2.3 ICS Payroll: How to Terminate a Dutch Employment Contract

Terminating a Dutch employment contract requires following specific procedures under Dutch law, whether the employee was hired directly or through an Employer of Record. A company without a Dutch entity must still comply with Dutch dismissal rules, notice periods and any settlement requirements. ICS Payroll's remote-hire EOR route places the local Dutch employment relationship with its partner, so terminations are managed through that local employment structure. The foreign company should understand the termination process before hiring to ensure it can comply when employment ends.

Dutch termination procedures and notice requirements

Dutch employment law sets notice periods and dismissal procedures that apply regardless of the company's location or entity structure. An employer must give written notice to terminate employment, and the notice period depends on whether termination is during the probationary period, with notice given by the employer, or with notice given by the employee.

During a probationary period, if any, employment can normally be terminated more easily with shorter notice. After the probationary period ends, an employer must follow Dutch dismissal procedures. Business.gov.nl describes dismissal procedures and protections as a required knowledge area. The exact procedures depend on the employment agreement, the grounds for dismissal and whether the employer obtained prior approval from Dutch employment authorities.

Notice periods must be stated in writing and must comply with the Dutch legal minimum. An employer cannot simply tell an employee the job is ending; written notice is required and the timing must meet statutory requirements. For a company expanding in the Netherlands without a local entity, see payroll and immigration planning. ICS Payroll's local Dutch partner manages the employment relationship, so termination notices and procedures run through that partner, ensuring compliance with Dutch law.

Grounds for dismissal in the Netherlands

Dutch law recognises several grounds for dismissal. Business.gov.nl lists grounds for dismissal as required knowledge. Common grounds include poor performance, misconduct, redundancy and organisational restructuring. However, an employer must follow the correct procedure and, in many cases, obtain approval from Dutch employment authorities before dismissal is valid.

A dismissal based on valid grounds requires warnings and the opportunity for the employee to respond. A dismissal based on redundancy or restructuring requires evidence that the position is genuinely no longer needed. An employer cannot dismiss arbitrarily; the grounds must be documented and the procedure must follow Dutch law.

A company without a Dutch entity cannot bypass these requirements by arguing that dismissal procedures apply only in the Netherlands. The employment contract is a Dutch one (issued by the EOR partner), so Dutch dismissal law applies. ICS Payroll's process is designed so that terminations comply by implementing them through the local Dutch partner.

Dismissal procedures and prior approval requirements

In many cases, an employer must obtain approval from Dutch employment authorities (the UWV or a local employment services office) before dismissing an employee. This approval requirement applies after the probationary period and for most grounds of dismissal. An employer cannot dismiss unilaterally without following the approval process.

The approval process requires the employer to demonstrate that the ground for dismissal is valid and that the correct procedure has been followed. The process takes time, so an employer should begin the process in advance if dismissal is foreseeable. An employer cannot simply wait for the approval and then dismiss; the timing and notice period must align with Dutch law.

A company hiring through an EOR must coordinate termination timing with the local Dutch employer. The local partner handles the termination and approval procedures through the employment structure. The foreign company should notify the provider in advance of any termination plan so that the partner can begin the approval process and ensure compliance.

Settlement agreements and transition payments

A Dutch employment contract termination may include a settlement agreement between the employer and employee. A settlement agreement can document the agreed end date, any severance or transition payment and the conditions of the employment end. Settlement agreements require mutual consent and must comply with Dutch law.

Dutch law provides for transition payments (severance) in certain dismissal situations. Business.gov.nl lists compensation and transition payments as required knowledge areas. A transition payment may be calculated based on the employee's age, length of service and salary. An employer may be required to pay a transition payment if dismissal is based on certain grounds.

A settlement agreement and any associated transition payment must be negotiated and documented. ICS Payroll's local Dutch partner can facilitate this process, as the partner is the contractual employer responsible for the termination and any settlement. The foreign company should budget for potential transition payments and should coordinate the settlement process through the provider.

Key steps for termination when using an EOR

ICS Payroll's process includes a monthly all-in Total Cost of Employment invoice, so termination will affect the invoice for the month in which employment ends. The company should clarify with the provider how final payments and any settlement amounts are processed through the invoicing structure.

Common termination mistakes to avoid

Employers without Dutch experience sometimes fail to obtain prior approval from Dutch authorities before dismissing. Another common mistake is not providing written notice or not respecting the notice period. A third is not documenting the grounds for dismissal or failing to follow documented procedures. See Dutch contract essentials for contract setup guidance.

Employers also sometimes underestimate transition payment obligations or fail to negotiate settlement agreements properly. Some attempt to bypass Dutch law by dismissing through the foreign company instead of through the local employer, which does not work for employees on Dutch contracts hired through an EOR.

A company using ICS Payroll's EOR route should avoid these mistakes by working with the provider to manage the termination process. The partner is familiar with Dutch dismissal requirements and can ensure that approval, notice and settlement are handled correctly.

Termination and moving from EOR to a Dutch BV

If a company is growing and considering moving from EOR to its own Dutch BV, termination procedures change. Employees hired through an EOR have Dutch employment contracts with the EOR partner. If the company incorporates, those employees do not automatically transfer to the Dutch BV; instead, the company must follow termination or transfer procedures with the EOR partner.

A company considering that transition should discuss the process with ICS Payroll in advance so that any required terminations or transfers are handled correctly. See realistic hiring timeline for planning. Settlement agreements or transition payments may be required depending on the circumstances and the agreement with the employee.

Summary: Dutch termination law applies even without a Dutch entity

Terminating a Dutch employment contract requires following Dutch law procedures, notice periods and dismissal approval requirements. A company without a Dutch entity must still comply with these rules when hiring through an EOR. ICS Payroll's remote-hire process manages the employment relationship through its Dutch partner, so terminations are handled by that partner in compliance with Dutch law. A foreign company should understand the termination process before hiring and should notify the provider in advance of any termination plan so that proper procedures are followed and Dutch law is respected.