The trend of layoffs does not seem to be slowing down, so it’s important to know exactly what to expect in case you’re faced with a similar situation. Terminations in the Netherlands can be quite a complex process, and we’re sure you’re wondering what kind of severance pay you’re entitled to! 

Before we dive into this complex topic, it’s important to note that the rules we’ll discuss refer to indefinite and fixed-term contracts. We won’t talk about 0-hour contracts and work through temporary work agencies (uitzendbureaus) 

Notice period 

The statutory notice period in the Netherlands depends on how long you’ve been working for your employer

• If you’ve been working less than 5 years – it’s 1 month
• If you’ve been working 5-10 years – it’s 2 months
• If you’ve been working 10-14 years – it’s 3 months
• More than 15 years – 4 months

But, it’s also possible for your notice period to be longer than the statutory duration. You’d find this in your employment contract, so always make sure you’re fully aware of the terms! If the employer wants to increase your notice period, they can do that – but at the expense of increasing their own notice period to be twice as long.

That means that if they increase your notice period to 2 months, then they’ll have to give you a 4-month notice period. If they increase your notice period to 3 months, then their notice period needs to be 6 months. 

It’s also important to understand that notice is calculated in calendar months. That means that whenever you submit your resignation – your notice period will start running from the 1st of the next month.

For example, you have a month’s notice and you submit your resignation on May 10th. Your notice period starts running on June 1st, making the last working day of June your last day with the company. 

If you’d prefer to listen instead, you can find our podcast episode on this topic below.

Mutual Termination (Settlement Agreement)

The Dutch law is very protective of employee rights. So if you’re on an indefinite-term contract, it is quite difficult to get rid of you! A fixed-term contract can easily be terminated naturally with its expiration date, but if there isn’t one – your employer will most likely have to offer you a Mutual Termination Agreement.

The name already gives away a big part of this process. Your cooperation and agreement are vital here, so you’re in a good position to negotiate. If your employer ever extends this document, the first thing you should do is get an employment lawyer to guide you through the process and lead the official communication. If you’re afraid that will be an expensive affair, don’t worry! Your lawyer will negotiate for their costs to be included in the final settlement, meaning your employer will end up paying for their services.

Your lawyer will also be able to make sure the wording of the agreement allows for you to access unemployment benefits from the Employee Insurance Agency (UWV) if that’s important to you.

There’s quite a few parts of the settlement agreement you could negotiate, for example:

• The settlement amount – how many monthly salaries or what amount will be included in your “severance” package 
• Garden leave – staying employed for a longer period of time (even though you’re not working) so your employer is still making all the social security contributions, and you have more time to find a new job (which is especially important if you’re on a working visa, and you have just 3 months to find a new sponsor)
• Payout or use of any leftover vacation days or other expenses incurred
• Waiving or softening the non-compete clause…

The garden leave negotiation can be particularly important for several reasons. The first of them we already mentioned – if you’re on a Highly Skilled Migrant visa, you have only 3 months to find a new job. So staying technically employed for longer gives you more space to find the next company that can sponsor your visa.

Another reason this is important is because your severance payout in this case will be taxed at quite a high percentage, which is usually ~50%. While you’re still employed, your salary is taxed as usual (even on garden leave), but a lump-sum payout is treated as a bonus, and thus taxed at a higher rate. These are all considerations to take into account before you finalize your negotiations. 

It’s also important to note you have the time to change your mind. After you’ve signed the settlement agreement, you have 14 days to go back on it. After the 14-day period, your settlement is final. 

Redundancy

If your employer is going through a difficult time, they could request terminations based on their economic situation. The underlying reasons for this could be:

– The company’s finances are struggling.

– There’s not as much work available.

– The company needs to reorganize.

– A department is shutting down.

– Technological changes mean fewer staff are needed.

– The company has to move to a new location.

When a company needs to let people go for business reasons, they start by letting go of temporary and self-employed workers. Then, they have to follow certain rules to decide who else will be laid off. They can’t just pick and choose who stays and who goes. The rule that’s applied is similar as in many other European countries – last in is first out. 

Your employer might ask you to leave due to economic reasons, but you don’t have to agree. If they still plan to cut your position, they need to get a permit from the UWV. 

If more than 20 employees or 10% of the workforce are let go within three months, it’s called collective dismissal. In that situation, the company has to tell the UWV beforehand and talk to the unions.

So all in all – your employer cannot just inform you today you’re not coming to work tomorrow because they’re struggling financially. There’s a process they have to follow in this case, and Dutch courts are quite strict about adhering to the rules. 

Poor performance

What about if you’re just not doing your job well enough?

In this case, the employer can let you go, however there’s a process they need to follow. You need to be notified about exactly where you’re not meeting expectations, and what goals they want you to achieve. This all needs to be documented in detail, and you need to be given a specific number of months to improve, along with milestones to achieve, and support they’ll provide to get you there. 

This plan is called a Performance Improvement Plan (PIP), and you’d normally create it together with your manager and the HR department. 

If you reach the milestones and improve in the way you’re expected to – you’re on your way to keeping your job! If your performance is still not up to their standards, then they can move for a termination. However, they’ll still need to prove to a Dutch judge that they’ve done everything correctly and that you were given an appropriate time to improve. 

Many companies will avoid doing this full process as it can take quite a while, and they’ll offer you a Mutual Termination Agreement instead. 

Fixed-term contracts

There are two main avenues for a fixed-term contract to be terminated:

• By giving notice before the contract expires 
• With the contract expiring without a new one being signed

Same rules apply if the employer wants to end your contract early – they must have a good reason for that and follow the correct process. That means they either need to explain to the UWV why they must terminate the contract, or they’ll offer you a settlement agreement.

Keep in mind – even if your contract expires, your employer needs to notify you about not extending in writing, and with taking the notice period into account. 

With a fixed-term contract ending, you’re still due all the amounts incurred from your employment:

• Any unused vacation days 
• Accrued holiday allowance
• Statutory severance pay of ⅓ of your gross monthly salary per year worked

More questions about your rights as an employee? You can reach us via info@movetonl.com, and we’d love to help!