What you need to know before hiring in the Netherlands: A guide to terminations

Hiring an employee in the Netherlands? When you’re onboarding a new hire, terminating them is probably the furthest thing from your mind. But if you don’t understand the basics of dismissing Dutch employees, you could get into legal trouble when you eventually part ways with team members.

Employees in the Netherlands have strong protections in many areas of labor law, and termination policies are no different. If you don’t adhere to the applicable Dutch regulations, you could be subject to a wrongful dismissal claim in the Netherlands.

Read on to learn everything you need to know before hiring Dutch employees—and how hiring through an Employer of Record (EOR) can spare you from bungling any local dismissal requirements.

How to terminate an employee in the Netherlands

The Netherlands has a unique hiring and firing system that’s entirely its own. Their labor code provides some of the strongest protections for employees in the world and involves both court hearings and government agencies to ensure nobody is fired without just cause.

In the Netherlands, there are four ways to terminate an employment relationship. They are as follows:

• With permission from the Dutch Employment Insurance Agency.* You’ll need to apply for a dismissal permit from the Dutch Employment Insurance Agency if the employee does not agree with the decision and if you’re letting them go due to bankruptcy or a long-term illness that has lasted over two years and prevented them from working. If you’d like to go around the Employment Insurance Agency, you can see if your collective labor agreement provides an unbiased committee that will look at the case.
• With permission from the cantonal court.* When the employee doesn’t agree with the decision but you’re dismissing them for reasons other than bankruptcy or a very long illness, you need a dismissal permit from a Dutch sub-district court, also called a cantonal court. You’d go through the cantonal court if, for instance, to terminate an employee due to a combination of issues, misconduct, and other employment agreement violations.
• By mutual consent. If both parties agree that it’s best to end the employment relationship, no permission is necessary. The next step is to come up with a mutual termination agreement that’s agreeable to everyone.
• By summary dismissal. In certain serious cases where there’s an "urgent need" to end the employment relationship immediately, employers can terminate employees themselves. However, you’ll still need to be prepared to prove you followed the correct procedures and dismissed the person for a valid reason. In a summary dismissal case, if the employee loses, they’re not entitled to benefits. So, there’s an extremely high chance that you’ll go to court if you wind up in this unfortunate situation.

*Note: If you do not get a dismissal permit from either the Employment Insurance Agency or the courts, you cannot dismiss the employee anyway. Unless there’s an "urgent reason," you cannot dismiss someone on your own in the Netherlands.

Termination rules in the Netherlands: What are acceptable grounds for firing an employee?

Now that you know how to fire an employee in the Netherlands, let’s go over the reasons why you might want to go to the courts or the government to get a dismissal permit.

The acceptable reasons for firing a Dutch employee fall under two general categories and the employer must obtain approval from the UWV (Employee Insurance Agency) or the sub-district (cantoral) court prior to terminating an employee.

• Economic/financial reasons. This category covers instances in which an employee is being let go because the company is restructuring due to bankruptcy, and other, similar reasons.
• Non-economic causes. This general-sounding category is something of a catchall for every reason that doesn’t fall under the “economic/financial reasons” umbrella. It includes issues like serious misconduct, a repeated and persistent pattern of incompetence or incapability, company policy violations, and so on.

If this is nerve-wracking because the second category sounds so vague, don’t worry: The courts will help you determine if you have valid grounds for terminating someone or not. So, even though it probably sounded like a lumbering, messy system that’s too much trouble at first, now, the Dutch system of getting permission probably makes a lot more sense!

The Netherlands’ termination requirements likely differ from those in other countries where you hire, and it’s crucial to keep your global hiring compliant with local laws.

What are the mandatory notice periods and termination pay for Dutch employees?

In the Netherlands, as elsewhere, employees are entitled to statutory minimum notice periods before they are terminated. The amount of notice they get depends on how long they’ve worked for the company; see the table below:

Then, there’s the matter of the payment an employee receives when they’re terminated. In the Netherlands, employees negotiate severance with their employer. All employees who have been terminated involuntarily also receive transition pay, which is separate from severance.

Transition pay is a sort of net that provides employees with financial support as they go from one job to another.

The easiest way to comply with Dutch termination requirements

If you employ a global workforce, keeping track of termination requirements gets complicated. Without any assistance, employers need to master conflicting just-cause considerations, probationary and notice periods, and severance pay laws that vary both within and among countries.

An alternative is to hire through an EOR, which can monitor termination requirements for you.

Frequently asked questions about terminating employees in the Netherlands

Do you need a reason to terminate an employee in the Netherlands?

Absolutely. You cannot involuntarily dismiss an employee without a reason under any circumstances. And you’ll need the permission of either the Employment Insurance Agency or the Dutch cantonal court to dismiss someone on valid grounds. Unless the person poses an immediate threat to the workplace, you need to obtain permission before you dismiss the person.

What is considered just cause for terminating an employee in the Netherlands?

In the Netherlands, just causes for termination fall under one of two broad categories: economic reasons and non-economic reasons.

Economic reasons include:

• Bankruptcy
• Restructuring
• Reorganization

Non-economic reasons include the following:

• Ordinary misconduct
• Breaches of company policy
• Severe misconduct
• Long-term incapacity to work (usually after 2 years)
• Underperforming (however, employees cannot be terminated solely due to underperformance) 

What is the law for dismissing a contractor in the Netherlands?

Dutch labor laws do not afford independent contractors the same rights as employees. So, the termination process can vary depending on the terms of the individual contract the freelancer signed with the company.

Typically, either party may terminate by providing notice as specified in the contract. If the contract does not specify a notice period, the reasonable notice period will depend on the length of the contract and the nature of the work performed.

If an independent contractor is found to be misclassified, they may be entitled to employment standards legislation protections and notice or termination pay in lieu of notice.

What’s the difference between severance and transitional pay?

In the Netherlands, severance is given to employees who consent to be dismissed. Transitional pay is given to employees who did not agree to the dismissal. Not extending a fixed-term contract is considered involuntary dismissal.

Manage the entire lifecycle of your international employees with Rippling

Global termination requirements can be a tangled web, but Rippling handles all of them, right out of the box—and so much more.

If you’re a foreign company hiring employees and contractors overseas, then Rippling will help you manage your entire employee lifecycle—from onboarding to offboarding your workers. Catch Rippling in action today.

Rippling and its affiliates do not provide tax, accounting or legal advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for tax, legal, or accounting advice. You should consult your own tax, legal, and accounting.