Employment law changes from 1 July 2015

The following employment law changes are to be implemented and are summarized here.

Options for dismissal

Under Dutch employment law, there are three routes to ending an employment relationship: by mutual consent, with the permission of the Cantonal court or via the labour office. As of 1 July 2015, an employer will no longer be able to choose which of these means of dismissal is appropriate. Depending on the reason(s) for dismissal, the new law coming into force will determine which route the employer has to take. Dismissals for economical, organisational and/or technical reasons and dismissals relating to an employee’s long term sickness will be dealt with by the labour office. Dismissals for other reasons will have to be dealt with by the Cantonal Judge.

Neither of the formal routes above need apply if an employer and employee reach an amicable agreement to terminate the employment relationship. However, in the event that an employee agrees to the termination of his or her employment, they may withdraw that consent or change their mind in respect of any agreement within 14 days. The employment will not then end by mutual consent in either event.

Severance payments

From 1 July 2015, the previously applicable “Cantonal Judge formula” will cease to apply to the calculation of severance pay and, in its place, transitional remuneration will be introduced. As a result, upon the non-renewal of a fixed term contract that has lasted at least two years or dismissal after two years’ employment (whether arising through the labour office or the Cantonal Judge) the employer will be obliged to pay the employee transitional remuneration, as follows:

  • During the first 10 years of employment, 1/6 monthly salary for every six months; and subsequently
  • During periods of employment exceeding ten years, 1/4 of the gross monthly salary for every six months.
  • For a limited period, older workers will receive a higher rate of 1 months’ salary per year of service for every year of service above the age of 50 (see below).

Monthly salary will be increased to take into account holiday pay and other aspects of pay, such as bonuses, which will be averaged over the preceding 3 years of employment (calculated on a monthly basis) and a 13th month. Also, only complete, worked 6 month periods will be taken into account for the calculation of transitional remuneration so that, for example, employment of 6 months and 1 day will not be rounded up to 1 year. Furthermore, transitional remuneration will be capped at EUR 75,000 (gross) or one years’ salary, whichever is the greater.

Older employees, aged over 50 years and with at least 10 years of employment will be entitled to the higher transitional remuneration identified above until 1 January 2020, unless they are employed in a small business (with fewer than 25 staff).

The calculation of transitional remuneration may be varied via collective agreement provided the employee will be entitled to equivalent rights, based on this agreement. Furthermore, in limited circumstances, an employer is able to make deductions from transitional remuneration, for example if the employment ends by mutual consent or if the employee is guilty of serious misconduct. Conversely, if it is the employer who is guilty of inappropriate conduct, the Cantonal Judge may award an additional severance payment to the employee, which will be payable on top of the transitional remuneration and is not subject to a maximum amount.

Consecutive fixed term contracts

From 1 July 2015, consecutive fixed term employment contracts will be converted into indefinite term contracts by operation of law if either (i) the aggregate duration of the consecutive fixed term contracts exceeds two years or (ii) more than three fixed term employment contracts are concluded consecutively with intervals of six months or less.