They will have to negotiate the terms and conditions, which are required to be laid down in a settlement agreement. Although the legal consequences are slightly different from a case of termina-tion with mutual consent, a similar way to terminate the employment contract is that the employer gives notice with the employee’s approval. In both situations, the employee has a period of two weeks to recon-sider his/her consent or approval. This will be three weeks if the employer does not inform the employee of these reconsideration rights in writing.

The above fully applies to an employment contract for an open-ended term.

The fixed-term employment contract ends automatically when the agreed term expires, without notice period or indemnity in lieu of notice. However, the employer is obliged to clearly inform the employee at least one month before expiry of a fixed-term employment contract if the contract will be renewed or not (and if so, under which conditions). If the employer does not (timely) adhere to this information obligation, a penalty of at maximum one month of salary will be owed to the employee. Note that fixed-term employment contracts can be terminated by either party prematurely if an ad interim termination clause has been included in the employment contract. In that case the general dismissal procedures as described above apply in full.

The project-based contract for a specific job will automatically end as soon as the agreed work is completed, without the need for observance of an information or notice period. Note that contracts for a specific job can be terminated by either party prematurely, if an ad interim termination clause has been included in the employment contract. In that case the general dismissal procedures as described above apply in full.

Dismissal motivation

The UWV and/or the sub district court will have to assess whether all the requirements for dismissal on the requested reasonable ground are met. If this is not the case, then the employment contract cannot be terminated. It is possible to terminate an employment contract based on two reasonable grounds that are both not fully met (ground i as referred to under ‘Kinds of dismissal’), but certain strict conditions are attached to this combination of grounds as well. Building a good file will therefore be very important.

Also in case of dismissal with immediate effect, the reasons must be clear and solid.

A termination with mutual consent in principle does not require specific grounds, but if there are no reasonable grounds, then an employee would most likely not be willing to cooperate.

Notice period

The statutory notice period for the employee is one month.

The statutory notice period for the employer depends on the continuous length of employment (seniority):

Seniority Notice by the employer
0 < 5 years 1 month
5 < 10 years 2 months
10 < 15 years 3 months
As of 15 years 4 months

Parties can agree in writing on a longer notice period for the employee, provided that the notice period for the employee cannot exceed six months and the notice period for the employer must then be at least twice the length of the notice period of the employee. Collective bargaining agreements may, however, deviate from this rule and the statutory notice period.

Giving notice is only possible after the UWV has given its prior approval. If the employer turns to the subdistrict court with a request to dissolve the employment contract, the court will also have to take into account the notice period. In both cases the procedural time can be deducted from the notice period. There will always remain a minimum notice period of one month.

Severance pay

Every employee has a statutory right to the transition compensation (transitievergoeding) as from the start of the employment relationship. This must be paid if the employer gives notice, after dissolution by the subdistrict court and if an employment contract for a definite period of time is not extended. The transition compensation must also be paid if the employment contract is terminated at the employee’s initiative because of culpable behavior by the employer.

The transition compensation amounts to one-third of the gross monthly salary per year of service. The transition compensation has a maximum (EUR 86.000 gross in 2022) or one year of salary for employees whose annual salary is higher than this amount. “Monthly salary” means the employee’s base fixed salary, increased with pro-rata holiday pay, fixed end-year payments (13th month), bonus and variable pay and certain other fixed payments.

In case the employment contract is terminated based on a combination of reasonable grounds (ground i as referred to under ‘Kinds of dismissal’), then the subdistrict court has the authority to grant an additional severance payment on top of the regular transition compensation (as applicable to grounds a-h as referred to under ‘Kinds of dismissal’), which is at maximum (an additional) 50% of the transition compensation.

In some cases the transition compensation does not have to be paid, such as to the retiring employee, if the employee is terminated for culpable behavior, in case an applicable collective bargaining agreement contains an equal arrangement or in case of bankruptcy of the employer.

Certain education and outplacement costs may be deducted from the transition compensation, provided that specific and strict conditions are met.

Parties can, to the benefit of the employee, agree on a contractual severance payment that deviates from the statutory rules. Nevertheless, this possibility may be limited in case of top-ranking employees working for financial institutions or certain institutions financed by public funds.

Dismissal formalities

The form in which notice is to be given after approval from the UWV is not prescribed by law. However, it is strongly advised to give notice in writing, so that the employer has proof.

In case the subdistrict court dissolves the employment contract, its formal decision will dissolve the employment contract. No further action by the employer is required.

How the termination during the trial period should be done is not prescribed by law, but it is strongly recommended to do so in writing. In any event, upon the employee’s request, the employer will have to in-form the employee in writing about the reason(s) for the dismissal.

Also in case of a termination because of urgent reasons, Dutch law does not prescribe that this must be done in writing, but again it is strongly advised to do so. If not, this will seriously weaken the position of the employer and is likely to lead to an invalid dismissal.

A termination with mutual consent must always be agreed upon in writing.

Special dismissal protection

Several types of employees have special dismissal protection. This includes:

  • Sick employees (during the first 104 weeks of sickness)
  • Pregnant employees (pre-maternity)
  • Employees on post-maternity leave (including a period of at least six weeks after pregnancy leave)
  • Members of an employee representation body
  • Trade union members
  • Employees using their rights to special leave
  • Employees who are or were recently involved in a transfer of undertaking

Certain exceptions apply to the prohibition to terminate these employees with special dismissal protection.

Legal means of employees

If the employer receives approval from the UWV and subsequently gives notice of dismissal, the employee can–depending on the specific situation–request the subdistrict court a) to nullify the notice; b) to reinstate the employee in his/her position; or c) for a reasonable compensation (billijke vergoeding), which comes in addition to the statutory transition compensation (see point 4).

The employee must do so within two months after the date on which the employment contract ended. After this procedure before the subdistrict court, appeal before the Court of Appeal and cassation before the Supreme Court are possible.

If the subdistrict court dissolves the employment contract upon the employer’s request, appeal and cassation are possible.

The employee can also request the subdistrict court to dissolve the employment contract, after which appeal and cassation are also possible.

Specific rules for executives

Terminating the corporate position of a statutory executive in principle results in the automatic termination of the employment contract (unless the statutory executive is ill or parties have agreed differently). The company thus does not have to request the UWV for prior approval to give notice, nor does the company have to turn to the subdistrict court with a petition in which it requests dissolution of the employment contract. However, also in case of a statutory executive’s dismissal, a company should have a reasonable ground for termination. If there is no reasonable ground, then there is a risk that a court (upon a petition by the executive director) would award an additional compensation, next to the transition compensation.

Collective dismissals

A collective dismissal implies the dismissal for business reasons of more than 20 employees (working in the same business area, with the dismissals taking place within a period of 3 months).

In case of a collective dismissal, the trade unions and the UWV should be notified in time. The employer should submit a dismissal plan. After the notification, the employer should also notify the works council. All aforementioned stakeholders should be able to have a substantial influence on the decision. Therefore, they should be involved before the final decision has been made.

In order to effectuate termination of the employment contracts in case of a collective dismissal, the individ-ual applications for dismissal need to be submitted to the UWV.

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Get in touch

Anne-Marie van den Belt
The Netherlands
avandenbelt@deloitte.nl | +31 88 288 2790

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