Dismissals and Termination of Employment in the Netherlands

In order to unilaterally terminate an employment agreement for an indefinite period of time, other than termination during the probationary period or an urgent reason for immediate dismissal, the employer requires a statutory dismissal ground to realise a termination. The employer can appeal to the following (limitative) statutory dismissal grounds under Dutch law:

1. Economic grounds
2. Long-term illness or disability
3. Regularly not being able to perform work due to illness or disability
4. Underperformance
5. Culpable acts or omissions
6. Conscientious objection
7. Disturbed working relationship
8. Other grounds than those mentioned above
9. Cumulated dismissal grounds based on more than two dismissal grounds as mentioned under C – H combined

Depending on the statutory dismissal ground, the Employee Insurance Agency (UWV) or the Court is competent to assess whether the termination is allowed or granted. The employer should request the UWV for permission to terminate the employment agreement in case it appeals to dismissal reasons A or B. The employer should request the Court to terminate the employment agreement in case it appeals to dismissal reasons C to I.

Depending on the kind of termination, different form requirements apply.

Unilateral termination:

• Employee Insurance Agency: the employer needs to give notice in writing after approval has been given by the Employee Insurance Agency (UWV) to terminate the employment agreement. The procedure time for a dismissal approval from the UWV can be deducted from the notice period. However, a minimum notice period of one month must always be observed.
• Court: if the employer has pursued termination based on legal proceedings, the court will terminate the employment agreement. Meaning that no further notice needs to be given by the employer.
• Probationary period: there is no formal requirement to give notice during the probationary period in writing. In case the employee asks for the reasons of termination, the employer is however obliged to confirm the reasons in writing. Moreover, it is highly recommended that notice be given in writing to create evidence that notice during the probationary period was given in a timely fashion.
• Summary dismissal: there is no statutory requirement to give immediate dismissal in writing. However, employers should be aware that if the immediate dismissal is challenged, the written confirmation of the dismissal will be assessed by the court including the timing and whether the reasoning for this decision has been made clear to the employee. When the immediate dismissal is given, the employer must directly inform the employee of the urgent cause(s) of immediate dismissal. It is advised to confirm the immediate dismissal in writing including the urgent cause(s)
• for immediate dismissal thoroughly and the considerations of the employer to immediately terminate the employment agreement instead of taking different measures.

Mutual agreement: 

Settlement agreement: Parties can also agree to terminate the settlement agreement based on mutual consent, which needs to be concluded in writing.

The statutory-notice period for the employee is one month, regardless of the number of years of employment. The statutory-notice period for the employer depends on the length of service as per the termination date. An applicable collective bargaining agreement may stipulate otherwise, but the statutory-notice period to be observed by the employer is equal to:

• One month if the employment has lasted five years or less;
• Two months if the employment has lasted between five and ten years;
• Three months if the employment has lasted between ten and 15 years;
• Four months if the employment has lasted for 15 years or longer.

The period of notice may, for the employee, be extended contractually up to a maximum of six months. If the employee’s period of notice is extended, however, the period of notice for the employer must be at least twice that of the employee. 

A payment in lieu of notice can be agreed upon in a settlement agreement. That said, employees are generally unwilling to accept this due to their right to unemployment benefits. The notice period must be fully respected to receive unemployment benefits consecutive to the termination date. If not, the employee has an income gap. An earlier end date, including payment in lieu, is not possible if the court terminates the employment agreement or if the Employee Insurance Agency (UWV) grants permission to terminate the employment agreement.

For international employees working under an employment agreement governed by Dutch law, the same rules regarding statutory notice periods, as outlined above, apply. 

The works council (if any) must be offered the opportunity to advise on any considered decision to terminate a number of employment agreements, which terminations have a significant impact on the organisation.

The employee representative body (if any) must be offered the opportunity to advise on any considered decision to terminate at least 25% of the employment agreements. The employee representative body has fewer formal rights than a works council. 

If there is no works council or employee representative body in place, the employees must be offered the opportunity to advise on any considered decision to terminate at least 25% of the employment agreements during a staff meeting. 

Under Dutch law, an employer is obligated to notify unions and the Employee Insurance Agency (UWV) and discuss the consequences of any reorganisation with the trade unions, when the employment agreement of more than 20 employees ends within a three-month period.

