Permanent Contract in the Netherlands (Vast Contract)

A permanent employment contract (vast contract or contract voor onbepaalde tijd) offers you the strongest level of employment protection under Dutch law. Your employer cannot simply terminate a permanent contract and must follow strict legal procedures. In this article, we explain what a permanent contract means for your rights, how dismissal works, what you are entitled to in terms of severance pay, and what role settlement agreements play.

What is a permanent contract?

A permanent employment contract (arbeidsovereenkomst voor onbepaalde tijd) is a contract without an agreed end date. Unlike a temporary contract, a permanent contract does not expire automatically. It continues indefinitely until either the employer or the employee takes action to end it, following the proper legal procedures.

Under Dutch employment law, a permanent contract is the "standard" form of employment. The legal framework is based on the principle that the employment relationship is ongoing, and the employer can only end it for specific, legally recognised reasons and through prescribed procedures. This reflects the strong position that Dutch law gives to employees.

You can obtain a permanent contract in several ways:

• Direct offer: Your employer offers you a permanent contract from the start of employment.
• Conversion from temporary: Your temporary contract is automatically converted into a permanent contract through the chain rule (ketenregeling) — after 3 consecutive contracts or after 36 months of consecutive employment (Article 7:668a BW).
• Implied permanent contract: In some cases, a court may determine that a permanent employment relationship has arisen based on the employer's conduct or promises, even without a formal permanent contract.

The distinction between a permanent and a temporary contract is fundamental in Dutch employment law. A permanent contract gives you significantly more protection against dismissal, longer notice periods (for the employer), and a stronger negotiating position if your employer wants to end the employment through a settlement agreement.

Strong dismissal protection

The defining feature of a permanent contract is the strong dismissal protection (ontslagbescherming) it provides. Under Dutch law, your employer cannot dismiss you without a valid reason and without following the correct procedure. This protection is primarily laid down in Articles 7:669 through 7:671 BW.

Article 7:669 BW requires that the employer has a "reasonable ground" (redelijke grond) for dismissal. The law lists eight specific grounds (labelled a through h) on which an employer can base a dismissal:

• a. Economic reasons (bedrijfseconomisch ontslag): Reorganisation, loss of revenue, or other business-economic reasons that necessitate job reductions.
• b. Long-term illness: The employee has been unable to work for at least 2 years due to illness, and recovery is not expected within a reasonable period.
• c. Frequent absence: The employee is frequently absent due to illness, causing unacceptable consequences for the business.
• d. Underperformance (disfunctioneren): The employee is unable to perform their work adequately, despite having been given sufficient opportunity and support to improve.
• e. Culpable conduct (verwijtbaar handelen): The employee has acted culpably or negligently in a way that makes it unreasonable to continue the employment.
• f. Conscientious objections (gewetensbezwaren): The employee has conscientious objections to the work, and it is not possible to offer alternative work.
• g. Disrupted working relationship (verstoorde arbeidsrelatie): The working relationship has become so seriously disrupted that it cannot be restored.
• h. Other circumstances (overige omstandigheden): Other circumstances that make it unreasonable to continue the employment.

In addition to having a valid ground, the employer must also demonstrate that there is no possibility of redeployment (herplaatsing) in another suitable position within the organisation. This redeployment obligation is an important additional layer of protection.

Dismissal routes

If your employer wants to end your permanent contract, there are three main routes available. The route depends on the reason for dismissal:

Route 1: UWV (Employee Insurance Agency)

For dismissal based on economic reasons (ground a) or long-term illness (ground b), the employer must request a dismissal permit from the UWV. The UWV assesses whether the employer has a valid reason and whether the proper procedures have been followed. The process typically takes 4 to 8 weeks.

For economic dismissals, the UWV checks whether the employer has correctly applied the "reflection principle" (afspiegelingsbeginsel), which ensures that dismissals are spread fairly across different age groups. The employer must also demonstrate that there is no suitable alternative work available.

If the UWV grants the dismissal permit, the employer can terminate the contract, subject to the applicable notice period. The time spent on the UWV procedure is deducted from the notice period, with a minimum remaining notice period of one month.

Route 2: Subdistrict court (kantonrechter)

For all other dismissal grounds (c through h), the employer must file a request with the subdistrict court to dissolve the employment contract. The court assesses whether the employer has a valid ground and whether redeployment is not possible.

Important aspects of the court procedure include:

• The court holds an oral hearing where both parties can present their case.
• The burden of proof lies primarily with the employer — the employer must demonstrate that the dismissal ground is valid and well-documented.
• For underperformance (ground d), the employer must show that the employee was informed of the problems, given a reasonable opportunity to improve, and provided with support (such as coaching or training).
• The court determines the end date and can award severance pay and, in some cases, additional "fair compensation" (billijke vergoeding) if the employer acted seriously culpably.

