Employment contracts in the Netherlands

Employment contract

An employment contract exists when three core elements are present:

• the employer is entitled to give orders as to how the work is to be carried out
• the work is to be carried out personally by the worker, and
• the worker receives remuneration (wages) for his/her work.

Please note, the label given to the relationship by the parties is not decisive. A court will consider all relevant factors in deciding whether a particular relationship amounts an employment contract.

Formal requirements

In general, there are no rules as to the form which an employment contract may take. An employment contract may be in writing or verbal and it may incorporate, by reference, terms in other documents, such as an employee handbook or a collective labour agreement (CLA).

Fixed term contracts

A fixed term employment contract may automatically terminate at the end of a predefined fixed term without having to comply with any particular termination formalities. However, employers are required to give employees whose fixed-term employment contracts of six months or longer are about to end, one month’s advance notice as to whether or not the contract will be renewed as well as the conditions upon which the employment contract may be renewed. Failure to do so will cause the employer to forfeit one (prorated) month’s salary to the employee.

Parties are free to enter into consecutive fixed term employment contracts, each ending automatically, provided that, in general, the breaks between the employment contracts (the links) are shorter than six months, total length of the consecutive employment contracts (the links) does not exceed two years and the number of consecutive employment contracts is less than four. If the total length is longer than two years and/or if the number of consecutive links exceeds three, the fourth employment contract will be of indefinite duration.

Dismissal

The dismissal method will depend upon the reason for dismissal, in case of personal reasons the employer should request the court to dissolve the employment agreement and in case of business economic reasons or long-term illness the employer should first obtain the permission of the Employment Agency (UWV-Werkbedrijf) before serving notice of termination. Besides these two options, parties can also terminate the employment agreement at any time by mutual consent.

Part time contracts

Part time employment contracts are possible and can be for an indefinite or fixed term. The Working Hours (Adjustment) Act provides that the employee can request to adjust his/her working hours.

Trial periods

The parties to an employment contract, whether for a definite or an indefinite period, can agree upon a trial period. The length of the trial period depends on the length of the employment contract:

• in agreements not exceeding six months: no trial period is possible

• in agreements for a period longer than six months but not exceeding two years: no longer than one month

• in agreements for a period of two years or more: no longer than two months, and 

• in fixed term agreements not coinciding with calendar dates (eg for the duration of a project or to replace a sick employee): no longer than one month.

Other provisions

The employer may include several other provisions, for instance a clause regarding confidentiality, non-competition, non-solicitation or non-dealing.

Please note, non-compete clauses are only valid if agreed upon in writing and the employee must be aged 18 or over when they enter into the clause. Furthermore, it is in principle only possible to agree to a non compete clause if it is included in an indefinite employment contract. Non-compete clauses in fixed-term employment contracts should only be agreed if a statement of reasons included with the clause demonstrates that the clause has been included to protect substantial business interests, which must be set out in the clause. If either of these requirements has not been complied with, the clause is null and void. Furthermore, a non compete clause may be limited or held to be null and void by a court on the grounds that considering (amongst other things) the employer’s interests which are to be protected by the clause, the employee is unreasonably restricted in his/her ability to accept another job which is considered suitable taking into account his/her abilities, experience, etc.

These clauses must be drafted carefully in order to be enforceable. Restrictions apply to restrictive covenants in fixed term contracts. These clauses might include a penalty clause.

Garden leave

Employers cannot require employees to take “garden leave” as such. To suspend an employee there must be an urgent cause and in most cases, the fact that the employee will be leaving the employer, will not be sufficient. Even if an employer has good reason to suspend an employee, and it was the employee who provided such cause, wages must generally be paid during a period of suspension.

General contractual terms

It is common and advisable to include in the employment contract, irrespective of the duration, at least terms in respect of the governing law, holiday accrual, payment of salary during sickness, working hours, non compete, applicability of a CLA and/or employee handbook and duration of the agreement.