Collective Agreement (CAO) in the Netherlands

A collective agreement — in Dutch called a collectieve arbeidsovereenkomst or CAO — is an agreement between employers (or employers' associations) and trade unions that sets out the terms and conditions of employment for a specific sector or company. Most employees in the Netherlands are covered by a CAO, often without even knowing it. In this article you can read what a CAO is, how it applies to you, what it typically covers, and how it affects your rights in case of dismissal.

What is a collective agreement (CAO)?

A collective agreement (CAO) is a written agreement negotiated between one or more trade unions on behalf of employees and one or more employers or employers' associations. The CAO sets out the terms and conditions of employment that apply to the employees covered by it. In the Netherlands, the legal framework for collective agreements is found in the Collective Agreements Act (Wet op de collectieve arbeidsovereenkomst, or Wet CAO), which dates back to 1927.

There are two main types of CAO in the Netherlands:

• Sector-level CAO (bedrijfstak-cao) — this applies to an entire sector or industry. Examples include the CAO for the metal industry (Metaal en Techniek), the CAO for healthcare (Zorg en Welzijn), and the CAO for the hospitality sector (Horeca). Sector-level CAOs are negotiated between employers' associations representing the sector and trade unions such as FNV, CNV, or De Unie.
• Company-level CAO (ondernemings-cao) — this applies only to employees of a specific company. Large employers such as the Dutch Railways (NS), KLM, or Philips have their own company-level CAO. These are negotiated directly between the employer and the relevant trade unions.

In the Netherlands, approximately 80% of all employees are covered by a CAO. This makes collective agreements a fundamental part of the Dutch labour market. Even if you are not a trade union member, the CAO can still apply to you — as explained in the next section.

How a CAO applies to you

A CAO can apply to you in several ways. Understanding which mechanism makes a CAO applicable to your employment relationship is important, because it determines the extent to which you can rely on its provisions.

1. Your employment contract refers to the CAO

The most common way a CAO applies to you is through an incorporation clause (incorporatiebeding) in your employment contract. This is a clause that states something like: "The CAO for [sector] applies to this employment agreement." If your contract contains such a clause, the CAO provisions become part of your individual employment conditions — regardless of whether you are a trade union member.

If you are unsure whether your contract refers to a CAO, check the first few pages of your employment agreement. The CAO reference is usually included in the general provisions at the beginning of the contract.

2. Generally binding declaration (Algemeen Verbindend Verklaring, or AVV)

Even if your employment contract does not mention a CAO, and even if your employer did not participate in the CAO negotiations, a CAO can still apply to you through a generally binding declaration. The Dutch Minister of Social Affairs and Employment (Minister van Sociale Zaken en Werkgelegenheid) has the power to declare a sector-level CAO generally binding for the entire sector. This is done pursuant to the Act on Generally Binding and Non-Binding Declarations of Collective Agreements (Wet op het algemeen verbindend en het onverbindend verklaren van collectieve arbeidsovereenkomsten, or Wet AVV).

When a CAO is declared generally binding (AVV), all employers and employees in the relevant sector are bound by its provisions — even those employers who are not members of the employers' association that negotiated the CAO, and employees who are not trade union members. This is a powerful mechanism that ensures a level playing field within a sector and prevents employers from undercutting employment conditions.

3. Trade union membership

If you are a member of a trade union that is a party to the CAO, the CAO applies to you directly on the basis of your membership. In practice, this scenario is less common in the Netherlands because most CAOs are either incorporated by reference in the employment contract or declared generally binding.

Relationship between the CAO and your employment contract

The relationship between your individual employment contract and the applicable CAO follows a clear hierarchy under Dutch law. Understanding this hierarchy is essential to know your rights.

The general rule is that a CAO provision takes precedence over a conflicting clause in your individual employment contract, unless the individual clause is more favourable to you. This principle is reflected in Section 12 of the Collective Agreements Act, which states that clauses in an individual employment contract that conflict with the CAO are null and void — unless they are more favourable to the employee.

In practice, this means:

• Minimum provisions: Most CAO provisions function as a floor. Your employer can offer you better conditions (for example, a higher salary than the CAO minimum), but cannot offer you worse conditions.
• Standard provisions (standaard-cao): In some cases, a CAO may contain standard provisions that cannot be deviated from in either direction. This is less common and must be explicitly stated in the CAO. Standard provisions set both the floor and the ceiling.
• If your contract is silent: If your employment contract does not address a particular issue (for example, a year-end bonus), but the CAO does, the CAO provision applies automatically.