The employer can also be obligated to involve or inform the unions under other circumstances based on the collective bargaining agreement (if applicable).

In order to unilaterally terminate an employment agreement for an indefinite period of time, other than termination during the probationary period or an urgent reason for immediate dismissal, the employer requires a statutory dismissal ground to realise a termination. Depending on the grounds of statutory dismissal, the Employee Insurance Agency (UWV) or the Court is competent in assessing whether termination is allowed or granted. The employer should request the UWV for permission to terminate the employment agreement in case it appeals to dismissal reasons A or B. The employer should request the Court to terminate the employment agreement in case it appeals to dismissal reasons C to I. 

In case of a collective redundancies, the UWV (besides the trade unions and works council) must be notified and confirm in writing that the notification is complete before the employer is able to pursue the formal procedure through the UWV.

If an employer intends to dismiss 20 employees or more working in the same working area on economic grounds within a three-month period, the employer must notify the Employee Insurance Agency (UWV), the unions and the works council (if any) or other employee representatives and discuss the consequences of any reorganisation with the trade unions. 

For the purpose of determining whether this threshold of 20 employees in three months has been reached, the method of dismissal — whether through the UWV, the courts, or mutual agreement — makes no difference. Each of these dismissals contributes to the overall count. 

Generally, if more than 20 employees are involved, the employer offers a social plan, which may be negotiated with trade unions (if applicable) or the works council. Unless a collective bargaining agreement is stipulated differently, there is no statutory obligation to offer a social plan, although it is very common to do so.

The works council (if any), the employee representative body (if any) or the employees must be offered the opportunity to advise on any mass redundancy being contemplated.

An employer can terminate an employment agreement (definite and indefinite) with immediate effect for an ‘urgent’ cause, such as theft, fraud, or other very serious misconduct. One of the formalities to strictly take into account is that notice must be given as quickly as possible (i.e. almost immediately) after the employer has become aware of relevant findings and (ideally) after the employee has been confronted with these findings. That said, the employer may take some time to conduct a careful investigation before granting summary dismissal. If an urgent cause is very complex, the employer has more time to investigate. However, a diligent approach must be taken at all times. Finally, the employer must immediately communicate to the employee why he is being dismissed for urgent cause. 

In case of an urgent cause, there is no requirement for a mutual agreement, or court action or procedure at the Employee Insurance Agency (UWV).

Case law shows that in the event of an urgent cause, the employer can also decide to confront the employee with the findings and then give the employee a conditional immediate dismissal. When the employer opts for this possibility, the employee is offered a settlement agreement that can be accepted within a couple of days. If the employee fails to do so in a timely fashion, then the employment agreement ends based on urgent cause as of the date the employee was offered the settlement. The benefit of this procedure is that it allows the employer to know usually within a week whether the matter can be closed by means of a final settlement instead of being confronted with lengthy and costly procedures initiated by the employee.

A wrongful dismissal – meaning that the statutory reason cannot be sufficiently substantiated or other requirements have not been met such as the redeployment obligation – can lead to the restoration of the employment agreement or to additional compensation (i.e. "fair compensation").

In case of collective redundancies, if trade unions are not consulted and the employer proceeds with the termination of the employment agreements, the Employee Insurance Agency (UWV) will not grant permission to terminate the employment agreements. If the employer still proceeds with the implementation of the collective redundancy based on a mutual agreement, these agreements are subject to annulment. This may have far-reaching consequences, since redundancy pay will have to be paid back in the event of annulment and the employment agreement will have remained valid throughout.

When the employment agreement is terminated via the Employee Insurance Agency (UWV) or the court, a mandatory severance payment (i.e. transition payment) is due. The amount of the transition payment depends on the seniority of the employee and is equal to: 

One-third of the monthly salary for each year of service. The monthly salary includes not only the fixed monthly salary but also other components like holiday allowance, fixed end-of-year bonus, fixed shift work allowance, regular overtime pay and average bonus over the last three years. The transition payment over the remaining part of the employment agreement is calculated according to the formula: (gross salary received over remaining part of employment agreement / gross monthly salary) x (1/3 gross monthly salary / 12).

