Guide to Employee Termination in the Netherlands
Your up-to-date guide for employee termination in the Netherlands in a fair, legal and practical manner for international HR leaders and business owners.
Ending an employment relationship in the Netherlands involves a structured legal process. Dutch labour law places strong emphasis on justified grounds, procedural fairness, and employee protection, meaning employers cannot terminate contracts unilaterally without following the correct route.
This guide walks through the key legal grounds for dismissal, procedural options, collective redundancy rules, and severance entitlements under Dutch law as of 2025. It’s designed to help both businesses and employees of international organisations operating in the Netherlands understand their rights and obligations.
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Grounds for Termination in the Netherlands
Before proceeding with dismissal, employers are generally required to make reasonable efforts to redeploy the employee to another suitable role, including offering training if necessary. This obligation does not apply in cases of serious employee misconduct.
Employment contracts can be ended immediately during the probationary period.
In cases of serious cause (dringende redenen), such as gross misconduct, an employer may also dismiss an employee with immediate effect. In such situations, neither UWV nor court approval is required, and notice periods do not apply. The employer must inform the employee of the decision without delay, typically within two to three days, and clearly state the reasons. Because these cases are highly sensitive, they require careful handling and are often subject to legal challenges.
A) Statutory Grounds
Dutch law sets out nine specific grounds for dismissal. Employers must rely on at least one of these grounds, or a combination of them, to justify termination:
1. Economic reasons
2. Long-term incapacity
3. Frequent absenteeism
Dismissal may be possible if recurring absences, unrelated to disability or protected leave, disrupt business operations.
4. Underperformance
Employers must show that the employee has been informed of performance issues, offered sufficient support or training, and allowed time to improve before dismissal.
5. Misconduct or culpable behaviour
This covers serious misconduct or repeated behavioural issues that make continued employment unreasonable.
6. Conscientious objections
If an employee cannot perform essential tasks due to deeply held beliefs, and reassignment is not possible, dismissal may be considered.
7. Broken employment relationship
When the working relationship has deteriorated irreparably (e.g. prolonged conflict), termination can be sought via the sub-district court.
8. Other compelling reasons
This catch-all provision covers situations not covered by the above, but where continuation of employment cannot reasonably be expected.
9. Cumulative grounds
Introduced to give employers more flexibility, this allows dismissal based on a combination of multiple weaker grounds when no single ground alone is sufficient. Courts may award additional compensation in such cases. However, the i-ground or the Cumulative ground may not include business-economic grounds or long-term incapacity in the combination.
A) Mutual Agreement
Apart from the above statutory grounds, employers and employees can mutually agree to end the employment through a settlement agreement (vaststellingsovereenkomst). This is often the fastest route, avoiding UWV or court proceedings.
Employees must receive the proposal in writing and are entitled to a 14-day reconsideration period during which they can withdraw their consent without penalty.
Termination Procedures in the Netherlands
There are four main routes to terminate an employment contract:
1. By mutual agreement
The simplest way to end an employment relationship is through mutual consent, documented in a written settlement agreement (vaststellingsovereenkomst).
No prior approval from UWV or the court is needed.
Employees must be given a 14-day reconsideration period to withdraw their consent after signing.
The agreement should clearly state the end date, any transition or severance payments, and other relevant terms (e.g. release of claims).
This route is often preferred in reorganisations or where both parties want a clean break.
2. Through the Employee Insurance Agency (UWV)
Employers must apply to the Employee Insurance Agency (UWV) for permission to terminate an employment contract in cases of:
Economic reasons (e.g. reorganisation, downturn, closure), or
Long-term incapacity (after 2 years of illness).
Key steps here include:
- Submitting a written dismissal request to the UWV, detailing the legal ground and supporting evidence.
- Giving the employee an opportunity to respond.
- Awaiting UWV’s decision.
If UWV grants permission, the employer may proceed with termination, respecting the notice period, which can be reduced by the length of the UWV procedure (though at least one month must remain).
If UWV denies the request, the employer may appeal to the sub-district court.
3. Through the sub-district court
For grounds other than economic or long-term illness, such as underperformance, misconduct, or a damaged working relationship, employers must apply to the sub-district court for termination.
The process involves:
Filing a petition explaining the legal ground(s) and evidence.
The employee can submit a defence.
The court assesses whether the legal criteria are met.
If the court grants the request, the contract is dissolved, and the court may set the end date. The employee is generally entitled to transition pay, and the court can award additional compensation (up to 50% extra) in some cumulative ground cases.
