A Dutch employer cannot terminate a permanent contract (contract for an indefinite period) at will. Under article 7:669 of the Dutch Civil Code the employer needs a reasonable ground drawn from a closed statutory list, must show that redeployment in another suitable role within a reasonable period is not possible, and must obtain prior permission from the UWV or a dissolution order from the subdistrict court, unless the employee agrees to the termination in writing. Only summary dismissal for an urgent cause bypasses that permission. Everything else is a procedure with a burden of proof on the employer.
What a permanent contract is and how it can end
A permanent employment contract is one without an agreed end date. It runs until one of the parties brings it to an end, and Dutch law prescribes exactly how that may be done. There are four routes in practice.
The employee can give notice, observing the statutory notice period. That is the simplest route and the one an employee should think hardest about, because resigning normally costs both the right to unemployment benefit and the right to the transition payment. Where a new job is already signed, that is rarely a problem; where it is not, it usually is.
The employer and the employee can agree to end the contract by mutual consent, recorded in a vaststellingsovereenkomst (settlement agreement). The employer can give notice after obtaining permission from the UWV, which is the route for redundancy and for long-term incapacity for work. And the employer can ask the subdistrict court to dissolve the contract, which is the route for all the personal grounds. Alongside these sits summary dismissal (ontslag op staande voet) for an urgent cause, which ends the contract immediately and without permission.
The reasonable grounds for dismissal
Article 7:669 paragraph 3 lists the grounds exhaustively, and an employer cannot invent a tenth. In outline they are: redundancy for business economic reasons, long-term incapacity for work lasting more than two years, frequent absence with unacceptable consequences for the business, unsuitability for the job other than through illness, culpable acts or omissions by the employee, refusal to perform the work on grounds of a serious conscientious objection, a seriously and permanently disrupted working relationship, other circumstances such that continuation cannot reasonably be required, and the cumulation ground introduced in 2020, under which a combination of two or more incomplete personal grounds can together justify dissolution.
Two of these grounds go to the UWV: redundancy and long-term incapacity. All the others go to the subdistrict court. The cumulation ground is the court route as well, and where the court dissolves on that basis it can award the employee an additional payment on top of the transition payment.
Whichever ground is invoked, article 7:669 paragraph 1 adds a second hurdle that employers regularly underestimate: dismissal is only permitted if redeployment of the employee in another suitable position within a reasonable period, with retraining where that can be expected, is not possible or does not lie in the reason. In a group of companies the redeployment obligation extends across the group. A file that proves the ground but says nothing about redeployment is an incomplete file.
For unsuitability in particular, the statute requires that the employee was informed of the shortcoming in good time and given a genuine opportunity to improve, with support where necessary. A dismissal file assembled after the decision has been taken tends to show exactly that, and courts read them accordingly. Our article on refusal of work deals with a ground that is frequently misapplied.
Dismissal by mutual consent and the settlement agreement
Most Dutch dismissals end in a settlement agreement rather than in a decision. That suits both sides: the employer avoids a procedure with an uncertain outcome and a public file, and the employee obtains influence over every term rather than over none. Everything is negotiable, including the end date, the payment, the notice period, the reference, the final holiday balance, the treatment of a non-competition clause, an outplacement budget and a contribution to legal costs.
Three points decide whether the agreement works. It must be drafted so that unemployment benefit is preserved, which in practice means that the initiative is recorded as the employer, that no urgent cause or culpability is attributed to the employee, and that the applicable notice period is respected in the end date. The employee has a statutory cooling-off period under article 7:670b of the Civil Code: the agreement can be dissolved in writing without giving reasons within fourteen days, extended to twenty-one days if the employer did not point the right out in writing within two working days. And the transition payment is a floor rather than a ceiling: in a negotiated exit the payment is what the parties agree, and the strength of the employer file is what determines it.
Never sign on the day you receive it. Have an employment lawyer check it first; employers frequently contribute to the cost of that review, because a properly checked agreement is also in their interest.
The UWV route: redundancy and long-term incapacity
Where the ground is redundancy or incapacity for work lasting more than two years, the employer applies to the UWV for permission to give notice. The procedure is written, the employee is given the opportunity to respond, and the UWV assesses whether the ground is made out and whether redeployment was properly examined.
In a redundancy case the employer must also show that the correct employees were selected. The statutory rule is the afspiegelingsbeginsel, under which employees performing interchangeable functions are divided into age brackets and the last in, first out principle is applied within each bracket, so that the age structure of the workforce is preserved. Getting the interchangeable functions wrong is the most common reason a redundancy application fails.
If permission is granted, the employer must give notice within four weeks, observing the applicable notice period. The time the UWV procedure took may be deducted from that period, but at least one month of notice must always remain. If permission is refused, the employer can still ask the subdistrict court to dissolve the contract on the same ground, and the court will make its own assessment. Where a collective agreement provides for a sector dismissal committee, that committee takes the place of the UWV. On the collective side, the rules on individual arrangements in collective dismissals add a further layer.
The subdistrict court route
For all the personal grounds the employer files a petition with the subdistrict court asking for the contract to be dissolved. The employee files a defence and, in the same proceedings, can ask for a fair compensation (billijke vergoeding) and can put forward a counter-request. There is a hearing, and the court gives a reasoned decision. Both parties can appeal, and appeal is a real remedy rather than a formality: courts of appeal regularly correct dissolutions.
