Understanding Your Options
If you need to dismiss an employee in the Netherlands, the first thing to understand is that at-will termination does not exist. Every dismissal must follow one of three legal routes, and every route requires proper documentation and, in most cases, a valid statutory ground.
The route you choose depends on the reason for dismissal, the urgency of the situation, and whether the employee is willing to cooperate.
Route 1: Settlement Agreement (Vaststellingsovereenkomst)
The most common and preferred route — approximately 85% of Dutch terminations use a settlement agreement:
- Process: Employer proposes termination with a package; employee negotiates terms
- Timeline: Can be completed in days to weeks
- Key terms: Termination date, severance (at minimum transition payment), notice period compensation, final salary, references, legal cost contribution
- Cooling-off: Employee has 14 calendar days to revoke a signed agreement — this right cannot be waived
- Unemployment: If structured correctly, the employee retains the right to unemployment benefits (WW)
Route 2: UWV Dismissal Permit
Used for two specific grounds: economic dismissal (redundancy) and long-term illness (after 2 years):
- Redundancy: Must demonstrate structural job loss due to financial, organizational, or technological reasons. Reflection principle applies for selection.
- Long-term illness: Employee must have been sick for 104+ weeks, reintegration must be exhausted, and there must be no prospect of recovery within 26 weeks.
- Processing: UWV typically decides within 4–6 weeks. Employee can appeal to the court.
Route 3: Court Dissolution (Kantonrechter)
Used for all other grounds — performance issues, misconduct, disrupted relationships:
- Process: Employer files a petition with the cantonal court. Oral hearing typically within 4–6 weeks.
- Documentation: The employer must prove the dismissal ground is 'fully substantiated' — partial grounds may justify cumulation (ground i) with additional compensation up to 150% of transition payment.
- Court decision: The judge can grant or deny dissolution. If granted, sets the termination date and confirms the transition payment amount.
Calculating the Transition Payment
Every dismissed employee (except summary dismissal for urgent cause) is entitled to a transition payment:
- Formula: 1/3 of gross monthly salary per year of service
- Part years: Pro-rated for partial years (including months and days)
- Day one: The right arises from the first day of employment — even probation terminations trigger transition payment
- Maximum: €94,000 (2026) or one annual salary if higher
- Additional compensation: Courts can award additional 'fair compensation' (billijke vergoeding) if the employer acted seriously culpably
