US vs Netherlands termination rules: permission first

A US employer decides, then acts. A Dutch employer asks, then acts. Article 7:669(1) BW lets an employer terminate an indefinite arbeidsovereenkomst only where two tests are satisfied at the same time: there is a redelijke grond drawn from a closed statutory list, and herplaatsing, redeployment into another suitable role within a reasonable period and if necessary with training, is not possible or not reasonable.

Both tests are examined by somebody outside the business before the contract can end. Redundancy and long-term incapacity go to UWV, which grants or refuses permission. The other grounds go to the kantonrechter, which dissolves the contract or declines to. There is no route that substitutes a payment for the process: writing a larger cheque does not buy the right to skip the application.

The grounds themselves are nine, lettered a to i in article 7:669(3) BW, and the list is closed rather than illustrative. That word does a lot of work for a US reader. A reason that is honest, commercially sensible and entirely lawful is still not a reason unless it maps onto one of the nine. The detailed mechanics of each route, including the vaststellingsovereenkomst and the reflection period that goes with it, are set out in our post on terminating employment in the Netherlands.

There are three ways out that do not run through an application, and a US reader should know what they are before assuming the system is closed. An ending by mutual consent, recorded in writing, avoids both bodies entirely and is how a great many Dutch employments end. A dismissal inside a valid proeftijd sits outside the grounds regime altogether, which is why the probation clause is worth getting right at signature. And summary dismissal for an urgent cause exists, but it is rare, it is high risk, and it is not a faster version of an ordinary dismissal.

At-will employment makes the ending an internal decision. The employer works out whether the reason is one it is not allowed to act on, documents what it needs to document, and then ends the job on a date it chooses. The risk arrives afterwards, as a claim, and it is a risk about the reason rather than about the procedure.

The Netherlands reverses the order. The reason is tested first, by a third party, and the ending only becomes available once that test is passed. The consequence is not mainly financial. It is that the date is no longer the employer’s to pick, and that a decision taken in a management meeting in March may not be executable until well into the summer.

This changes what a US business has to plan. Restructuring becomes a project with an external dependency in the middle of it. Performance management becomes a paper trail built months before anyone intends to use it, because the ground for unsuitability requires that the employee was told in time and given a real opportunity to improve. And an underperforming hire in month five is not a quick correction, which is why the contract that was signed at the start matters far more here than it does at home.

A granted permission is not a standing right. Article 7:671a(6) BW makes UWV permission valid for four weeks from the date of the decision, and within that window the employer has to give notice in writing, stating the reason. Miss the window and the application has to be made again.

It goes further than that. Article 7:671a(9) BW makes void any clause that excludes or limits the duty to seek permission, or that extends the four weeks. The period is not something a contract can negotiate, and a US parent’s standard employment agreement will not survive contact with it.

Timing has to be planned backwards from that four-week window. UWV states that handling a complete dismissal application usually takes about four weeks, and its procedure runs in three parts, with the employee given two weeks to file a defence before the case is decided. Where permission is granted, article 7:672(6) BW then credits the time the procedure took against the notice period, but at least one month of notice always remains. Where it is refused, there is no appeal to UWV: the employer can go to the kantonrechter within two months or file again only on new information, as UWV sets out in its guidance on what happens after an application.

The dismissal does not simply stand and cost money. Where an employer ends the contract without the permission it needed, the employee can apply to the court within two months either to have the contract reinstated or to be compensated. Reinstatement is a genuine outcome, not a theoretical one, and it is the remedy a US employer has no mental model for.

The compensation route has no ceiling. A billijke vergoeding, the award a court can make where the ending results from seriously culpable conduct by the employer, has no statutory cap and no published tariff. The court sets the amount on the facts, which means nobody can price the exposure in advance and any adviser offering a multiplier is guessing.

The two-month window matters as much as the remedy. It runs from the ending, it is short, and it does not depend on the employee having complained first, so an employer that assumes silence means acceptance can find out otherwise late in a quarter it has already closed.

That is the real asymmetry between the two systems. In the Netherlands the cost of doing it properly is knowable and the cost of doing it badly is not. A US buyer used to treating dismissal risk as a number on a spreadsheet is being asked to treat it as a procedure instead, and the procedure is the cheaper of the two.

The Dutch statutory severance is called the transitievergoeding and it is modest by the standards of the fear it generates. Article 7:673 BW sets it at one third of a month’s pay for each year the contract lasted, with a proportionate part for anything shorter than a year. The maximum for 2026 is € 102.000,00, set in article 7:673(2) BW itself, or a year’s pay where that is higher.

Two features of it catch US employers out. The first is that it starts on day one: there is no qualifying period, so a hire who leaves after four months is owed a proportionate amount. The second is that it is owed on a non-renewal. Letting a fixed-term contract expire on the employer’s initiative triggers it under article 7:673(1)(a), which means the US habit of using a fixed term as a low-cost trial has a price attached in the Netherlands.

Notice sits on top and runs by length of service: one month under five years, two months from five, three from ten and four from fifteen, given against the end of the month unless something else is agreed in writing. None of that is expensive compared with what a US employer expects to pay a departing senior employee. The money was never the difficult part. The calendar is.

Notice can be lengthened in writing, but not freely: where the employee’s period is extended it may not exceed six months, and the employer’s must then be at least double the employee’s. An imported contract that quietly doubles the employee’s notice without doubling the employer’s has created an obligation its drafter did not intend.

One more point of difference is worth stating plainly, because it cuts the other way. The transitievergoeding is not automatically owed where a contract ends by mutual consent, since article 7:673(1) does not list mutual termination. In practice it tends to be where the negotiation starts, but that is practice rather than entitlement, and treating it as a floor is a choice an employer makes rather than a rule it obeys.

Four things move from the back of the plan to the front, and all four are decisions taken long before anyone wants to end anything.

• Illness stops the process. Article 7:670(1) BW prohibits notice while an employee is unfit through illness until the incapacity has lasted two years, and the narrow escape route closes the moment the employee reports sick rather than when the employer decides to act.
• The two years of sick pay come with a reintegration process that UWV marks at the end, and a badly run process can add a further year of wages. See our post on the Wet verbetering poortwachter.
• Performance cases are built, not declared. The unsuitability ground requires that the employee was told in time, given a genuine chance to improve, and not left short of the training or working conditions they needed.
• Endings are commonly settled by mutual consent rather than fought, which is why what the contract says at the start does most of the work at the end.

None of this makes a Dutch hire a bad idea, and none of it makes the country difficult to employ in. It makes the sequence different, and a plan built on the US sequence will be wrong at exactly the moment it matters. For a US company hiring its first Dutch employee, the practical conclusion is that the exit terms belong in the same conversation as the salary. Our post on US companies hiring in the Netherlands covers the rest of the ground a US buyer has to cross, and our comparison of US and Dutch employer costs puts the running cost next to it.

Employer of Record Netherlands employs the person on a Dutch arbeidsovereenkomst and carries the employer duties that go with it, including this process, while your business keeps the work and the decision about whether the role continues.