Employment relationships can come to an end for a variety of reasons, such as an employee quitting, being fired, or being made redundant. In the Netherlands, employees and employers can also come to a mutual agreement to end their employment.
Whatever the situation, there are specific rules and regulations that apply to the end of an employment relationship. In this guide, we’ll take you through some of the most important things you should know before hiring in the Netherlands, including notice periods for both employers and employees, the rules around termination of employment contracts, and the post-termination restrictions you can impose on your employees.
In the Netherlands, employers have to give notice when they want to dismiss an employee, and employees have to give notice when they resign. The specific period of notice for either party might be different depending on the collective labour agreement that applies and the employee’s contract.
The statutory notice period for an employee in the Netherlands is one month. That means that an employee has to give notice at least one month before their planned end date when they leave their job. An employer and an employee can agree on a shorter or longer notice period, which should be explicitly stated in the employment contract. However, it can’t be longer than six months. If the employee’s notice period is more than one month, the employer’s notice period has to be at least twice as long.
The length of the notice period an employer in the Netherlands has to give an employee depends on their length of service. The statutory notice periods are:
Collective labour agreements can provide for shorter notice periods. Also, notice periods can be longer than four months if both parties agree, but can’t be more than six months.
Fixed-term contracts end on a fixed date, which means they don’t have a notice period. However, employers in the Netherlands have to inform employees on fixed-term contracts if they don’t want to renew their contracts. They should do this in writing at least one month before the end date.
There is no need for either party to give notice in the following circumstances:
If an employer in the Netherlands fails to give their employee the correct notice, they might have to pay them compensation. This amounts to the total the employee would have earned for working their notice period, which means it is equal to at least one month’s salary.
Severance pay in the Netherlands is known as a ‘transition payment,’ and it must be paid when either:
Employees are entitled to a transition payment from their first day of employment. However, employers only have to pay this when their employee doesn’t agree with the dismissal.
The amount employers have to pay depends on the employee’s monthly salary and length of service. You can calculate the transition payment you would have to pay an employee by dividing their total gross monthly salary by three and then multiplying that figure by the number of years they have worked for you.
For example, an employee who earned EUR 3,000 per month and had worked for you for a total of 4 years would be entitled to a transition payment of EUR 4,000. The maximum amount for a transition payment is EUR 94,000 as of 2024.
Termination of employment in the Netherlands is only permissible in certain circumstances, in accordance with Dutch employment law. There are also specific rules that employers need to follow to make sure the termination process is fair.
Valid reasons for termination of employment in the Netherlands
In the Netherlands, the following are considered valid reasons for dismissing an employee:
Employers can also dismiss their employees for a combination of the reasons listed above.
Different ways to terminate an employment contract in the Netherlands
In the Netherlands, employees have to agree to a dismissal. If they do, there are two options:
Once an employee has given their agreement for a termination of employment in the Netherlands, they have 14 days to reconsider. If they change their mind, they can revoke their consent without giving a reason.
If the employee doesn’t agree to the dismissal, things are a bit more complicated for the employer. They can still dismiss the employee, but they need the approval of the Employee Insurance Agency or the sub-district court, depending on the grounds for the dismissal. Specifically, the Employee Insurance Agency handles dismissals on the grounds of economic reasons or long-term incapacity, and the sub-district court handles all other reasons such as unsatisfactory performance or conflict between the employer and the employee.
Post-termination restraints are restrictions an employer can impose on their employees’ actions after they leave their employment. The idea is to protect your business by preventing ex-employees from poaching staff, soliciting customers, or launching a competing business. In the Netherlands, there are two main types of post-termination restraints that employers can impose on their employees: non-solicitation clauses and restrictive covenants. Collectively, these can be referred to as non-competition agreements or non-compete clauses.
A non-solicitation clause is a clause that can be added to an employee’s contract, which states that they may not approach or recruit any customers or employees from their former employer after they leave the company. This prevents the departing employee from causing their former employer to lose business.
Restrictive covenants are similar to non-solicitation clauses but are more comprehensive in scope. They can prevent employees from working with competitors, setting up a competing business, or otherwise engaging in activities which could harm their former employer’s business.
