Joost Kokje, 14 June 2024

Employment law in the Netherlands – part 3 key features of Dutch Labor Law

The Dutch labor law framework is characterized by a balance between employee protection and entrepreneurial flexibility, rooted in a tradition of social dialogue and progressive regulation. Understanding the key features of Dutch labor law is crucial for both employers and employees operating within the Netherlands. In this third part of our comprehensive guide into Dutch labor laws, we highlight some essential elements that define this legal landscape.

1. Employment Contracts

Dutch law recognizes three main types of employment contracts:

• Permanent contracts: these are open-ended contracts that provide significant job security. Termination is subject to stringent legal requirements, such as prior court proceedings.
• Fixed term Contracts: These are for a specified period and can be renewed up to three times within a three-year period before they automatically convert into a permanent contract.
• Temporary Agency Contracts: These involve a tripartite relationship between the employee, the temporary employment agency, and the company where the employee actually works.

Each type of contract must comply with specific legal requirements regarding terms, conditions, and notice periods. Other contract types exist as well, such as payroll contracts.

2. Probationary Period

Probationary periods in the Netherlands are strictly regulated. For permanent contracts and fixed-term contracts longer than two years, a probationary period of up to two months is allowed. For fixed term contracts with a duration between six months and two years, only one month is allowed. Fixed term contracts shorter than six months, a probationary period is not permitted. During the probationary period, both employer and employee can terminate the contract with immediate effect for any reason other than discriminatory grounds.

3. Working hours and overtime

The standard workweek in the Netherlands is 40 hours, but variations exist depending on the sector and specific agreements. The Working Hours Act (Arbeidstijdenwet) governs maximum working hours, rest periods, and overtime:

• Maximum hours: Employees can work a maximum of 12 hours per shift and 60 hours per week, though these limits are subject to averaging over a given period.
• Overtime: Compensation for overtime is typically agreed upon in the employment contract or collective labor agreements (CLAs). There is no statutory requirement for overtime pay, but – at least in some sectors – it is regularly provided for.

4. Leave and holidays

Employees in the Netherlands are entitled to various types of leave:

• Annual leave: The statutory minimum is four times the weekly working hours (e.g., 20 days for a full-time employee). Additional days are often provided by CLAs. Best practice as well shows employer offering 5 above statutory holidays on a yearly basis.
• Public Holidays: There are generally eight public holidays, though the exact number can vary.
• Sick Leave: Employers must pay at least 70% of the employee’s salary for up to two years of illness. The salary does not only include base wage, but potentially as well commission or bonus.
• Parental Leave: Parents are entitled to parental leave, which can be taken up until the child reaches eight years of age.
• paternity leave: relatively recently additional rights have been introduced, providing more support for new fathers. Now 5 additional weeks are offered to be taken within 6 months after the child is born. The employee’s wage is covered by the UWV up to 70%.

Other types of leave exist as well, such as pregnancy leave and short term and long term care leave.

5. Dismissal and Termination

Dutch law imposes strict rules on dismissals to protect employees from unfair termination:

• Dismissal with permission: employers need prior permission from the Employee Insurance Agency (UWV) or a court to terminate an employment contract.
• Grounds for dismissal: before permission is granted, valid reasons for termination need to be proven. Valid reason may be economic reasons, long-term incapacity, poor performance, and misconduct.
• Notice period: the notice period varies based on the length of service, generally ranging from one to four months. CLA might deviate from this, just as employment agreements.

In cases of unfair dismissal, employees can claim compensation or reinstatement. Additionally, when the employer terminates the employee’s employment, in principle the employee is entitled to a statutory severance pay (transitievergoeding), being 1/3 of a monthly wage (including holiday allowance and commission and/or bonus) per year worked.

6. Collective Labor Agreements (CLAs)

Many industries and sectors in the Netherlands are governed by collective labor agreements, which set terms and conditions of employment, including wages, working hours, and benefits. These agreements are negotiated between employers’ organizations and trade unions and are legally binding if employers are a member of the employers organizations, if the CLA is incorporated into the employment agreement and/or if the CLA has been declared universally applicable by the Dutch government.

7. Employee representation

Dutch law promotes strong employee representation through Works Councils (Ondernemingsraad):

• Works councils: companies with 50 or more employees are required to establish a Works Council. These councils have various rights, including the right to be informed and consulted on significant business decisions. As well they have a right of consent on several topics, such as the implementation of reward policies.
• Representation in smaller companies: In smaller companies with between 10 and 50 employees, employee representatives may be elected to ensure workers’ voices are heard. When the employees request for such a representative, the company is obliged to appoint.

Conclusion

Dutch labor law provides a robust framework that balances the interests of employees and employers. Its key features, from comprehensive employment contracts and strict dismissal protections to detailed regulations on working hours and leave entitlements, make it one of the most protective labor systems in Europe. Understanding these laws is essential for maintaining compliant and fair workplace practices in the Netherlands.

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