This formula is also used to calculate the transition payment if the employment agreement lasted less than one year.

In2025, the maximum transition payment is EUR 98,000 gross, and for employees who earn more than EUR 98,000 gross a year, the transition payment is maximised at one annual gross salary. 

In the situation where an employment agreement is terminated on the basis of the cumulated dismissal ground, the sub-district court can grant, in addition to the transition payment, a severance of up to half of the transition payment. 

The employee is entitled to additional (reasonable) compensation if the employer has acted in a seriously culpable way. In that case, the remuneration is not subject to a maximum amount and is determined by the court.

If the agreed or statutory notice period is not observed, the termination of the employment agreement is deemed ‘irregular’. An irregular termination does not affect the validity of the termination itself, but it entitles the other party to claim statutory damages.

In the Netherlands, there are several types of restrictive covenants, including:

• Non-competition clause: Can be agreed upon in an employment agreement for an indefinite term if it is set out in writing with an adult employee. The accepted scope of this clause will depend on the activities of the employee. A non-competition clause in a definite-term employment agreement is, in principle, not allowed. There is one exception to this rule; if the employer can prove that there are important business or service interests. A motivation in the employment agreement must make clear why there is an important business or service interest. Without this motivation, the clause is not valid.
• Non-solicitation clause: The non-solicitation clause restricts the employee from contacting or doing business with the employer's clients, customers, or business relations for a certain period after the employment agreement ends. It is intended to protect the employer's business interests and relationships.
• Non-poaching clause: This clause prohibits the employee from directly or indirectly attempting to persuade employees of the employer or its affiliates to work for the employee's company or another employer.
• Confidentiality clause: Obligates the employee to maintain strict confidentiality regarding all information that the employee acquires during the performance of his/her duties regarding the affairs, activities and interests of the employer or any of its affiliates. The employee is prohibited from disclosing this information to third parties during and after the end of the employment agreement.
• Intellectual property right clause: Specifies that present and future intellectual property rights arising from or relating to the work performed by the employee under the employment agreement shall belong to the employer. 

It is common practice to agree upon a penalty clause in case of a breach by the employee of the restrictive covenants. There is no maximum for a penalty. However, in most cases, if the penalty is too high, the penalty is mitigated by the courts based on the circumstances of the case.

Dutch employment law prohibits giving notice to certain categories of employees, such as pregnant women, members and former members of a works council and employees who are absent due to illness (at least during the first two years). 

In cases where the illness commences after the employer files his application for dismissal to the Employee Insurance Agency (UWV), the employer will still be allowed to give a notice of dismissal to the employee. 

The rules for special protection do not apply to cases of termination of employment by the court. However, the court will assess whether the request for termination involves a prohibition to terminate and will refuse the termination if the reason for termination directly results from a prohibition to terminate. 

If a collective bargaining agreement (CBA) applies, the employment conditions will be governed by the CBA. The CBA may also provide for an alternative dismissal route in case of redundancy, but that is uncommon.

In the Netherlands, the statutory director who is appointed by the shareholder of a private or public limited company has a special legal status. This also applies to statutory directors of foundations or associations.

The statutory director has a dual position: a corporate position and an employment agreement with the company. The statutory director does not enjoy the same dismissal protection as regular employees. 

In all circumstances, the employer must ensure that there are one or more reasonable grounds based on which the employer can terminate the employment agreement. Usually, lack of trust is presented as the main reasonable ground for termination. The possible (limitative) statutory reasonable grounds under Dutch law are as follows: 

1. Economic grounds
2. Long-term illness or disability
3. Regularly not being able to perform work due to illness or disability
4. Underperformance
5. Culpable acts or omissions
6. Conscientious objection
7. Disturbed working relationship
8. Other grounds than those mentioned above
9. Cumulated dismissal grounds based on more than two dismissal grounds as mentioned under C –  H combined

Before being able, exceptions excluded, to terminate the corporate position of the statutory director by means of a shareholders' resolution, certain procedural steps must be taken. These steps are set out in the company's association articles. The manner in which the statutory director is invited in writing, the wording of the invitation (which should not only include the reasonable grounds but also explicitly state that the statutory director has the right to render advice about the contemplated decision and be heard), and the timing of the shareholders' meeting are essential to ensure that the corporate termination cannot be legally challenged. 

