Please note that the content of the legal report is inevitably much general and brief considering the labor law system in Western European countries with high social welfare is very comprehensive and complex.
1. How to terminate an employment contract in the Netherlands
Generally speaking, the Dutch labor law system for dismissal is particularly unusual, as it is very protective of employees. In most cases, the employer needs permission from the regional labor office, known as UWV WERKbedrijf (“UWV”), or the court to fire employees.
The employer may terminate an employment contract only when the dismissal is based on solid grounds. Dismissal is void when:
 it is based on discrimination or one of the statutory grounds;
 the employee is pregnant or on maternity leave;
 the employee is a member of the works council; or
 the employee is absent from work due to sickness.
There are different ways available to terminate an employment contract:
 Termination by mutual consent.
 Termination during the probationary period.
 Expiry and non-renewal of a fixed-term employment contract (in this case, the employer must notify the employee one month in advance).
 Summary dismissal for an urgent reason.
 Rescinding the employment contract by court ruling.
 Giving notice to terminate with authorization from UWV.
(1) Termination by mutual consent
All employment contracts may be terminated at any time by mutual consent between parties, with or without observance of the statutory or agreed notice period and with or without payment of compensation to the employee. It is important for the employer to ensure that the employee’s consent to the agreement is explicit and clear. Since the Work and Security Act came into force in 2015, a two-week reflection period has been introduced. Within this period the employee has the right to rescind the settlement agreement. The employer must inform the employee of this right; if the employer fails to do so, the reflection period will be extended.
(2) Termination during probationary period
During the probationary period, either party may terminate the employment contract at any time without observing a notice period and without any liability for severance pay, unless the termination is, for instance, based on discriminatory reasons. At the employee’s request, the employer must provide the reasons for the termination of the employment contract during the probationary period. Further, there are no conditions for terminating the agreement.
(3) Non-renewal of fixed-term contract
When the employer decides not to renew a fixed-term contract, this means that the contract will automatically terminate after the contract’s end date. The employer must inform the employee at least one month in advance, regardless of whether the employment contract will be renewed or not.
(4) Summary dismissal
If an urgent cause exists, an employer may summarily dismiss an employee. In such a case, the contract of employment is not terminated by notice and consequently the provisions which apply to termination by notice do not have to be observed. An urgent cause is a circumstance or set of circumstances which are such that the employer cannot in all reasonableness be expected to allow the contract to continue. An urgent cause may exist, inter alia, if an employee is guilty of theft or embezzlement or divulges confidential information.
Whether an urgent cause actually exists will depend on the specific circumstances of the case. It goes without saying that an urgent cause for summary dismissal will only exist very rarely. If an employer is hesitant in effecting a summary dismissal, it will be void regardless of whether an urgent cause did actually exist.
If an employee who has been summarily dismissed wishes to contest the existence of an urgent cause, he may, in principle, take two courses of action. He may claim that the termination was void since no UWV permit was obtained or he may acquiesce in the termination but seek to recover damages on the grounds that it was unlawful. These damages are limited to the amount of salary which the employee would have received during the notice period had it been properly observed, or to the actual damages directly resulting from the dismissal. In most cases, the employee claims that the termination was void, especially if he has become unemployed as a result.
(5) Rescission by the court
If the dismissal is for reasons relating to the employee, the employer must ask the cantonal labor court to rescind the employment contract on the basis of one of the reasonable grounds set out in Clauses (c) to (h) of Paragraph 3 of Article 7:669 of the Dutch Civil Code. The list is exhaustive and it is not possible to combine different (incomplete) dismissal grounds to justify a dismissal. The reasonable grounds are as follows:
 Frequent sickness absence – where no improvement is expected within 26 weeks and it is not possible for the employer to arrange cover for the employee's workload during this period. The employee's absence must have unacceptable consequences for the employer's operations and the reason for the absence should not be connected to any failure of care by the employer.
 Poor performance – where the employee has been given sufficient opportunity to improve his or her performance and has been notified of the consequences of failure to do so.
 Culpable behavior – the employee has committed culpable acts or omissions to the extent that continuation of the employment contract cannot reasonably be expected.
 Conscientious objections – the employee refuses to perform work under his or her contract of employment due to conscientious objections.
 Disturbed working relations – the employee's working relationship with his or her employer is disturbed to the extent that continuation of the employment contract cannot reasonably be expected.
 Other grounds – the circumstances are of such a severe nature that continuation of the employment contract cannot reasonably be expected.
It has been proven difficult for employers to dismiss an employee on one ground. The government has therefore introduced a new ground for dismissal (which will likely become the ‘i-ground’), which intends to give the cantonal judge the option to determine the end of the employment contract on more than one ground for dismissal, if justifiable.
The Balanced Labor Market Act expects to introduce a new reasonable ground for dismissal, known as the ‘i-ground’. In order for this to apply, there must be a combination of circumstances pertaining to two or more other grounds for dismissal, which is such that the employer cannot reasonably be expected to continue the employment relationship. If the court dissolves the employment contract on the i-ground, the transition payment is increased by 50%.
(6) Dismissal with official authorization of UWV
The employer needs permission from the UWV before it can terminate the employment contract in the following situations:
 The employee has been absent due to sickness for more than two years.
 The employer wants to terminate the contract due to bad economic circumstances    within the company (business reasons).
This dismissal permit must be obtained before notice is given to the employee. Termination in these cases without the UWV’s prior permission is void. The employer must apply for a dismissal permit to the UWV covering the location where the work is normally carried out or where the employee is employed, giving reasons for the proposed dismissal. It usually takes around six weeks for the UWV to respond. It assesses the reasonableness of the proposed dismissal, consulting an advisory committee made up of representatives of trade unions and employers' organizations. Sometimes these representatives will ask for more information from one or both parties.
After obtaining the dismissal permit from the UWV, the time spent on the UWV proceedings may be deducted from the applicable notice period, although the remaining notice period must be at least one month.
2. Obviously unreasonable dismissal
If an employment contract is terminated unilaterally by the employer, even if an UWV permit has been obtained and the proper notice period observed, the employee may file a legal action alleging that the termination was “obviously unreasonable”. Termination will be deemed obviously unreasonable if either no reason, a mere pretext, or a false reason is given, or if the hardship endured by the employee is disproportionate to the employer’s interests.
In such an event, the employee may claim reinstatement or compensation in an amount to be determined by the court. This compensation differs from that which is paid when a contract of employment is rescinded.
3. Severance payments
Before the entry into force of the Work and Security Act, severance payments beyond the right to paid notice were either at the discretion of the employer or awarded by the courts under the ‘cantonal judge formula’. This position changed with the introduction of the statutory transition payment scheme. Now, on non-renewal of a fixed-term contract of two years or more or a dismissal after two years' employment, an employer must pay transitional remuneration (unless the dismissal results from seriously culpable conduct).
Transition payments are linked to length of service and age, as follows:
 For the first 10 years of employment, the payment is one-sixth of monthly
wages for each completed six months of service;
 From the 10th year of employment onwards, the payment is one-quarter of
monthly wages for each completed six months of service; and
 For employees aged over 50 and employed for more than 10 years, the
payment is one-half of monthly wages for each completed six months of service (this is a transitional arrangement until 2020 that does not apply to small employers with fewer than 25 employees).
An employee is not entitled to a transition payment if the dismissal resulted from his or her seriously culpable conduct; while the court may award additional compensation to an employee where the employer's conduct has been seriously culpable.
Monthly wages, for the purposes of calculating a transition payment, include holiday pay, overtime, shift allowances and bonus payments. Transition payments are capped at