4. By summary dismissal in urgent cases
In exceptional cases, employers may dismiss an employee immediately without notice or UWV/court involvement, if there is a “serious cause” (dringende reden).
Examples include:
- Theft or fraud
- Physical violence
- Gross insubordination
- Other serious misconduct that makes continued employment untenable
Summary dismissal must be given without delay, with the reason clearly communicated in writing.
Employees often challenge summary dismissals in court, and if the court finds the reason invalid, the employer may be ordered to reinstate the employee or pay substantial compensation.
5. Court-Ordered Dissolution of Employment
If an employer has valid legal grounds but cannot secure employee consent or UWV approval, they may ask the district court to dissolve the contract. Typical reasons include frequent illness, underperformance, misconduct, conscientious objections, a seriously disrupted working relationship, or cumulative grounds combining several factors.
The employer files a formal petition, after which both sides can present their arguments in court. If the court grants the request, the contract ends after the applicable notice period, and the employee may be entitled to transition compensation, depending on the circumstances.
Following the right procedure is essential. If the employer bypasses these legal routes, the dismissal is invalid, and the employee may be reinstated with back pay.
Collective Redundancy
When a business plans to dismiss a significant number of employees within a short period, Dutch collective redundancy rules apply. These rules are designed to protect employees’ rights and ensure transparency during large-scale reorganisations.
Definition of Collective Redundancy
Under Dutch law, a collective redundancy occurs when an employer intends to dismiss 20 or more employees within a three-month period in the same UWV district/ same UWV region / geographical work area for economic reasons.
This threshold applies regardless of the company’s size. If it’s reached, employers must follow additional procedural steps before proceeding with the dismissals.
Notification and Consultation Requirements
When collective redundancy is triggered, the employer must:
Notify the trade unions and works council (if applicable) in advance of the dismissals.
Submit a notification to UWV about the planned redundancies, including the number of employees affected, reasons, and timeline.
Provide unions or employee representatives with relevant information and consult in good faith about alternatives, such as redeployment or social plans.
Employers cannot issue notice to employees until one month after the unions and UWV have been informed, unless both agree to shorten this period.
Selection Criteria
Dutch law requires that employee selection for redundancy follow the “reflection principle” (afspiegelingsbeginsel), designed to ensure objective and fair selection.
This principle works as follows:
- Employees are divided into age groups within each job category.
- Last in, first out applies within each age group, to preserve a balanced workforce across age categories.
- Temporary staff are usually dismissed first.
This process limits employer discretion and helps avoid claims of unfair targeting.
Social Plans and Negotiations
While not always legally mandatory, it is common practice for employers to negotiate a “social plan” with unions or employee representatives in collective redundancy situations.
A social plan typically covers:
Redeployment and training opportunities
Severance arrangements (sometimes above statutory transition pay)
Support for affected employees, such as outplacement services
Courts often view adherence to a fair social plan favourably if disputes arise later.
UWV Procedure for Collective Dismissals
Once consultations are complete, the employer must still apply to the UWV for each individual dismissal within the collective process. The UWV assesses whether the legal grounds and selection criteria have been applied correctly.
Employees dismissed as part of a collective redundancy retain the right to transition pay and may still challenge the dismissal in court if procedures are not followed correctly.
Protected Employees & Special Cases
Dutch employment law provides strong protections for certain categories of employees, making their dismissal more complex. Employers must be aware of these rules to avoid legal challenges or nullification of dismissals.
1. Employees on Sick Leave
Employees who are unfit for work due to illness or injury are protected against dismissal for the first two years of their incapacity. During this period, the employer is required to:
- Continue paying at least 70% of the employee’s salary (subject to certain caps), and
- Make reasonable efforts to facilitate the employee’s reintegration, including offering alternative suitable roles if available.
Dismissal during this two-year period is only possible in exceptional cases, such as closure of the entire business or summary dismissal for serious misconduct unrelated to the illness.
After two years of illness, if recovery or suitable reintegration is not possible, the employer can apply to the UWV for dismissal on the basis of long-term incapacity. UWV will assess whether the reintegration obligations have been fulfilled before granting approval.
2. Pregnant Employees and Parental Leave
Employees who are pregnant, on maternity leave, or on parental leave benefit from enhanced protection against dismissal. Termination during these periods is generally prohibited, except in exceptional circumstances such as:
- Summary dismissal for urgent cause, or
- Economic dismissal where the closure of the business affects all employees equally.
3. Works Council and Union Representatives
Works council members and trade union representatives enjoy additional protection due to their representative roles. Dismissal of these employees requires prior consent from UWV, and UWV applies strict scrutiny to ensure that the dismissal is unrelated to their representative activities.
