A permanent contract is an employment contract in which you do not agree on an end date. So your contract lasts indefinitely. With a permanent contract, you cannot be fired quickly. This is because such an employment contract only ends when you or your employer give notice. You must comply with the notice period and other rules that apply in a dismissal procedure. The employer is obliged to follow specific legal procedures and provide notice according to Dutch employment law.
The Dutch Civil Code forms the legal basis for the procedures and requirements regarding the termination of the employee’s contract. The importance of the employee’s contract is central in determining the rights and obligations of both parties during termination.
Your employer also needs to have a reasonable ground for dismissal under Dutch law. Moreover, this reasonable ground will have to be assessed by the UWV or the cantonal court (subdistrict court), which is responsible for reviewing and approving termination requests. The employer cannot terminate a permanent contract without following the proper legal process or obtaining court approval.
Introduction to Employment Law
Employment law in the Netherlands serves as the foundation for fair and balanced working relationships between employers and employees. It sets out the rules that govern employment contracts, including how they are formed, the rights and obligations of both parties, and the procedures for ending the employment relationship. Employment law covers essential topics such as notice periods, working hours, and the terms under which contracts can be terminated. By understanding employment law, both employers and employees can ensure that their employment contracts comply with legal requirements and that their rights and responsibilities are clearly defined throughout the course of employment.
Understanding Your Rights as an Employee
As an employee in the Netherlands, it is important to be aware of your rights under Dutch employment law. The type of employment contract you have—whether a permanent contract or a fixed term contract—determines the notice period you are entitled to and the process that must be followed if your employment is terminated. Employees should also know their eligibility for unemployment benefits and severance pay in the event of dismissal. If you are unsure about your rights or the terms of your contract, seeking legal advice can help you better understand your position and ensure you receive all the protections and compensation you are entitled to under Dutch employment law.
Types of Contracts
In the Netherlands, employment contracts generally fall into two main categories: permanent contracts and fixed term contracts. Each type of contract establishes a different kind of employment relationship and comes with its own set of rules regarding duration, termination, and employee rights. Understanding the differences between these contracts is essential for both employers and employees to ensure that the terms of employment are clear and that both parties know what to expect throughout the contract period.
Permanent vs. Fixed-Term Contracts: Key Differences
A permanent contract, also known as a contract for an indefinite period, does not specify an end date and continues until either the employer or the employee decides to terminate it, usually by giving notice in accordance with the applicable notice periods. In contrast, a fixed term contract has a clearly defined end date or is tied to the completion of a specific project. Once the end date is reached, the contract ends automatically unless both parties agree to renew or extend it. The type of contract you have affects your rights regarding dismissal procedures, the length of notice periods, and your entitlement to benefits such as unemployment benefits and severance pay. Employers and employees should carefully consider the implications of each contract type before entering into an employment agreement.
How Contract Type Affects Dismissal Procedures
The dismissal process in the Netherlands is closely linked to the type of employment contract in place. For permanent contracts, employers are generally required to observe a notice period and, in many cases, must obtain approval from the Employee Insurance Agency (UWV) or a court before terminating the contract. This provides additional protection for employees and ensures that dismissals are justified and follow the correct legal procedures. For fixed term contracts, the employment relationship typically ends automatically on the agreed end date, but if an employer wishes to terminate the contract early, a valid reason is required and a settlement agreement may be necessary. Both employers and employees should review the terms of their employment contract, including any clauses related to notice periods and dismissal, to ensure compliance with Dutch employment law and to avoid potential disputes when the contract ends.
A permanent contract can be terminated in the following ways:
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Cancel yourself subject to the statutory notice period you can terminate your permanent contract yourself as long as you observe the statutory notice period. Note, however, that if you resign yourself (i.e., the employee resigns), you will, in principle, lose your right to unemployment benefit and transition compensation. A good reason to resign is a signed employment contract with your new employer, meaning you have found a new job. When an employee resigns, it is important to follow the proper legal procedures and provide the required notice to avoid complications.
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Employer has good reason to terminate the employment contract your employer argues a good reason and can substantiate it with a well-founded dismissal file. It is often tried first whether dismissal by mutual agreement is possible. If you cannot agree together, your reason for dismissal or the UWV or the subdistrict court will decide on the dismissal request. Examples of dismissal reasons that are common are:
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economic reasons
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poor performance
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disrupted working relationship
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regular absenteeism
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long-term disability
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a culpable act or omission
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Standing dismissal due to (structurally) serious behavior if you have seriously misbehaved (structurally), your employer can summarily dismiss you. Think of an urgent reason, such as fraud, theft, violence, or gross negligence. In such cases, the employer may terminate the contract immediately. If you are summarily dismissed, your employment and salary stop immediately. Your employer does not need to ask permission from the subdistrict court. However, it is essential that your dismissal was announced immediately and that you were told the urgent reason.
Dismissal procedures with a permanent contract
When your employer wants to terminate your employment contract indefinitely, he must have reasonable grounds for doing so (unless an exception applies). Depending on that ground for dismissal, one of the following dismissal procedures will be used:
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By mutual agreement; although many people do not realize it, negotiation is almost always possible in a dismissal procedure. Both parties involved—the employer and employee—must reach an understanding. As an employee, you often have the most leeway when terminated by mutual agreement, as you can influence all provisions and your approval is required. The speed, relative certainty about the outcome, and the small amount of work this procedure takes are also often reasons for your employer to choose this. This involves the use of a settlement agreement, also known as a termination agreement, which formalizes the terms of dismissal. The employee agrees to the terms of the termination agreement, and their consent is essential for finalizing the dismissal. Have you received a settlement agreement? If so, always have it checked by an employment lawyer.