Until the shareholders meeting takes place, parties have the opportunity to negotiate a settlement agreement. The benefit of reaching a settlement agreement is that it allows the employer to know usually within a week whether the matter can be closed by means of a final settlement instead of being confronted with lengthy and costly procedures initiated by the statutory director. 

If no settlement agreement is reached, the shareholders' meeting will take place. In this meeting, the  statutory director will be given the opportunity to be heard and will be given an advisory vote as a statutory director. It is important to ensure that the discussion held during the shareholders' meeting and the resolution are well documented in case the statutory director decides to initiate court proceedings afterwards to claim damages. Once the corporate position has been terminated validly, the employment agreement will end automatically after expiration of the notice period, unless a prohibition of termination applies (for example prohibition of termination of employment agreement during illness). 

Often, the handing over of the invitation holds an element of surprise for the statutory director and preserving this surprise is recommended. The reason is: if the statutory director is aware of the contemplated decision to terminate the corporate position and calls in sick before having received the invitation, the employment agreement can no longer end automatically. In such a scenario, the prohibition of termination of the employment agreement due to illness applies. This could mean that the corporate position has ended, and the company must seek termination through the court or wait until the company doctor has confirmed that the statutory director is no longer ill after which notice can be given.

The statutory-notice period for the statutory director is one month, regardless of the number of years of employment. The statutory notice period for the employer depends on the length of service as per the termination date. An applicable collective bargaining agreement may stipulate otherwise, but the statutory notice period to be observed by the employer is equal to: 

• One month if the employment has lasted five years or less;
• Two months if the employment has lasted between five and ten years; 
• Three months if the employment has lasted between ten and 15 years; 
• Four months if the employment has lasted for 15 years or longer. 

The period of notice may, for the statutory director, be extended contractually up to a maximum of six months. If the statutory director's period of notice is extended, however, the period of notice for the employer may not be less than twice that of the statutory director. In practice, companies often opt for a notice period that exceeds the statutory term, either to safeguard continuity when the statutory director gives notice or as additional compensation in case the initiative to terminate lies with the company.

Importantly, a long notice period means that in case of termination by the company, payments over this period are due in addition to the transition payment. 

A payment in lieu of notice can be agreed upon in a settlement agreement. That said, employees are generally unwilling to accept this due to their right to unemployment benefits. To receive unemployment benefits consecutive to the termination date, the notice period must be fully respected. If not, the employee has an income gap. An earlier end date, including payment in lieu, is not possible if the court terminates the employment agreement or if the UWV grants permission to terminate the employment agreement. 

For international statutory directors working under an employment agreement governed by Dutch law, the same rules regarding statutory notice periods, as outlined above, apply.

If the company has a works council, then both the dismissal and the hiring of a statutory director (in light of the Works Councils Act, this person is defined as the individual who, alone or jointly with others, exercises the highest direct authority in managing work within an enterprise) are subject to the prior advice of the works council. The involvement of the works council must be initiated at such a stage when the decision is still being contemplated. As mentioned above, it is recommended that the handing over of the invitation to the shareholders meeting is done without prior announcement to the statutory director. This, and the fact that parties will often try to settle the termination rather than actually have the shareholders meeting, means that the fewest number of persons will be aware of the contemplated decision. The communication with the works council is subject to statutory confidentiality and is usually involved shortly after the invitation has been handed over to the statutory director.

No involvement.

Not applicable.

Not applicable.

An employer can terminate an employment agreement (definite and indefinite) with immediate effect for an ‘urgent’ cause, such as theft, fraud, or other serious misconduct. One of the formalities to take into account is that notice must be given shortly (i.e. almost immediately) after the employer has become aware of relevant findings. Due to the fact that the statutory director also holds a corporate position, a shareholders meeting should be convened as soon as possible – in accordance with the articles of association – in which the immediate dismissal is put on the agenda. In the invitation for the shareholders meeting, the contemplated decision of summary dismissal and the urgent cause given rise to the dismissal should be articulated.

