Navigating Employee Dismissal and Notice Periods in the Netherlands

Effective January 1, 2020, the Dutch Balanced Labour Market Act (WAB) introduced significant reforms to dismissal procedures, unemployment insurance contributions, and severance pay. In the Netherlands, terminating an employment contract is a regulated process that requires careful adherence to legal grounds. Employers cannot dismiss employees arbitrarily; instead, they must obtain approval from either the Dutch court or the Employee Insurance Agency (UWV). Valid reasons for termination include economic redundancy, long-term disability (exceeding two years), frequent absenteeism due to illness impacting operations, poor performance, misconduct, refusal to perform duties based on conscience, or disruption of workplace harmony. For instance, a multinational company restructuring its European operations must demonstrate that no suitable alternative roles exist before proceeding with redundancies. Employers should always consult individual contracts, collective labor agreements, and industry practices to ensure compliance.

Understanding Notice Periods Under Dutch Law

Dutch labor law mandates minimum notice periods that increase with an employee’s tenure. The statutory notice period starts at one month and scales as follows:

Less than 5 years of service: 1 month’s notice
5 to 10 years of service: 2 months’ notice
10 to 15 years of service: 3 months’ notice
Over 15 years of service: 4 months’ notice

For indefinite-term contracts, written notice is obligatory. Employees may terminate immediately in cases of employer violence, threats, or unforeseen incapacity. Additionally, a 14-day cooling-off period allows employees to reconsider termination agreements. Special protections apply during maternity leave or illness, extending the reconsideration window up to two months. Consider a scenario where an employee on sick leave receives a dismissal notice; the employer must allow for this extended period to avoid legal challenges.

Severance Pay and Transition Compensation

Severance pay, or transition compensation, is designed to provide financial stability upon dismissal. In mutual separation cases, compensation typically ranges from two to six months’ salary, though exact amounts depend on negotiations. The standard calculation is:

For tenure under 10 years: 1/3 of monthly salary per year of service
For tenure over 10 years: 1/5 of monthly salary per year of service

The cap is set at €83,000 or one year’s salary, whichever is higher. From day one of employment, including probation, employees accrue transition compensation at 1/3 of monthly salary per full year worked, prorated for partial years. Employers must also settle unused vacation days and outstanding holiday allowances. For example, a senior manager with 12 years of service earning €5,000 monthly would receive €12,000 in transition compensation (12 × €5,000 × 1/5).

Step-by-Step Dismissal Process in the Netherlands

Terminating an employment contract involves a structured approach to minimize disputes:

Initial dialogue: Engage in transparent discussions with the employee about reasons and alternatives.
Formal notice: Issue written termination adhering to statutory notice periods.
Mutual agreement: Draft a termination contract outlining severance, end date, and obligations.
Payment processing: Disburse agreed compensation promptly.
UWV notification: Report the termination to the Dutch labor authority for compliance.

A case study from SailGlobal highlights how a tech firm avoided litigation by following these steps, including early UWV engagement for a redundancy round.

Unemployment Benefits Under WAB Regulations

Dutch unemployment insurance (WW) provides income support under specific conditions. Since 2020, employers contribute differentially: 2.64% for permanent contracts and 7.64% for flexible contracts (e.g., fixed-term). Eligibility requires 26 weeks of work in the last 36 months, active job seeking, and UWV registration. Benefits are calculated at 70% of previous earnings for the first three months, dropping to 50% thereafter, with caps based on individual circumstances. The maximum duration is generally 24 months, extended for employees over 50. Refusing suitable job offers or training can lead to benefit suspension. For example, a marketing professional laid off after five years might receive €2,100 monthly initially (70% of a €3,000 salary), contingent on ongoing UWV check-ins.

Navigating these regulations demands expertise. SailGlobal offers tailored support to ensure compliant dismissals, from notice periods to severance calculations.

Dutch Dismissal Laws: Notice Periods, Severance Pay, and Compliance Guide