It is therefore always advisable to read your employment contract alongside the applicable CAO, to get a complete picture of your employment conditions.

Common CAO provisions

A CAO typically covers a wide range of employment conditions. Below are the most common provisions you will find in a Dutch collective agreement.

Salary scales and pay increases

One of the most important functions of a CAO is setting out salary scales (loonschalen). These scales define the minimum salary for each job level and often include annual increments based on experience (known as periodieken). The CAO also typically includes provisions for periodic salary increases that apply to all employees in the sector.

If your employer is bound by a CAO, they must pay you at least the minimum salary for your job level as defined in the CAO salary scale. If you believe you are being paid below the CAO minimum, you may have a claim for back pay.

Working hours and overtime

CAOs typically specify the standard working week (often 36, 38, or 40 hours), rules regarding overtime, and compensation for overtime work. Some CAOs allow for flexible working arrangements, time-for-time schemes, or individual working time accounts.

Holiday allowance and holiday entitlement

While Dutch law provides a minimum of 8% holiday allowance (vakantietoeslag) and 20 days of annual leave (based on a full-time working week), many CAOs provide more generous entitlements. A CAO may offer 25 or more holiday days, additional days off for special occasions (such as a wedding or bereavement), and a higher holiday allowance.

Notice periods

The statutory notice period in the Netherlands is one month for employees (longer for employers, depending on years of service). However, a CAO may deviate from these statutory notice periods. Some CAOs provide for shorter notice periods, while others may extend them. The notice period specified in the CAO overrides the statutory default.

Sick pay

Dutch law requires employers to continue paying at least 70% of the employee's salary during the first two years of illness. Many CAOs supplement this to 100% of the salary during the first year of illness, and 70% or more during the second year. The specific sick pay arrangements can vary significantly between sectors.

Pension

Many sector-level CAOs include provisions for participation in a sector pension fund (bedrijfstakpensioenfonds). Participation in these pension schemes is often mandatory and provides employees with an additional retirement income on top of the state pension (AOW).

Training and education

An increasing number of CAOs include provisions for training and personal development, such as a personal training budget, paid study leave, or the right to follow certain courses during working hours. These provisions support employees in maintaining and developing their skills throughout their career.

The CAO and dismissal

The relationship between a CAO and dismissal is particularly important if you are facing the possibility of losing your job. CAOs can contain several types of provisions that affect the dismissal process and your entitlements.

Notice periods in the CAO

As mentioned above, the CAO may specify notice periods that differ from the statutory defaults. If you are being dismissed, the applicable notice period determines how long your employer must continue paying your salary before your employment actually ends. In the context of a settlement agreement, the notice period also affects when your entitlement to unemployment benefits (WW) begins — the so-called fictieve opzegtermijn.

Dismissal committee (ontslagcommissie)

Under certain conditions, a CAO may establish a dismissal committee (ontslagcommissie) that takes over the role of the UWV in assessing dismissal applications based on business economic reasons or prolonged incapacity for work. If your CAO contains such a provision, your employer must submit the dismissal request to this committee rather than to the UWV. The committee must meet the same standards as the UWV and follow the same rules, but the process may be faster or have sector-specific elements.

Severance pay and the CAO

Article 7:673b of the Dutch Civil Code allows a CAO to provide an alternative arrangement for the statutory transitievergoeding (severance pay), provided that the alternative is of equivalent value. Some CAOs include provisions for additional severance payments, lump-sum compensation, or alternative arrangements such as outplacement budgets or extended salary payments. If your CAO offers a more generous severance arrangement than the statutory minimum, you may be able to benefit from it.

Social plans in reorganisations

When a company undergoes a reorganisation that leads to redundancies, a social plan (sociaal plan) is often agreed upon between the employer and the trade unions or the works council. A social plan is essentially a collective agreement that sets out the terms and conditions under which employees will be made redundant. It is closely related to the CAO and, in many cases, is negotiated by the same parties.

