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An employment contract is a written contract containing all the agreements made between an employer and an employee. The agreement contains all rights and obligations for both parties.
Sometimes there may be a lack of clarity as to whether or not there is an employment contract. According to the law, an employment contract is an agreement whereby one party, the employee, undertakes to perform work for a certain period of time in the service of the other party, the employer, and receives payment for this work. Five main elements are distinguished in this definition:
- the employee must perform work;
- the employer must pay wages for the work;
- the work must be carried out for a certain period of time;
- there must be a relationship of authority;
- the employee must carry out the work himself.
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Types of employment contracts
There are different types of employment contracts and the type depends on the employment relationship between employer and employee. An employer and an employee may conclude a fixed-term employment contract or a contract for an indefinite amount of time.
Fixed-term employment contract
In case of a fixed-term employment contract, the end date of the contract is fixed. Another option is for the employer and the employee to agree to enter into an employment relationship for a certain period of time, for example for the duration of a certain project. The contract then terminates automatically when the project is terminated.
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An employer may offer a fixed-term employment contract to an employee with maximum of three times in a period of up to 24 months. If there is a period between the fixed-term employment contracts during which is there is no employment contract, and this period has a maximum of 6 months, then the time between the contracts is nevertheless counted in the calculation of the 24-month period.
Termination of fixed-term employment contract
A fixed-term employment contract ends by operation of law. This means that the contract eautomatically terminates at the agreed time, without having to take any action. The employer must inform the employee in writing one month in advance whether or not the employment contract will be extended and, if so, under what conditions. However, a fixed-term employment contract must be terminated if the parties have agreed on this or if this is required by law.
A fixed-term employment contract can only be terminated prematurely, i.e. before the term of the employment contract has expired, if this has been agreed in writing by both parties. It is therefore advisable to always include an interim termination clause with a notice period in a fixed-term employment contract.
Are you looking for legal assistance in drawing up a fixed-term employment contract? The lawyers of Law & More are at your service.
Employment contract for an indefinite period
An employment contract for an indefinite period of time is also referred to as a permanent employment contract. If there is no agreement as to the period for which the contract will be concluded, the employment contract is assumed to be for an indefinite period of time. This type of employment contract continues until it is terminated.
Termination of an employment contract for an indefinite period
An important difference in relation to a fixed-term employment contract is the method of termination. Prior notice is required for termination of an employment contract for an indefinite period of time. The employer can apply for a dismissal permit at the UWV or request the subdistrict court to dissolve the contract. However, a valid reason is required for this. If the employer receives the dismissal permit, he must terminate the employment contract with due observance of the applicable notice period.
Reasons for termination of an indefinite employment contract
An employer may only dismiss an employee if he has good reason to do so. Therefore, there must be a reasonable ground for dismissal. The following are the most common forms of dismissal.
Dismissal for economic reasons
If the circumstances in the employer’s company are reason enough to request the dismissal of an employee, this is referred to as dismissal for economic reasons. Various economic reasons may apply:
- poor or deteriorating financial situation;
- work reduction;
- organisational or technological changes within the company;
- cessation of business;
- relocation of the company.
Dismissal due to dysfunction means that the employee does not meet the job requirements and is unsuitable for his or her job. It must be clear to the employee what, in the opinion of the employer, must be improved with regard to his or her functioning. As part of the improvement process, performance interviews must be held with the employee on a regular basis. It should be considered to offer courses or coaching by a third party at the expense of the employer. Reports must be made of the interviews and included in the employee’s personnel file. In addition, the employee must be given sufficient time to improve his performance.
In the event of an immediate dismissal, the employer terminates the employee’s employment contract with immediate effect, i.e. without notice. The employer must have an urgent reason for this and the dismissal must be given ‘immediately’. This means that the employer must dismiss the employee immediately at the moment the urgent reason is clear. The reason for the dismissal must be given at the same time as the dismissal. The following reasons can be considered urgent:
- gross insult;
- not keeping business secrets.
Resignation by mutual consent
If the employer and the employee both agree on the termination of the employment contract, the agreements between both parties are laid down in a settlement agreement. In this case, the employment contract ends by mutual agreement. The employer does not have to request permission from the UWV or the subdistrict court to terminate the employment contract.
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