4. Probationary Period
During a valid probationary period, either party may terminate the employment contract with immediate effect, without giving notice or stating reasons.
However, the probationary clause must meet legal requirements regarding duration and be agreed in writing. If the clause is invalid, normal dismissal rules apply.
5. Fixed-Term Contracts
For fixed-term contracts, employment ends automatically at the agreed end date, unless otherwise specified. Employers must provide written notice at least one month before the contract ends to confirm whether it will be renewed or terminated.
If this notice is not given, the employer may owe one month’s salary as compensation. If the contract is terminated before the end date, standard dismissal rules apply.
Notice Periods
When terminating an employment contract in the Netherlands, both employers and employees must respect statutory or contractual notice periods. These timelines depend on the employee’s length of service and any specific terms set out in the employment contract or applicable collective labour agreement (CAO).
Statutory Notice Periods for Employers
For employers, the minimum statutory notice periods are as follows:
| Employee’s Length of Service | Minimum Notice Period |
|---|---|
| Less than 5 years | 1 month |
| 5 to 10 years | 2 months |
| 10 to 15 years | 3 months |
| More than 15 years | 4 months |
Employers may agree to longer notice periods in the employment contract, but any period longer than six months must be in writing and is relatively uncommon in practice.
The duration of the UWV or court procedure may be deducted from the notice period, provided that at least one month’s notice remains after this deduction.
Notice Periods for Employees
Employees are generally required to give one month’s notice, unless their contract or collective agreement specifies a different period. This period cannot be unreasonably long and must be clearly stated in writing.
Probationary Period and Summary Dismissal
During a valid probationary period, either party may terminate the contract with immediate effect, without any notice requirement. Similarly, in cases of summary dismissal for urgent cause, termination is immediate.
Payment in Lieu of Notice
Employers may choose to terminate the contract earlier by paying the employee for the notice period instead of requiring them to work it. This approach can be useful in sensitive cases where it’s not practical for the employee to remain at work during the notice period.
However, this payment is treated as taxable income, and the same rules for severance and transition payments still apply.
Special Rules for Fixed-Term Contracts
For fixed-term contracts that end naturally on the agreed date, no notice period applies, but employers must still inform the employee at least one month before the contract end date whether it will be renewed or not.
Failure to provide this notification may lead to a penalty equivalent to one month’s salary.
Severance Pay / Transition Compensation
In the Netherlands, employees whose contracts are terminated by the employer are generally entitled to transition compensation (transitievergoeding). This is a statutory form of severance pay designed to support employees as they transition to new employment.
The amount and eligibility depend on the type of termination and the employee’s length of service. In some cases, additional severance may be agreed through a settlement agreement or awarded by a court.
Transition Compensation
Employees are entitled to transition pay if their contract is terminated by the employer, whether through UWV, court procedure, or the non-renewal of a fixed-term contract. This right applies regardless of the reason for dismissal, except in cases of serious culpable misconduct by the employee.
Calculation formula:
- Transition pay is equal to one-third of a month’s salary per year of service, including pro-rated amounts for partial years.
- All fixed salary components and regular allowances are included in the calculation.
There is no minimum service period required. Employees accrue transition pay from the first day of employment.
The amount of transition pay is subject to an annual statutory cap. For 2025, the maximum transition compensation is €98,000 gross or one year’s gross salary, whichever is higher. This ceiling is reviewed annually by the government and has been rising over time with inflation.
While the transition payment is capped by law at this maximum amount, most employees will not reach the cap, but high-earning employees should be aware that they might not get “1/3 month per year” for all years if the raw calculation exceeds the statutory maximum.
Employers must pay the transition compensation within one month of the employment ending. Failure to do so can result in the employee claiming statutory interest and penalties.
Additional Severance
In some cases, employees may receive additional compensation on top of transition pay:
- Settlement agreements: Employers may offer extra severance as part of a negotiated mutual termination to secure employee consent and avoid lengthy procedures.
- Cumulative ground dismissals: When dismissal is based on a combination of grounds (i-ground), courts have discretion to award up to 50% extra compensation on top of the statutory transition pay.
- Court awards: If a court finds the employer acted seriously culpably (e.g. gross procedural breaches), it may grant fair compensation (billijke vergoeding) in addition to transition pay. This amount is discretionary and can be substantial.