Until the shareholders meeting takes place, parties have the opportunity to negotiate a settlement agreement. The benefit of reaching a settlement agreement is that it allows the employer to know usually within a week whether the matter can be closed by means of a final settlement instead of being confronted with lengthy and costly procedures initiated by the statutory director. 

If no settlement agreement is reached, the shareholders' meeting will take place. In this meeting, the statutory director will be given the opportunity to be heard and will be given an advisory vote as a statutory director. In the shareholders' meeting, the decision will be made to terminate the corporate and employment position with immediate effect without statutory severance being due. The employment agreement will end automatically and immediately once the corporate position has been terminated validly. This is also during illness. The prohibition to give notice during illness does not apply when the sick employee is dismissed for urgent cause, as long as the dismissal for urgent cause is legally valid.

If there is no reasonable ground, urgent cause and/or if redeployment (within the group) is reasonable, but the statutory director has been dismissed anyway, the requirements for dismissal are not met. If these requirements have been violated, the court may grant the statutory director fair compensation. 

Even though in case of a wrongful dismissal, the statutory director cannot claim reinstatement within the company. This is due to his (previous) dual position. The only consequence, if the requirements are not met, is granting of the above-described fair compensation.  This is different if the statutory director can successfully claim that the corporate position was not ended properly. In such a situation, also the termination of the employment agreement could be challenged.

When the statutory director’s employment agreement is terminated, the mandatory transition payment is due. The amount of the transition payment depends on the seniority of the employee and is equal to: 

One-third of the monthly salary for each calendar year. The transition payment over the remaining part of the employment agreement is calculated according to the formula: (gross salary received over remaining part of employment agreement / gross monthly salary) x (1/3 gross monthly salary / 12).

This formula is also used to calculate the transition payment if the employment agreement has lasted less than one year. 

In 2025, the maximum transition payment is EUR 98,000 gross and for employees who earn more than EUR 98,000 gross a year, the transition payment is maximised at one annual gross salary. 

In case parties have agreed to a contractual severance, one should verify whether the statutory director is entitled to both the contractual severance (i.e. a golden parachute) as the statutory severance. Parties must have clearly agreed, in the employment agreement, whether the transition payment is included in the golden parachute.

The statutory director may be entitled to an additional (reasonable) compensation, if the employer has acted in a seriously culpable manner. This could apply if the dismissal is not based on any of the statutory reasonable grounds. In that case, the additional compensation, damages, and remuneration is not subjected to a specific maximum amount and will be determined by the court. If the statutory director wishes to challenge the decision of the shareholder, he should initiate court proceedings within three months after termination of his employment. 

In the Netherlands, there several types of restrictive covenants, including:

• Non-competition clause: may be inserted into the employment agreement, but it will only be valid if it was set out in writing with an adult employee. If a non-competition clause is inserted into a definite term employment agreement, the compelling reasons that such a clause is necessary must be specified in writing in the employment agreement.
• Non-solicitation clause: may be included in the employment agreement. The non-solicitation clause restricts the employee from contacting or doing business with the employer's clients, customers, or business relations for a certain period after the employment agreement ends. It is intended to protect the employer's business interests and relationships.
• Non-poaching clause: may also be inserted into the employment agreement. This clause prohibits the employee from directly or indirectly attempting to persuade employees of the employer, or its affiliates, to work for the employee's company or another employer.
• Confidentiality clause: obligates the employee to maintain strict confidentiality regarding all information that the employee acquires during the performance of his/her duties regarding the affairs, activities and interests of the employer or any of its affiliates. The employee is prohibited from disclosing this information to third parties during and after the end of the employment agreement.
• Intellectual property right clause: specifies that present and future intellectual property rights arising from or relating to the work performed by the employee under the employment agreement shall belong to the employer.

The termination prohibitions that apply to employees also apply in the relationship with the statutory director. Dutch employment law prohibits giving notice to certain categories of employees, such as pregnant women, members and former members of a works council (which are not statutory directors due to the nature of these roles), and employees who are absent due to illness (at least during the first two years of illness). 

As mentioned above, if the statutory director calls in sick before actually having received the invitation to the shareholders' meeting, the employment agreement will not end automatically, but will remain in place. The statutory director will in that case be protected against termination of his employment agreement whereas his corporate position can end..