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If you have a company in the Netherlands and you want to dismiss employees, you must have a valid reason, such as refusal to perform work, culpable conduct, excessive sickness absence, reorganisation or company closure. If you dismiss more than 20 employees at once for economic reasons within a 3-month span and within one geographical work area, this is called collective redundancy.
Dismissal by mutual consent
Dismissal by mutual consent means you and your employee mutually agree to end the employment contract. In other words, your employee agrees voluntarily to the dismissal.
Dismissal by mutual consent is only valid if it is recorded in a written termination agreement (settlement agreement). An agreement on dismissal compensation or severance pay is also an option.
For a dismissal by mutual consent you do not need the consent of the Employee Insurance Agency (Uitvoeringsinstituut Werknemersverzekeringen, UWV). Nor do you need to have the employment contract terminated by a sub-district court.
Employee reconsideration period
Your employee has 14 days to reconsider the dismissal by mutual consent. During this period, he/she can get advice and revoke his/her written consent without giving a reason. You must clearly state this in your termination agreement. If you fail to do so, the reconsideration period will be automatically extended to 21 days.
Before approving a dismissal, the Employee Insurance Agency or the sub-district court checks whether it is fair or not. The grounds for dismissal determine who does the check:
- You must request permission from the Employee Insurance Agency in cases where the dismissal is for economic reasons or due to an employee's long-term incapacity to work, and there is no mutual consent. This applies to both employment contracts for an indefinite period (a permanent contract) and fixed-term contracts (with a notice period). The Employee Insurance Agency checks whether you have complied with all the rules (reasonable grounds, alternative employment). If the Employee Insurance Agency does not approve the dismissal, you cannot dismiss your employee. In such cases, you will have to turn to the sub-district court for termination of the employment contract.
- You have to apply to the sub-district court if there are other reasons for dismissal (such as unsatisfactory performance or conflict). Or in the case of fixed-term contracts which cannot be terminated early. The court will check whether all the relevant legal criteria have been met.
Collective Labour Agreement Committee for dismissal for economic reasons
A Collective Labour Agreement (CAO) may provide for a (sector) committee that is independent and unbiased to evaluate a dismissal for economic reasons rather than the Employee Insurance Agency.
Reducing the notice period
Dismissal procedures take time, whether they go through the Employee Insurance Agency or sub-district court. You may subtract some of this time from the applicable notice period. However, a notice period of at least a 1 month should be observed.
If an employer or employee disagrees with the sub-district court regarding a dismissal, they have the right to appeal.
Protection against dismissal
There are situations where your employee is protected against dismissal, for example, during the first 2 years of illness, during maternity leave or because your employee has joined a trade union. These are called prohibition conditions. If a prohibition condition applies, the Employee Insurance Agency will not give you permission to dismiss your employee, unless the protection condition concerned is due to end within 4 weeks of the permission being granted. If permission was granted, but the employee turned out to be protected against dismissal after all, the permission is void and the employment contract is still valid.
Not only the Employee Insurance Agency, but also the sub-district court has to take protection against dismissal into account. The court may only terminate an employment contract if the employee is not specifically protected against dismissal. If your employee believes that their dismissal breaches a prohibition condition, he or she has up to 2 months following their dismissal to ask the court to declare it null and void or order the employer to pay proper compensation.
Dismissal rules in collective labour agreement or employment contract
In a collective labour agreement or employment contract, the rules on dismissal may differ from the ones described above. With a fixed-term contract you usually need to wait until the end of the contract period.
If your employee has a fixed-term employment contract of 6 months or longer which ends automatically, you must inform them whether or not their contract will be renewed no later than 1 month before the end of the contract. If you fail to do so, your employee is entitled to compensation of 1 month's salary.
If you want to dismiss an employee who entered employment before reaching pension age but who in the meantime does receive an Old Age Pension (AOW), you do not need the approval of the Employee Insurance Agency or the sub-district court.
Cumulative grounds for dismissal
Cumulative grounds for dismissal has been added to the list of reasonable grounds for dismissal to make it more attractive for employers to offer a fixed contract rather than a flexible one.