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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. You can also agree to severance payment.
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.
Employment Insurance Agency (UWV)
- for economic reasons, or
- due to an employee's long-term incapacity to work, and there is no mutual consent.
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.
Dismissal of ill employees
You may only dismiss an ill employee in specific circumstances, such as during the probationary period or when you are facing bankruptcy. You can dismiss an employee after 2 years of long-term illness. During that time you must have done all you can to ensure they return to work as quickly as possible in a responsible way. If your employee cannot go back to work after 2 years and you have not done enough for their reintegration, the Employee Insurance Agency (Uitvoeringsinstituut Werknemersverzekeringen, UWV) can impose a fine (loonsanctie, in Dutch). You may not dismiss your employee and you must pay their wages for 1 more year.
You must pay your employee a transition payment over the full period of employment. As of 1 April 2020, you can apply for compensation (in Dutch) of the transition payment for ill employees with the Employee Insurance Agency (UWV). You qualify for this (in Dutch) if:
- The employment contract was (partly) terminated because of long-term illness
- At the time of dismissal your employee was still unfit for work
- You have payed your employee a transition payment
Compensation can be claimed for dismissals dating back to 1 July 2015.
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 must 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.
The sub-district court also 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 receives an Old Age Pension (AOW), you do not need the approval of the Employee Insurance Agency or the sub-district court.
Changes to dismissal rules
A new law came into force on 1 January 2020 to regulate flexible work, dismissal and the financing of unemployment benefit. Through the Balance Employment Market Act (Wet arbeidsmarkt in balans, WAB), it is more attractive for employers to offer a fixed contract rather than a flexible one. At the same time flex workers have more stability in their job and income. The new law affects:
- Dismissals and transitional payments
- Temporary employees and chain provision
- Payroll staff and stand-by workers
The new law also means cumulative grounds for dismissal is to be added to the list of reasonable grounds for dismissal. Find out more about preparing for the Balance Employment Market Act.