Employers who have to fire people will first terminate temporary contracts. However, in many cases a temporary contract cannot simply be terminated. If no interim termination clause is included in the contract, payment must be made for the full duration of the contract. Until January 1, 2009, we had a very favorable subdistrict court formula in the Netherlands for employees with a contract for an indefinite period. For each year of employment, a lump sum payment equal to one month’s salary had to be paid. For older employees, the amount could be even higher per year of service. The scheme has been simplified since 2009. For younger employees up to the age of forty, the lump sum payment is now based on half a month’s salary per year that they have worked for the employer in question. In some cases it is more beneficial for an employee to have a temporary contract compared to a permanent contract.
A temporary contract
A major disadvantage of a temporary contract is that the employer may not extend the contract after the temporary period ends. If it turns out that it is more beneficial for the company to continue with fewer employees, it can get rid of the employees with a temporary contract very cheaply. However, this only applies if the contract has reached or is almost reaching its end date. Firing an employee with an annual contract with only a few months left can be very expensive. An employer cannot simply dismiss an employee, even if a reorganization is underway. A temporary contract cannot be terminated prematurely, unless an interim termination clause is included in the contract.
In nine out of ten cases it is more favorable to have a permanent contract, but there are exceptions. Someone who has been employed for a short period with a permanent contract has a high chance of being fired in a reorganization. In that case, the reflection policy is applied. Here, employees with similar functions are divided into age groups. Within these groups, the duration of the employment contract with the boss in question is taken into account. The person with the shortest tenure in the group will be fired first. By applying the subdistrict court formula, the employee receives a buyout arrangement depending on the duration of the employment contract. With short-term permanent contracts, the lump sum may be very low.
What does the reflection policy entail?
In the event of a reorganization for economic reasons, the employer is obliged to apply the reflection policy. In this arrangement, staff are divided into age groups. Within the age groups, the duration of the employment contract with the employer in question is then examined. Short-term employees within the groups will be dismissed first. If several employees have to be dismissed, it will have to concern employees from different age groups.
Where can I seek advice?
In the event of a reorganization, it is wise to seek advice from an expert. You can do this through your legal expenses insurance or your trade union. They can assist and advise you about the options. They can also check to what extent the employer has used the correct working method.