Dutch labour law is complicated and, in certain respects, differs greatly from other legal systems. In 2015 some major changes have been made in Dutch labour law. Please find in this newsletter an update of the main issues.
If the duration of a contract is shorter than 2 years, the trial period may not exceed one month. During the probation period, both parties can terminate the employment agreement at any time, with immediate effect and without any notice. The probation period of for example 6 months is not allowed.
The Holiday Allowance Act provides that an employer is obliged to pay a holiday allowance equal to a certain percentage, currently 8%, of the employee’s salary.
According to Dutch law the employee is entitled to 20 holidays (reed: working days) per calendar year with retention of salary assuming a full working week of 40 hours (legal holidays). The limitation period for the legal holidays is 6 months after the end of the year in which the employee can claim those holidays.
It is allowed to agree more than 20 holidays per calendar year. In the Netherlands it is common to have more than 20 holidays. According to Dutch Civil Law, the additional holidays the employee has saved can not be claimed after expiry of 5 years.
Occupational disability of the employee
In the event of illness, an employee is entitled to receive at least 70% of his salary for a maximum period of 104 weeks. This payment can be maximized to 70% of the maximum standardized wage per day (the employee who earns more than the maximum standardized wage per day, will receive only 70% of the maximum standardized wage per day). It is also possible to agree that the employee will receive 70% of the last benefited wage.
It is also possible to supplement the wage up to 100% (for example for a period of the first 6 weeks of illness or for the first 52 weeks of the sickness), but this does not absolve the employer to pay at least 70% of the maximum standardized wage during the 104 weeks of illness.
In the Netherlands it is quite common that the statutory sickness pay (70%) will be raised by the employer for some period. Still there are also other options than the 100% / 70%.
If the employment contract is for 12 months and the employee will become sick during this contract and will not recover, than the employer has to pay at least 70% of the maximum standardized wage till the end the contract.
It is possible arrange an insurance, which will cover the costs in case of illness of the employee.
As per January 1st, 2015, a non-competition clause in a fixed-term employment contract is invalid (regardless of the contract’s duration), unless the clause includes written substantiation evidencing that non-compete clause is necessitated by pressing interests of the business or service.
Termination of the contract
A fixed-term contract will expire automatically and lawfully without a requirement for prior notice.
An announcement period is applicable to fixed-term employment contracts, which are six months or longer. The employer must announce to the employee not later than one month before the end of the contract whether the contract will be renewed or not. This need to be done in writing. If the employer fails to do this, he will have to pay compensation which is equal to one month salary.
Termination in the interim
To terminate the contract for an indefinite period but after the trial period, the employer will need the permission from the Dutch Regional Dismissal Authority (“UWV”) or from the Dutch court, unless the employee agrees with the termination. The UWV and the Dutch court will only grant a permit if, in balancing the employer’s and employee’s interests, he deems the proposed termination reasonable.
If the employer wants to terminate a contract for personal reasons (bad behaviour), than the court has the jurisdiction to terminate the contract and depending on the circumstances, the court may grant the employee a reasonable compensation.
The extension of the contract for a definite period
As per July 1st, 2015 an employment agreement for a definite period of time automatically changes into an employment agreement for an indefinite period of time if it is extended after a period of two years (24 months) or when it is extended for the fourth time during this period.
The extension of the assessed contract, for example with a period of 1 year, can happen automatically. The employee has just to appear at work and the employer has to let him work.
If the employee has at least 2 years of service at the employer, the employee is entitled to a transition payment. The payment is dependent of the length of the employment.
The transitional payment is 1/3 month’s salary per year of service for the first 10 years, and ½ month’s salary per year of service after that. The maximum gross transitional payment is € 75.000 euros (in 2015) or one year’s salary if this is higher than € 75,000 gross.
Our advisors are pleased to inform and advise you about these and other matters. So if you have any questions pursuant to this newsletter, please feel free to contact us.