These clauses also often prevent employees from discussing trade secrets with their future employers. They may include penalty clauses that impose financial sanctions for violating the restrictive covenant.
Under Dutch law, there are certain requirements that non-competition clauses have to adhere to in order to be found valid. In general, post-termination restraints shouldn’t be too broad or restrictive. If a court finds that even one aspect of a non-competition clause is unfair, the entire agreement could be declared invalid.
The specific criteria that non-competition clauses need to meet are:
In the Netherlands, employers can enforce a non-competition clause in court if the employee has breached it. To do this, they need to prove that the clause serves a legitimate business interest and that it doesn’t unreasonably interfere with the employee’s ability to make a living. They also need to give evidence of any potential harm caused by breaching the agreement, and that this outweighs the benefits of doing so. Courts can impose financial penalties on employees if they find that they have breached a reasonable non-competition agreement.
In some circumstances, employees may choose to waive their rights to bring a claim against their employer. In the Netherlands, this is usually in the context of a settlement agreement.
A settlement agreement is a legally binding contract between an employer and an employee that outlines the terms and conditions of the end of their employment agreement. Settlement agreements may be used to address issues of wrongful termination, discrimination, breach of contract, or other disputes.
As part of a settlement agreement, employees can agree to waive their rights to bring any further claims against their employer. This is a way to provide closure to both parties and prevent future litigation.
Here are a few other factors that employers should keep in mind when drawing up settlement agreements in the Netherlands:
When a business is purchased by another business, there are rules about what happens to employees at that organisation. In the Netherlands, employees are protected by the European Acquired Rights Directive 2001/23/EC, which is implemented as part of the Dutch Civil Code.
These regulations stipulate that employees should be transferred from the old employer to the new one and that all of their rights and obligations transfer with them. The employees’ employment contracts remain unchanged, apart from the name of their employer.
What counts as a transfer of undertaking in the Netherlands?
In the Netherlands, only certain transactions count as transfers of undertaking. Dutch business law stipulates that the sale of an entire business and all its activities is always a transfer of undertaking. However, things get more complicated when only certain parts of a business are sold or transferred.
According to the Supreme Court of the Netherlands, the key question is whether the identity of the company is preserved. If a business’ activity is effectively closed down and then continued or renewed by another business with the same or similar business assets, this is likely to be considered a transfer of undertaking in the Netherlands.
Consulting with employee representatives
In the Netherlands, employers have to consult with employee representatives about any proposed transfer of undertaking. They must provide them with the reason behind the potential transfer, the potential consequences for employees, and what measures will be taken. Employers must also inform individual employees about transfers and their consequences.
Joint liability
When a business is transferred, the seller and the buyer are jointly responsible for the fulfilment of their obligations under employment contracts for one year after the sale. After this date, responsibility passes solely to the purchaser.
When employees object to the transfer
Employees don’t have to continue their employment with the new company if their company is purchased or transferred. If an employee objects to the transfer, they can refuse to continue their employment and their contract will end on the transfer date.
There are many different ways an employment contract can come to an end. But whatever the situation, you need to understand the rules that cover the end of employment in the Netherlands — or you could end up facing legal issues.
Our solutions ensure your business is protected from risk when a relationship with a worker comes to an end — whatever the reason. We can also help you to avoid missed opportunities by re-deploying talent where possible.
With our EoR solution, you can engage workers anywhere in the world, without putting your business at risk. No more worrying about local labour laws, tax legislation or payroll customs — we’ve got you covered.
DISCLAIMER: The information contained on this website is provided for general informational purposes only and should not be construed as legal, tax, or other professional advice on any subject matter. While we endeavor to ensure that the content is accurate and up to date, we make no warranties or representations of any kind regarding the completeness, accuracy, reliability, suitability, or availability of the information contained herein. The content on this site is not intended to be a substitute for professional advice. Users should not act or refrain from acting based on any information on this website without seeking the appropriate legal, tax, or other professional advice tailored to their specific circumstances from qualified professionals. We expressly disclaim all liability in respect to actions taken or not taken based on any or all of the contents of this website. Use of the information on this site does not create an attorney-client, tax advisor-client, or any other professional-client relationship between the user and the website or its authors.
