New Dutch labour laws: Conversion of a fixed term to a permanent contract

The Legal Expat Desk (LED) is an information hub by GMW advocaten, advising the expat community in the Netherlands since 2006. LED regularly publish articles covering a wide spectrum of legal topics.

As of July 1, 2015, the rulings on when a fixed-term contract automatically becomes a permanent contract have changed. These rules are known as the chain rule (ketenregeling).

The chain rule

Under the chain rule you and your employer can agree on up to three consecutive fixed-term contracts ending on an agreed date (by operation of law).

From July 1, 2015 onwards, these fixed-term contracts must be completed within 24 months, or two years. Previously the time frame was 36 months, or three years. This period includes possible intervals between the contracts.

Examples of contracts under new law

There are several different temporary contract arrangements which relate to the new chain rule and its maximum duration of three contracts or two years. Here are some common examples:

› Two 12-month contracts

If you and your employer agree upon two consecutive contracts, each with a duration of one year, then after the completion of the second contract, the third contract (if offered) is for an indefinite period of time.

› Three 8-month contracts

Another possible structure is for three consecutive contracts, each with a duration of eight months, with the last agreement ending by operation of law. Any following contract is automatically for an indefinite period of time.

› Two contracts, interval then third contract

If you complete two contracts of nine months, followed by an interval of up to six months, then you agree on a third contract of eight months, this last contract will become for an indefinite period of time.

In the above case the permanent contract is applicable because the total duration of all three contracts, including the interval, exceeds 24 months.

Breaks between contracts

The chain of agreement, or ongoing contracts, is broken in cases where there is an interval of more than six months between contracts. Prior to July 1, 2015, the maximum interval between contracts was three months.

Now, after a six month interval, the chain of temporary contracts starts again.

Collective labour agreements

Please be aware of any collective labour (union) agreements that apply to your contract! In such agreements various stipulations can be taken up, in which case the above rules do not always apply.

Transitory law

So what laws are applicable if your chain of contracts started before July 1, 2015? Here are several example scenarios to help you understand how the new law applies to you:

1. The new ruling does not apply

Under the old law, a maximum of three contracts for a total duration of three years was possible without a permanent contract coming into effect.

If your third one-year-contract concluded before July 1, the old rulings apply. This means your third contract ends by operation of law.

2. Your contract overlaps with the new ruling

You had two contracts of 18 months and the second was concluded after July 1, 2015.

In this case the agreement automatically becomes a permanent contract by probation of law, since the total duration exceeds the two years of the new law.

3. You had an interval before the new ruling

You had two contracts of 12 months and the second contract ended after January 1, 2015. After an interval you are offered a 12 month contract, ending July 1, 2016.

Since the interval between your second and third contracts is less than six months then your last contract automatically becomes permanent.

The new transitional allowance

The Dutch government has also introduced a new transitional allowance (transitievergoeding) to help not only people who lose their permanent contract, but also people whose temporary contracts have not been renewed.

If your employment agreement(s) had a total duration of 24 months or more, then you’re eligible for this one-off payment from your employer within one month of the end date of your contract.

Intervals between contracts do not count when determining the duration of the agreements.

In short, the value of the transitional allowance is 1/6 of your monthly salary for every six months that you have worked.

This means that if you've been employed for two years (or 24 months), your one-off payment will be equal to 2/3 of your monthly salary, also when the employment agreement ends by operation of law.

Understand your situation

The examples mentioned in this article are intended as a guide only, there are many more situations which are also possible.

If you are unsure how the new ruling applies to your current work agreement then it is wise to seek professional advice as you may have access to options or benefits that were not previously available.
 

Willemijn Lenders is specialised in employment law at GMW advocaten / Legal Expat Desk. She can help you to understand and negotiate your employment contract. For more information, please contact her directly.