Route 3: Settlement agreement (vaststellingsovereenkomst)

The most common way to end a permanent contract in practice is through a settlement agreement. This bypasses both the UWV and the court: employer and employee negotiate the terms of departure directly. The advantages of this route include speed, flexibility, and the ability to negotiate terms that go beyond what a court might award.

Because you have strong dismissal protection with a permanent contract, your negotiating position when presented with a settlement agreement is generally strong. Your employer knows that the alternative (going through the UWV or court) is time-consuming, uncertain, and expensive. This gives you leverage to negotiate better terms, including a higher compensation, release from duties, and the lifting of restrictive clauses.

Notice periods

When a permanent contract is terminated, both the employer and the employee must observe a notice period. The statutory notice periods are set out in Article 7:672 BW:

Employer's notice period

The employer's notice period depends on the employee's length of service:

• Less than 5 years of service: 1 month
• 5 to 10 years of service: 2 months
• 10 to 15 years of service: 3 months
• 15 years or more: 4 months

Employee's notice period

The employee's notice period is always 1 month by default, regardless of years of service. This can be extended in the employment contract, but only under the condition that the employer's notice period is at least double the employee's period.

Notice must generally be given at the end of a calendar month. The employer can only give notice after obtaining UWV permission (for grounds a and b) or after a court ruling (for grounds c through h). With a settlement agreement, no notice is formally given, but the "fictitious notice period" applies for unemployment benefit purposes.

Severance pay

When your permanent contract is terminated at the initiative of the employer (or at the employer's request through the court), you are entitled to statutory severance pay (transitievergoeding). This right is established in Article 7:673 BW.

The severance pay is calculated as one-third of your gross monthly salary for each year of service. Partial years are calculated proportionally. The monthly salary includes your base salary plus fixed components such as holiday allowance (vakantiegeld), thirteenth month, and structural overtime.

In addition to the statutory severance pay, the court can award "fair compensation" (billijke vergoeding) under Article 7:681 BW if the employer has acted seriously culpably. This additional compensation is not subject to a fixed formula and can be substantial. Examples of seriously culpable employer conduct include fabricating a dismissal ground, failing to follow a proper improvement plan, or creating a hostile work environment to pressure you into leaving.

In a settlement agreement, the compensation is the result of negotiation. The statutory severance pay is commonly used as a starting point, but additional factors can lead to higher compensation: the strength (or weakness) of the employer's dismissal case, your age and employability, and any damages you may suffer from losing your job. Our lawyers can assess your specific situation and advise on what is a reasonable compensation. Upload your agreement for a free review.

Settlement agreement with a permanent contract

A settlement agreement (vaststellingsovereenkomst) is the most common way to end a permanent contract in practice. The employer proposes a settlement agreement when they want to end the employment without going through the time-consuming and uncertain UWV or court procedure. Common situations include reorganisations, disrupted working relationships, differences of opinion about performance, or simply a mutual decision that the cooperation is no longer working.

Because you have strong dismissal protection with a permanent contract, your position in settlement agreement negotiations is generally favourable. Key points to negotiate include:

• Compensation: The statutory severance pay as a minimum, with possible additional compensation depending on the circumstances.
• End date: Must correctly account for the fictitious notice period to protect your unemployment benefit rights.
• Release from duties: Whether you continue to work until the end date or are released with continued pay.
• Non-compete and non-solicitation clause: Having restrictive clauses lifted or limited. See our page on non-compete clauses.
• Certificate of employment: A positive certificate of employment and reference agreements.
• Legal costs contribution: A contribution towards the costs of your legal adviser.
• Holiday days and holiday allowance: Payment of outstanding entitlements.

Modification of employment conditions

A permanent contract does not only protect you against dismissal. It also protects you against unilateral changes to your employment conditions. Your employer cannot simply change your salary, working hours, job description, or workplace without your consent.

Unilateral modification clause

Some employment contracts contain a unilateral modification clause (eenzijdig wijzigingsbeding) under Article 7:613 BW. This clause gives the employer the right to change certain employment conditions, but only if the employer has a "weighty interest" (zwaarwichtig belang) that outweighs your interest in maintaining the existing conditions. A "weighty interest" is a high threshold that goes beyond normal business considerations.

Without a modification clause

Without a modification clause, the employer must rely on the general principle of "good employeeship" (goed werknemerschap, Article 7:611 BW). Under case law (the Stoof/Mammoet ruling), the employer can propose a change if there are changed circumstances that give reasonable cause for the proposal. However, you must also act as a "good employee" and cannot unreasonably refuse a reasonable proposal.