What a social plan typically contains

A social plan usually includes provisions such as:

• Severance formula: Many social plans use a severance formula that is more generous than the statutory transitievergoeding. Historically, the subdistrict court formula (kantonrechtersformule) was commonly used, though many current social plans use a factor applied to the transitievergoeding (for example, 1.5 times the statutory amount).
• Outplacement and retraining: Budgets for outplacement services, coaching, and retraining to help redundant employees find new employment.
• Internal redeployment: Procedures for attempting to place affected employees in alternative positions within the company before proceeding with dismissal.
• Extension of notice period: Some social plans provide for an extended notice period with full salary continuation, giving employees more time and financial security to search for new employment.
• Supplementary benefits: Additional payments or benefits, such as a supplement to unemployment benefits (WW) for a certain period.

Legal status of a social plan

The legal status of a social plan depends on how it was agreed. A social plan that is negotiated and signed with one or more trade unions has the status of a CAO and is legally binding. A social plan agreed with the works council, on the other hand, does not have the same legal status and is considered more of a guideline — although courts generally give significant weight to such agreements.

If your employer is carrying out a reorganisation and a social plan is in place, it is crucial that you understand its provisions. The social plan may entitle you to a higher severance payment or additional benefits beyond what the law requires. If you have received a settlement agreement as part of a reorganisation, make sure the terms reflect the social plan.

How to check your CAO

If you want to know which CAO applies to you and what it provides, there are several steps you can take:

1. Check your employment contract: Look at the first pages of your employment contract for a clause that refers to a specific CAO. This is usually stated under "applicable CAO" or "terms and conditions."
2. Ask your employer or HR department: Your employer is required to inform you about the applicable CAO. If your employment contract does not clearly state which CAO applies, ask your HR department.
3. Check your pay slip: Some pay slips mention the applicable CAO or the salary scale under which you are classified.
4. Visit CAOWijzer.com or the AWVN database: The website caowijzer.com allows you to search for CAOs by sector. The AWVN (General Employers' Association of the Netherlands) also maintains a database of collective agreements.
5. Ministry of Social Affairs and Employment: The ministry's website publishes all CAOs that have been declared generally binding (AVV). You can check whether the CAO in your sector has AVV status and download the full text.
6. Trade unions: If you are a member of a trade union such as FNV, CNV, or De Unie, you can contact them for information about the applicable CAO and for personal advice on your employment conditions.

Frequently asked questions

Does a CAO apply to me even if I am not a trade union member?

Yes, in most cases. If your employment contract refers to a CAO, or if the CAO has been declared generally binding (AVV) by the Minister of Social Affairs and Employment, the CAO applies to you regardless of your trade union membership. Approximately 80% of Dutch employees are covered by a CAO, and the vast majority of these are not trade union members themselves.

Can my employer offer me less than the CAO provides?

No. If a CAO applies to your employment, your employer cannot offer you conditions that are less favourable than what the CAO prescribes. Clauses in your individual employment contract that are less favourable than the CAO are null and void. Your employer can, however, offer you more favourable conditions (unless the CAO contains standard provisions that prohibit deviation in either direction).

What happens when a CAO expires?

When a CAO expires (nawerking), the existing conditions continue to apply to individual employment contracts until a new CAO is agreed upon or the employment conditions are lawfully changed by other means. This means you do not suddenly lose your CAO-based rights when the CAO expires. However, the CAO no longer applies to new employment contracts concluded after its expiration, unless the employer voluntarily continues to apply it or a new generally binding declaration is issued.

Can a CAO override statutory law?

In certain areas, Dutch employment law explicitly allows CAOs to deviate from the statutory provisions, including in ways that may be less favourable to employees. This is known as driekwart dwingend recht (three-quarter mandatory law). For example, the statutory rules on the chain of fixed-term contracts (Section 7:668a BW) can be modified by a CAO. However, provisions that are fully mandatory (dwingend recht) cannot be overridden by a CAO. The specific areas where a CAO can deviate from statutory law are defined in the relevant legislation.

How does the CAO affect my settlement agreement?

The CAO can affect your settlement agreement in several ways. It may set minimum notice periods that influence the end date and the start of your unemployment benefits. It may contain severance provisions that serve as a benchmark for the compensation offered. It may include a social plan that provides for additional benefits. When we review your settlement agreement during our free check, we always verify compliance with the applicable CAO.

Does the CAO apply to temporary agency workers?

Temporary agency workers (uitzendkrachten) are generally covered by the CAO for Temporary Agency Workers (CAO voor Uitzendkrachten), negotiated by the ABU or the NBBU with the trade unions. In addition, after a certain period of working for a particular client (inlener), agency workers are entitled to the same employment conditions as directly employed workers of that client, as specified in the Agency Work Directive (Waadi) and the relevant CAO provisions.