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Through the UWV; dismissal from the UWV is requested for business economic reasons or long-term disability. Your employer will then ask for a dismissal permit.
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Via the subdistrict court, if the first two options are both not possible/applicable, your employer will start proceedings with the subdistrict court. Your employer will then petition the competent court (subdistrict court) to dissolve the employment contract. The competent court will review the case and issue a court’s decision on the termination. There is a time limit for employees to contest or appeal the court’s decision or the terms of a termination agreement.
Severance pay with a permanent contract
Basically, any employee who is involuntarily dismissed is entitled to a transition allowance. The starting point is that your employer initiated to terminate your employment contract. However, some exceptions can be down to both your employer and yourself. For example, you will not receive a transition allowance if, in the opinion of the subdistrict court, you have behaved seriously culpably. The subdistrict court may then omit the transition allowance. In very special situations, the subdistrict court may award the transition allowance despite the culpable conduct.
Eligibility for severance pay and unemployment benefits is governed by the Unemployment Insurance Act, which sets out the legal framework for such entitlements.
When a dismissal occurs, the statutory notice period applies in most cases. This means the employee remains employed during this period, and the length of the notice period depends on factors such as tenure, pension age, or collective agreements.
Level of transitional compensation
To determine the amount of statutory transitional compensation, the number of years of service and the amount of your salary are taken into account. The employee’s length of service not only affects the compensation amount but also determines the employee’s notice period. In some cases, employment contracts may stipulate a longer notice period than the statutory minimum, often depending on the employee’s length of service.
There is room for negotiation in all procedures.
It is good to know that dismissal is rarely a done deal. We are happy to assess your situation, and explain your chances and the best steps to take.
Please don’t stay in limbo any longer; we are here for you.
Feel free to contact our lawyers at [email protected] or call us at +31 (0)40-3690680.
Additional Important Information About Termination of Permanent Contracts
Notice Period and Statutory Requirements
When terminating a permanent employment contract, the employer is required to observe the statutory notice period, which depends on the employee’s length of service. The employer’s notice period may differ from the employee’s notice period, depending on the employment contract or collective agreement. The statutory notice period is designed to protect employees by providing them with sufficient time to prepare for the end of their employment and to seek alternative work. A different period may be agreed upon in the employment contract, provided it meets legal requirements. A collective agreement or collective agreements can also specify notice periods and other employment terms beyond statutory requirements. The notice period can be extended if stipulated in the employment contract or collective labour agreement.
Role of the Employee Insurance Agency (UWV)
In many cases, an employer must obtain permission from the Employee Insurance Agency (UWV) before terminating a permanent employment contract, especially in cases of economic reasons or long-term incapacity. The UWV assesses whether the dismissal is justified and whether the employer has explored all possibilities for redeployment within the company or elsewhere. This safeguard ensures that dismissals are fair and lawful under Dutch employment law.
Importance of Mutual Consent and Settlement Agreements
Often, dismissal by mutual consent is preferred, as it allows both employer and employee to agree on the terms of termination, including severance pay and other benefits. Such agreements are formalized in a termination or settlement agreement. Employees should seek legal advice before signing such agreements to ensure their rights are fully protected.
It is important to note that fixed term employment and temporary contracts have specific rules regarding duration, renewal, and statutory rights. A fixed term employment contract, also known as a temporary contract, typically ends automatically at the end of the agreed period unless renewed. The procedures for ending or renewing a fixed term employment contract differ from those for permanent contracts, and employers must inform employees in writing about renewal or non-renewal decisions within the required timeframe.
Summary Dismissal and Immediate Effect
In cases of gross misconduct, such as fraud or violence, an employer may summarily dismiss an employee with immediate effect. This means the employment contract ends immediately without notice or severance pay. However, the employer must communicate the urgent reason for dismissal immediately, and the employee has the right to contest this dismissal.
Severance Pay and Transition Allowance
Employees dismissed from a permanent contract are generally entitled to a transition allowance (transitievergoeding), calculated based on their gross monthly salary and years of service. This compensation helps cushion the financial impact of losing a job and supports the employee during the transition to new employment. In addition, depending on the circumstances of their dismissal, employees may be eligible to receive unemployment benefits, which provide further financial support while they search for a new job.
Seeking Legal Advice
Given the complexity of dismissal procedures under Dutch law, employees facing termination of a permanent contract are strongly advised to seek legal advice. Legal experts can help evaluate the fairness of the dismissal, negotiate settlement agreements, and represent employees in proceedings before the UWV or subdistrict court.
Summary
Terminating a permanent employment contract in the Netherlands involves strict legal requirements aimed at protecting employees. Employers must have valid reasons, follow proper procedures, and often require approval from the UWV or court. Employees have rights to notice periods, severance pay, and the possibility to negotiate terms. Understanding these rights and obligations is crucial for both parties to ensure a fair and lawful termination process.