An employment contract can end in different ways, all of which are laid down in the law. Dutch labour law has a closed system of dismissal. This means that the employment contract can only be terminated in a manner prescribed by law. The employment contract may (only) end by:
- operation of law
- mutual consent
- termination with the approval of the Employee Insurance Agency (UWV)
- termination without the approval of the Employee Insurance Agency
- by dissolution by the sub-district court (kantonrechter)
Termination of a fixed-term employment contract
A fixed-term employment contract may end:
- by operation of law due to the expiry of the term of the employment contract
- due to premature termination (through or with the approval of the Employee Insurance Agency)
- by mutual consent or by dissolution by the sub-district court
Termination by operation of law
With a fixed-term employment contract, the duration is laid down in advance or can be determined objectively (for example, “replacing the employee Mr De Vries during his illness”).
In this case, the fixed-term employment contract ends by operation of law as soon as the agreed period of time has elapsed. In other words, no dismissal procedure is required.
Based on the Collective Labour Agreement for Dutch Universities (CAO Nederlandse Universiteiten), the employment contract also ends by operation of law when the employee reaches retirement age.
The law requires the employer to inform (”notify”) the employee in writing, and at least 1 month before the fixed-term employment contract ends by operation of law, whether the employment contract will be extended. If the employer fails to meet the notification requirement, it must pay the employee one month’s salary. If the notification is provided late (i.e. during the last month of employment), the employer must pay the employee an adjusted amount.
Special attention must be paid if an employment contract was entered into for a fixed term but with the prospect of an open-ended employment contract (for good performance). This fixed-term employment contract also ends by operation of law, but with this appointment an expectation was raised for the employee or a promise was made.
It is therefore recommended that for these employment contracts an appraisal is always made at the end of the term so that it is also clear to the employee why an open-ended employment contract will not follow.
Premature termination
A fixed-term employment contract can only be terminated prematurely if this option is laid down in the employment contract. Radboud University has included a premature termination clause in its model contract. Premature termination is governed by the same conditions as the termination of open-ended employment contracts (see below under: Termination of an open-ended employment contract).
Mutual consent and dissolution
A fixed-term employment contract may also end by mutual consent or by dissolution by the sub-district court (see below under: Termination of an open-ended employment contract).
Termination of an open-ended employment contract
An open-ended employment contract can end by:
- mutual consent
- termination with the approval of the Employee Insurance Agency
- termination without the approval of the Employee Insurance Agency
- dissolution by the sub-district court
Important: File creation
In order to terminate an employment contract by giving notice or through dissolution, it is of the essence that a sufficiently substantiated file is available. Depending on the nature of the grounds for dismissal, a proper file contains the following (alongside the usual information such as employment contracts and personal data, etc.):
- records of meetings setting out everything that was discussed and arranged with the employee
- written evaluations of arrangements made
- records of performance interviews
- appraisals
- where applicable: written warnings
- where applicable: information about finances/cancellation of work, etc.
Files must be up-to-date. Reports that are, say, 3 years old lose their force if no more recent records are available. That would make it difficult to rely on those records in dismissal proceedings. The Employee Insurance Agency and the sub-district court are hesitant to accept reports drafted after the fact for the purpose of building a file.
Having a proper file is important for more than one reason. First of all, the employer must be able to substantiate its intention to dismiss the employee. It must be able to prove that there was indeed unsatisfactory performance, for example, or a breakdown of the working relationship. Secondly, the file must reveal that the employer has given the employee ample opportunity to improve the existing situation, which also requires the employer to put in the required effort by means of assistance and/or support.
Mutual consent
An open-ended employment contract may end because the employer and employee agree to this. This is known as termination by mutual consent. In cases of termination by mutual consent, the arrangements made must be recorded in a written agreement (settlement or termination agreement). The employee must sign a clear and unambiguous declaration to this effect. Termination by mutual consent does not result in the employee losing their entitlement to unemployment benefit.
Termination with the approval of the Employee Insurance Agency (UWV)
The employer must seek the Employee Insurance Agency’s approval if it wishes to terminate the employment contract due to:
- financial reasons
- long-term occupational disability due to illness or otherwise
The proceedings involving the Employee Insurance Agency are conducted in writing. The employer requests the Employee Insurance Agency’s approval using the dismissal forms drawn up by the Employee Insurance Agency for this purpose. The employee is then provided with the opportunity to dispute the request in writing. Finally, the Employee Insurance Agency decides whether or not to approve the request. It is important that the employer demonstrates that the employee cannot reasonably be reassigned to an alternative suitable position, with or without training.
Termination without the Employee Insurance Agency’s approval
Both the employer and the employee can terminate the open-ended employment contract by giving notice.
Both the employer and the employee will then be bound by the following period of notice based on the Collective Labour Agreement for Dutch Universities:
- 3 months if the employee has been continuously employed for 12 months or longer and
- 2 months in all other cases.
Furthermore, the Employee Insurance Agency’s approval is not required in the following situations:
- in case of termination during the probationary period
- upon reaching retirement age
- in case of summary dismissal
Summary dismissal:
The most drastic form of termination of the employment contract is summary dismissal. The approval of the Employee Insurance Agency is not required, and the period of notice does not apply. The employment contract is terminated with immediate effect. The blame for summary dismissal virtually always lies with the employee, in which case there is no entitlement to unemployment benefit. Due to the major consequences for the employee, summary dismissal should not be instituted lightly. There are important requirements that must be met by the employer, which include the following:
- there must be an urgent cause
- the dismissal must be forthwith
- the reason for the dismissal must be given immediately upon dismissal
Situations that could warrant summary dismissal are theft, fraud, threat, refusal to work and/or refusal to carry out an assignment, etc. Since summary dismissal must meet very strict legal demands, the employment lawyer of the HR Department must always be consulted urgently. Any delay will considerably inhibit the chances of success.
Dissolution by the sub-district court
Both the employer and the employee can request the sub-district court to dissolve the employment contract. This is only possible in case of the following grounds for dismissal:
- frequent absenteeism
- poor performance
- refusal to work based on conscientious objections
- a breakdown of the working relationship
- other circumstances (demonstrating reasonable grounds)
- within 2 months of the Employee Insurance Agency refusing to grant approval (due to financial reasons or long-term occupational disability).
It is important to note that the law stipulates that “other circumstances” must be interpreted very strictly; this condition is not intended as a catch-all reason for dismissal. It includes such grounds as the detention or illegality of the employee, the lack of a work permit and irreconcilable differences between the employer and the employee. These grounds must therefore be substantiated in the supporting file. In proceedings involving the sub-district court, it is likewise important that the employer demonstrates that the employee cannot reasonably be reassigned to an alternative suitable position.
Transitional severance pay
If the employment contract is not extended, or if the employee is made redundant, there is usually an entitlement to transitional severance pay. If the contract ends or is terminated for financial reasons, the employee is not entitled to transitional severance pay if the employee claims a supplementary benefit under the Non-statutory Unemployment Regulations for Dutch Universities (BWNU), except where the employee waives entitlement to this benefit.
Amount of transitional severance pay (2023)
The transitional severance pay is ⅓ x the gross monthly salary per year worked at Radboud University. The maximum severance pay is €89,000 gross unless the annual salary is higher than €89,000 gross, in which case the maximum severance pay is the gross annual salary.