Severance pay

Every Embassy will at some point come across Dutch law. Whether it concerns hiring an employee on the basis of a fixed-term employment contract or the dismissal of a locally hired staff member, or questions from companies from the home country.

In 2015 Dutch employment law drastically changed, in particular with regard to the dismissal of employees. These changes have a big impact on employers in the Netherlands, especially on Embassies. Being aware of what is and is not allowed under Dutch employment law can significantly reduce the risk of timely and costly procedures. In this newsletter Russell Advocaten will put in order the most relevant aspects of severance pay, including the latest changes.

Severance pay

Transition compensation
Up to 1 July 2015, Embassies could often terminate the employment contract of their employees without being obliged to pay a severance payment. However, from 1 July 2015, each employee, including employees of Embassies, whose employment contract lasted for two years or longer and is terminated upon initiative of the employer, is, in principle, entitled to transition compensation. The amount of the transition compensation depends on the length of employment (1/3 of the monthly salary per year of service over the first ten years of service and one-half a month’s salary over the subsequent years). The transition compensation is subject to a maximum of EUR 76,000 (to be adjusted by the government yearly) or one year’s salary if that is higher. Up until 1 January 2020, there will be transitional arrangements for older employees entitling them to higher transition compensation. The entitlement to transition compensation will lapse due to imputable acts or omissions by the employee.

Fair compensation
If the dismissal is due to imputable acts or omissions of the Embassy as an employer, the court can award the employee a fair compensation in addition to the transition compensation. The subdistrict court is free to determine the amount of fair compensation that has to be paid. What the factors are and why they will be determining for the level of fair compensation is (still) unclear. In one case the employee was granted a fair compensation of twice the transition compensation, being more than EUR 30,000. In another case the court based the level of the fair compensation on the difference between the most recent salary of the employee and the amount of unemployment benefits for a period of six months (the employee is expected to find a new job within this period). This resulted in a fair compensation of EUR 10,000.

More information
This newsletter provides a brief insight into Dutch employment law and the potential consequences for your Embassy. But the Embassy desk of our firm also focuses on:

  • Labour law
  • Rent law / Real estate
  • Investment / Doing business in the Netherlands
  • Matrimonial issues
  • Immunity issuesJan Dop, LL.M, Head of Embassy Desk

Jan Dop,
Head of Embassy Desk