The court must find the ground fully made out. A ground that is only partly proved is not enough on its own, which is why the cumulation ground was added. Where the court dissolves the contract it fixes an end date that takes the notice period into account, and it will award a fair compensation on top of the transition payment where the dismissal is the result of seriously culpable conduct by the employer, for example where the employer manufactured the disruption it now relies on.
The court can also refuse to dissolve. That outcome leaves the employment in place, which is why a disrupted relationship case is usually settled: neither side really wants the employee back at a desk after the hearing, and both know it.
Prohibitions on notice
Article 7:670 of the Civil Code prohibits termination in a number of situations regardless of the ground. The best known is illness: an employer may not give notice during the first two years of incapacity for work. Others include pregnancy and maternity leave, membership of the works council, and membership of a trade union in connection with union activities. Termination in breach of a prohibition can be set aside by the court.
The prohibitions are not absolute. They do not apply where the employee consents in writing, where the contract is dissolved on a ground unconnected with the circumstance protected, or where the business or a distinct part of it is being closed down. Nor do they cover an employee who fell ill after the dismissal request had already been received. The interaction between illness and dismissal is the single most litigated point in this area, and our article on illness, burnout and work pressure sets out what both sides must do during the first two years.
Notice periods
Article 7:672 sets the periods. Notice is given against the end of the month unless a written agreement or established practice designates another day. The employer notice period depends on length of service: one month for less than five years of service, two months for five to ten years, three months for ten to fifteen years and four months from fifteen years. The employee period is one month.
Both can be varied by written agreement, within limits. The employee period can be extended to a maximum of six months, but only if the employer period is then at least twice as long. A contract that doubles the employee notice period without doubling the employer period is defective, and the defect works against the employer. A collective agreement can shorten the employer period, and many do.
Summary dismissal for an urgent cause
Summary dismissal (ontslag op staande voet) ends the contract immediately, without notice and without permission from the UWV or the court. Articles 7:677 and 7:678 of the Civil Code set the bar: there must be an urgent cause, such as theft, fraud, serious violence or gross dereliction, the dismissal must be given without delay once the cause is known, and the reason must be communicated to the employee at once and simultaneously with the dismissal. All three requirements must be met; failing any one of them is fatal.
Courts apply this strictly, and they weigh the personal circumstances of the employee, including length of service and the consequences of the dismissal, against the seriousness of the conduct. An employee who is summarily dismissed loses pay immediately and normally has no entitlement to unemployment benefit, which is why the two-month deadline described below matters so much. An employer that is unsure should suspend the employee on full pay, investigate properly, and then decide, rather than dismiss first.
The transition payment
An employee whose contract is terminated at the employer initiative, or not continued at the employer initiative, is entitled to a transition payment (transitievergoeding) under article 7:673. The entitlement runs from the first day of the employment, so it exists during the probationary period as well, and it is calculated from length of service and gross salary including fixed allowances such as holiday pay. There is a statutory maximum that is adjusted each year and published by the government, so any figure quoted in an article should be checked against the current year before it is relied on.
There are exceptions in both directions. No payment is due where the court finds that the employee acted in a seriously culpable manner, although the court retains a discretion to award it anyway in exceptional cases. No payment is due where the employee is under eighteen and worked limited hours, where the employee reaches pension age, or where the employer is bankrupt. That last point catches people out: in a bankruptcy there is no claim for the transition payment and the UWV wage guarantee scheme does not cover it, which is set out further in our article on the rights of employees when the employer goes bankrupt.
Separate from the transition payment is the fair compensation, awarded only where the employer acted in a seriously culpable way. It has no formula; the court assesses it on the circumstances, including the loss of income the employee can be expected to suffer.
Deadlines you cannot afford to miss
The limits in article 7:686a paragraph 4 are forfeiture periods. They cannot be extended, and the court applies them of its own motion.
An employee who wants the court to set aside a termination given without the required permission, including a summary dismissal, or who wants compensation in its place, must file the petition within two months of the day on which the contract ended. A claim for the transition payment must be filed within three months of that day. Missing the two-month deadline means the dismissal stands however unlawful it was, which is the single most damaging mistake an employee can make. Take advice in the first week, not in the second month.
The employer has deadlines of its own: notice within four weeks of the UWV permission, and, for a summary dismissal, action without delay once the facts are known.
What to do if your permanent contract is being terminated
Ask for the ground in writing and for the file that supports it, because the employer must be able to state which of the statutory grounds it relies on. Do not sign a settlement agreement on the spot, and remember that the cooling-off period gives you a further fourteen days even if you have signed. Check that the notice period in the proposed end date is correct, because an end date that is too early costs you weeks of income and can affect the start of unemployment benefit. If you have been summarily dismissed, put your objection in writing immediately, state that you remain available for work, and get advice the same week.
Employers should start from the file rather than from the decision: identify the ground, document the redeployment assessment, and, where the ground is unsuitability, be honest about whether the employee was genuinely given the chance to improve. Almost every dismissal case that goes wrong for an employer goes wrong at that point.
Law & More advises employees and employers on the termination of permanent contracts: assessing and negotiating settlement agreements, conducting UWV and subdistrict court proceedings, challenging summary dismissals and claiming the transition payment and fair compensation. Contact our employment lawyers for an assessment of your position, and see our Dutch employment law guides, our overview of employee rights in the Netherlands and of employers rights and obligations, and our practice page on Dutch employment law and on employment contracts in the Netherlands.
