All questions

Discontinuing employment

i Dismissal

Employees may be dismissed only if the employer has a reasonable ground for dismissal. Depending on the grounds for dismissal, an employment contract can be terminated by proper notice, with prior permission from the UWV, or if it is rescinded by the sub-district court. In addition, the parties may terminate an employment contract by mutual consent and memorialise their terms in a settlement agreement.

Termination by mutual consent

Settlement agreements are valid only if they are concluded in writing. Employees have the option to terminate settlement agreements within 14 days, either by withdrawing their consent (without giving a reason) or by rescinding the settlement agreement out of court. Employers are obliged to point out this option to employees; failure to do so extends the 14-day period to three weeks.

Notice after permission from the UWV

Employers have to request permission from the UWV to terminate an employment contract on economic grounds or on the ground of an employee's long-term illness (more than 104 weeks).

If permission is granted, the employer may deduct the time the UWV or the collective dismissal committee needed to process the application from the applicable notice period to a minimum of one month. In employment contracts, the parties often refer to the statutory notice period, which is one month for the employee. The employer's statutory notice period depends on the length of the employment and is one month for employment contracts with a duration of less than five years, two months for contracts with a duration of between five and 10 years, three months for contracts with a duration of 10 to 15 years, and four months for contracts with a duration of more than 15 years. The parties can also agree on a different notice period, with a maximum of six months for the employee, but in that case the employer's notice period must be twice as long as the employee's notice period. Payment in lieu of notice is not allowed.

If an employer acts in violation of the rules for giving notice of termination, the employee may seek annulment of the notice of termination, or ask for fair compensation. If the UWV or the collective dismissal committee has given the employer permission to terminate the employment contract and the employer has done so, the employee may also request the sub-district court to restore the employment contract or to award fair compensation. These proceedings are initiated by submitting an application.

Even if a dismissal permit has been granted, a dismissal will be prohibited if it occurs during the first two years of illness, concerns an employee who is pregnant or on maternity leave or ill due to pregnancy or childbirth, is based on the employee's membership of a trade union, is based on the employee's attendance of meetings of political organisations, is based on the employee exercising his or her right to parental leave, or involves any discrimination.

Requesting the sub-district court to rescind the employment agreement

The sub-district court is designated to review the other grounds for dismissal in termination proceedings. In these cases, employers are not entitled to follow the UWV procedure. The requests concern termination on the grounds of, among other things, the employee repeatedly calling in sick, unsuitability, imputable acts, refusal to perform work and damaged working relationships. Furthermore, the sub-district court is the designated dismissal route in situations involving fixed-term employment contracts that do not include a clause on giving early notice of termination, if the employment contract is terminated on economic or long-term illness grounds. Employers can also apply to the sub-district court if the UWV has refused to grant permission to give notice of termination.

The application on which a termination request is based must fully substantiate at least one of the reasonable grounds in order for the court to rescind the employment contract, which will be terminated on the date ordered by the court. When terminating the contract, the court will take the applicable notice period into account and deduct the time the court proceedings took. After these court proceedings, it is possible to file an appeal with the appeal court and subsequently with the Supreme Court.

Reassignment

Employers must substantiate that it is not possible to reassign the employee – even after training – to a suitable alternative position within the company or the group. If a suitable alternative position is available, the employer must offer it to the employee. In such a case, the employer does not have the right to terminate the employment contract.

Transition payment and fair compensation

All employees employed for two years or more and whose employment contracts end, or employees with fixed-term employment contacts that are not renewed, are generally entitled to a transition payment. As a rule, employees are not entitled to a transition payment if their employment contracts are terminated by mutual consent, but this will naturally play a role when arrangements are made regarding the termination. In addition, employees are not entitled to a transition payment (1) if the employment contract is terminated on the employee's initiative (except in the event of serious imputable acts or omissions on the part of the employer), (2) if the employee has committed serious imputable acts or omissions, or (3) in the case of termination on or after the employee has reached state retirement age or a different retirement age.

The payment is not age-related and amounts to one-sixth of the monthly salary for each six months of service over the first 10 years of the employment contract. For each period of six months after that, the transition payment amounts to one-quarter of the monthly salary. Until 2020, a higher calculation standard applies to employees above the age of 50, except in the case of small employers (with 25 employees or fewer) where the dismissal was prompted by the small employer's poor financial situation. Monthly salary means one month's gross salary plus fixed wage components. The payment is set at a maximum of €81,000 gross or one annual salary for employees who earn more than this amount. When entering into an employment contract, employers and employees may agree on a higher payment, but not a lower payment.