In practice, the most common disputes about modification of conditions concern changes in salary, working location, working hours, and job content. If your employer proposes significant changes that you disagree with, seek legal advice about your options. In some cases, a proposed change may be so significant that it effectively constitutes a (constructive) dismissal.

Special dismissal protection

In addition to the general dismissal protection that comes with a permanent contract, certain categories of employees enjoy special dismissal protection (bijzonder ontslagverbod). These protections are also known as "dismissal bans" (opzegverboden) and are set out in Article 7:670 BW. During these protected periods, the employer generally cannot terminate the employment, even with UWV permission:

• During illness: Your employer cannot dismiss you during the first two years of illness. This is one of the strongest protections in Dutch law. However, this protection does not apply if you were already ill before the UWV procedure started, or in the case of summary dismissal.
• During pregnancy and maternity leave: You are protected from dismissal during pregnancy and for a period after returning from maternity leave.
• During parental leave: You cannot be dismissed because of taking or requesting parental leave.
• Works council membership: Members of the works council (ondernemingsraad) enjoy protection against dismissal related to their council activities.
• Trade union membership: You cannot be dismissed because of your trade union membership or activities.
• Military service: During military service or alternative civil service.
• Transfer of undertaking: You cannot be dismissed solely because of a transfer of the business to a new owner.

These protections apply on top of the regular dismissal protection. This means that even if the employer has a valid dismissal ground, the dismissal may still be blocked if one of these special protections applies. The exceptions are limited: for example, the illness protection does not apply if the entire business is being shut down.

Your rights as a permanent employee

Beyond dismissal protection, a permanent contract comes with a comprehensive set of employment rights under Dutch law. Here is an overview of the key rights you should be aware of:

• Continued salary during illness: Your employer must continue to pay at least 70% of your salary (with a minimum of the statutory minimum wage in the first year) for up to two years of illness. Many CAOs require higher continued payment, often 100% in the first year and 70% in the second year.
• Holiday entitlement: You are entitled to a minimum of four times your weekly working hours in holiday days per year (for a full-time employee, this is 20 days). Many employers offer additional contractual holiday days.
• Holiday allowance: You are entitled to 8% of your gross annual salary as holiday allowance (vakantietoeslag), paid annually (usually in May).
• Equal treatment: You are protected against discrimination on grounds of age, gender, race, religion, disability, sexual orientation, and other characteristics.
• Safe working environment: Your employer has a legal duty to provide a safe and healthy working environment (Arbeidsomstandighedenwet).
• Privacy protection: Your employer must respect your privacy rights, including in the context of monitoring, data processing, and personal information.
• Training and development: Under certain circumstances, your employer has an obligation to offer you training and development opportunities, particularly if your position is at risk.

Frequently asked questions about permanent contracts

Can my employer dismiss me from a permanent contract?

Yes, but only through the proper legal procedure and with a valid reason. Your employer must either obtain permission from the UWV (for economic reasons or long-term illness), request dissolution from the court (for other grounds), or propose a settlement agreement. You have strong dismissal protection and can always refuse a settlement agreement.

What severance pay am I entitled to with a permanent contract?

You are entitled to statutory severance pay of one-third of your monthly salary per year of service. In a settlement agreement, the compensation is negotiable and may be higher. The court can also award additional "fair compensation" if the employer acted seriously culpably.

Can I be dismissed during illness with a permanent contract?

Not during the first two years of illness. This dismissal ban (opzegverbod bij ziekte) is one of the strongest protections in Dutch law. After two years, dismissal is possible if recovery is not expected, but the employer must still go through the UWV procedure. Signing a settlement agreement during illness is technically possible but carries serious risks for your benefit entitlements.

What happens if my employer wants to change my employment conditions?

Your employer cannot unilaterally change your conditions without your consent. Even with a modification clause, the employer must demonstrate a "weighty interest." If you disagree with proposed changes, seek legal advice. Significant unilateral changes may constitute constructive dismissal.

Is a settlement agreement always better than going to court?

Not necessarily. A settlement agreement offers certainty and speed, but if your employer has a weak case for dismissal, going to court might result in the dismissal being denied altogether, or in higher compensation. The best approach depends on your specific circumstances. Have a lawyer assess your situation to determine the optimal strategy.

How does a permanent contract affect my unemployment benefits?

A permanent contract itself does not affect your unemployment benefit rights. What matters is how the employment ends. If termination is through a properly drafted settlement agreement or a formal dismissal (not for culpable reasons), you are generally entitled to unemployment benefits, provided you meet the standard eligibility requirements. The end date must correctly account for the fictitious notice period.