Severance packages come in many forms, and are handed out for many different reasons. These can include company-wide layoffs, elimination of a particular job title, retirement, or a mutual arrangement between employee and employer to part ways. In the EU, the regulation of severance pay is left at the discretion of the member states. In the Netherlands, employment law differs greatly from other legal systems, particularly regarding the position of the employee when it comes to dismissal. The result is that Dutch (or expat) employees are better protected in the Netherlands than in many other countries. Whatever the reason for settling a contract with a severance package, it is good to be aware of the best way to deal with them.
There are several situations in which an employer in the Netherlands should provide a severance package. The criteria include the following: the employee has been with the company for two years or longer, the employment has been terminated at the behest of the employer, the termination of the contract has been found to be not of a serious cause, or the termination has taken place prior to the retirement age. In addition to these criteria, an employer should consider a severance package if the employee has left the company because of serious culpable behaviour by the employer. In most cases employers try to resolve the dismissal as amicably as possible, by aiming for a mutually agreed severance package. In the case when either party cannot reach an agreement (for instance the employer offers too little for the employee, or the employee wants too much from the employer), the employer can file a request for termination with the subdistrict court. In serious cases (such as theft) an employer is permitted to dismiss an employee with immediate effect.
As of July 1st 2015, the transition payment (transitievergoeding) replaces the former redundancy payments, and has largely replaced the practice of dismissal compensation packages that were initiated by cantonal courts in situations where a dismissal took place without mutual agreement. The transition payment involves one third of the employee’s monthly wage per year of employment for the first 10 years of employment, and half of the monthly wage worked per year after that. It is important to note that prior to taking the decision to dismiss an employee, the employer requires permission from the work placement branch of the Employee Insurance Agency (UWV Werkbedrijf), or the subdistrict court. Employees over the age of 50, who have worked more than 10 years at a company, are entitled to one monthly salary per year of employment, although this is a transitional arrangement until 2020 that does not apply to small employers (those with less than 25 employees).
Employment law in the Netherlands can make it a difficult and arduous task for both employers and employees if a mutual agreement cannot be made. As mentioned already, the law is such that employees have much better protections regarding dismissal than in many other countries. If a severance package is on the table, then the best option is for both the employer and the employee to come to an amicable agreement. This removes the need to get permission from a public authority, and can save both time and money.
Sources:
• https://www.eurofound.europa.eu/publications/information-sheet/2015/working-conditions-labour-market/statutory-regulations-on-severance-pay-in-europe-info-sheet-0
• https://www.eurofound.europa.eu/observatories/emcc/erm/legislation/netherlands-severance-payredundancy-compensation