If the employment contract was terminated on the grounds of serious imputable acts or omissions on the part of the employer, the sub-district court may award additional compensation to the employee.

Under the Balanced Labour Market Act, employees will be entitled to a transition payment from the first day of employment. Furthermore, the distinction between 10 or more years of service will be eliminated: the transition payment will amount to one-third of the monthly salary for each year of service. Moreover, if a termination is based on the cumulative dismissal ground, the court may grant the employee an additional payment of a maximum of 50 per cent of the transition payment.

Instant dismissal

Both employers and employees are entitled to terminate employment contracts with immediate effect for urgent cause, without having to observe the statutory or contractual notice period and without having to seek a permit from the UWV. Examples of urgent causes that may justify an instant dismissal include theft, fraud, embezzlement and physical abuse. In an adjudication to determine the existence of urgent cause for termination, all relevant circumstances of the situation, including the personal circumstances of the employee, must be considered. A court will ultimately determine whether the urgent cause has been shown. Instant dismissal is an extreme measure and courts are conservative in adopting an urgent cause.

ii Redundancies

It is possible to make employees redundant for economic reasons. In such cases employers must follow the UWV procedure or try to reach a settlement with the employee or employees in question. The rules (e.g., notification period, pay in lieu of notice, severance payment, categories of employees protected against dismissal) described in subsection i also apply to cases involving redundancy.

In the event of mass lay-offs, additional rules apply. A mass lay-off occurs when a company decides to dismiss 20 employees or more, within three months and within an area of activity of the UWV. Companies must notify both the UWV and the relevant trade unions of mass lay-offs, and state the following: the reasons for the lay-off; whether the works council was consulted; and the number of employees concerned, including details about the employees' functions, ages and years of service.

After it has notified the UWV accordingly, the employer can choose to follow the individual termination procedures with the UWV or try to settle with each individual employee concerned.

The UWV may not consider the request for a permit until one month after the date of notification, unless this statutory waiting period would hinder the re-employment possibilities of the employees who will be dismissed or the employment of other employees in the company. If a statement from the trade unions affirming that the employer consulted them on this matter is attached to the employer's notification to the UWV, the UWV will consider the request for a permit immediately, without observing the one-month waiting period.

If an employer does not give the required advance notification but ultimately requests permission from the UWV to dismiss 20 or more employees within three months, the aforementioned statutory waiting period is increased to two months. The purpose of the statutory waiting period is to facilitate consultations between the employer and the trade unions.

If a company has a works council, the works council should be given the opportunity to advise on the proposed decision to reorganise the organisation. The employer is obliged to submit its proposed decision in written form (a request for an advice) to the works council at such a moment that the works council can still have a significant impact on the proposed decision. A request for advice must, at a minimum, include a statement of the grounds for the proposed decision, the consequences anticipated for the persons who work for the company, and the proposed measures that will be taken in that respect. If and when requested by the works council, the employer is obliged to provide the works council with all information and data that it reasonably requires to perform its duties, in a timely fashion and in written form if so required. Generally speaking, the works council may decide what information is reasonably necessary for it to perform its duties.

Before it issues its advice, the works council and the employer will deliberate on the matter concerned at least once in a consultative meeting, which means that the employer is obliged to join the meeting and to provide the works council with the requested information. The employer has to give the works council a reasonable period of time to issue its advice. Although one month is considered to be a reasonable period, it is likely that the works council will request more time. Therefore, it is not uncommon for the whole consultation procedure to take six to eight weeks.

If the works council's advice is not followed, or is not followed in its entirety, the employer must inform the works council of the reasons for not following the advice. This will delay the process and, as a consequence, the employer will have to suspend the implementation of its decision until one month after the date on which the works council was notified of the decision. If the decision is fully in line with the advice, the employer may implement the decision immediately.

Where dismissals are the result of a reorganisation, the employer can provide for financial compensation in a social plan. Employers have no obligation to draw up or negotiate a social plan. However, in the event of a mass lay-off, the employer will benefit from setting a standard for the financial compensation in a social plan and the works council will require a social plan as part of the mandatory advice procedure. If trade unions are not involved in the matter, a social plan is sometimes agreed to with the works council, or simply drafted unilaterally by the employer.