No Severance in Cases of Serious Misconduct
If the employee is dismissed for serious culpable behaviour (e.g. theft, violence, or gross misconduct), they may lose their right to transition compensation. However, this is applied narrowly and must be supported by clear evidence. Employees often challenge such dismissals in court.
Tax Treatment
Transition and severance payments are treated as taxable income in the Netherlands. Employers are required to withhold income tax at source. Depending on the amount and the employee’s tax situation, it may push them into a higher tax bracket for that year.
Risks of Non-Compliance & Employee Challenges
The Netherlands has strict legal requirements for dismissals, and failure to follow the correct procedures can have significant financial and legal consequences for employers. Employees have several avenues to challenge dismissals they consider unlawful.
1. Invalid or Unlawful Dismissals
If an employer terminates a contract without the required permission (from UWV or the court) or fails to respect the statutory grounds and procedures, the dismissal can be declared null and void.
In this situation:
- The employment relationship is deemed to have never ended.
- The employer may be required to reinstate the employee.
- Back pay (including holiday allowance and benefits) must be paid from the date of dismissal until reinstatement.
Similarly, failing to observe collective redundancy rules, such as notifying unions or UWV, can invalidate the dismissals or delay their effectiveness.
2. Employee Objections and Legal Claims
Employees who disagree with their dismissal have the right to challenge it in court, typically within two months of termination. Common grounds for legal challenges include:
- The employer lacked valid legal grounds.
- Procedural requirements were not followed correctly.
- The dismissal was discriminatory or retaliatory.
- Transition pay or other entitlements were miscalculated or unpaid.
In cases of mutual termination agreements, employees also benefit from a 14-day reconsideration period, during which they may withdraw their consent without giving a reason. If the employer fails to inform the employee of this right, the reconsideration period is extended to 21 days.
3. Compensation and Reinstatement
If the court finds the dismissal unfair but not void, the employment contract will not be reinstated. Instead, the court may award:
- Statutory transition pay, if it hasn’t already been paid.
- Additional compensation if the dismissal was based on cumulative grounds or if the employer acted culpably.
- Fair compensation (billijke vergoeding), which is discretionary and can be substantial if the employer seriously breached its obligations.
In void dismissals (e.g. no UWV/court authorisation), reinstatement is the default outcome.
Reputational and Operational Risks
Aside from legal and financial consequences, mishandled terminations can lead to reputational damage, strained relationships with works councils or unions, and increased regulatory scrutiny. For international businesses, non-compliance may also complicate immigration processes and future hiring in the Netherlands.
Key Takeaways for Employers
Terminating employment in the Netherlands involves clear legal frameworks, strict procedural safeguards, and strong employee protections. For employers, especially international businesses, understanding and applying these rules correctly is essential to avoid legal disputes and financial exposure.
Here are the key points to keep in mind:
- Always rely on a valid legal ground: Dismissals must fit one or more of the nine statutory grounds, or be mutually agreed through a written settlement.
- Choose the correct procedural route: Economic and long-term incapacity dismissals go through UWV; other grounds require sub-district court approval.
- Plan carefully for collective redundancies: Early union consultation, notification to UWV, and adherence to selection rules are mandatory when 20+ employees are affected.
- Respect protection rules: Employees on sick leave, maternity leave, or in representative roles are legally protected and may require special procedures.
- Observe notice periods and pay transition compensation: These are statutory obligations, with clear formulas and timelines.
- Document everything: Thorough documentation of the grounds, communications, and procedures is crucial for defending against challenges.
- Anticipate employee challenges: Employees can contest dismissals in court, and procedural errors often lead to reinstatement or additional compensation.
How Beyond Borders HR Can Help
Managing terminations in the Netherlands requires careful handling, from selecting the correct legal grounds to following the right procedure and calculating transition pay accurately. For international companies, this can be challenging to manage across different jurisdictions.
Beyond Borders HR supports businesses through every step of the employment termination process in the Netherlands. Our team can:
- Assess the appropriate legal route for each case, including UWV, court, or mutual agreement.
- Prepare compliant documentation, including dismissal letters, settlement agreements, and employee communications.
- Advise on collective redundancy procedures, consultation obligations, and social plans.
- Ensure accurate calculation of notice periods and severance payments, based on the latest legal thresholds.
- Coordinate with local legal partners to handle complex or high-risk cases.
- Support cross-border HR teams to ensure consistency while remaining locally compliant.
Whether you’re handling a single dismissal or a larger restructuring, we help ensure that the process is legally sound, efficient, and sensitive to employee relations.
Need help handling Dutch dismissals with confidence? Chat to Beyond Borders HR for expert guidance.
