Fixed-term or defined employment contract ends by operation of law

Temporary employment contract ends automatically

The basic principle of a fixed-term (or temporary or defined) employment contract is that it ends automatically on the agreed end date. Therefore, the employer does not have to take any action or request permission from the subdistrict court or the UWV Werkbedrijf to terminate the employment contract.

Even if the employee is sick, unfit for work or pregnant, a fixed-term employment contract automatically ends on the end date.

However, there are two important exceptions to this main rule:

  1. The employment contract no longer ends by operation of law if there has been a chain of employment contracts and the limits of the so-called chain rule have been exceeded (see below). In that case, the employee is in fact automatically employed for an indefinite period of time and the employment contract therefore no longer ends automatically. The employee is then entitled to full severance protection.
  2. A fixed-term employment contract also does not end by operation of law if, prior to this temporary contract, the employee was employed on the basis of a permanent contract. The law provides that an employee does not lose the protection against dismissal if he agrees that the employment contract for an indefinite period is converted into a fixed-term employment contract.

Type of contract must be administered in the payroll administration

Employers are required to administer in the payroll administration:

  • whether the employment contract is permanent employment (Yes/No)
  • whether the employment contract has been agreed (and signed) in writing (Yes/No)

These statements must be listed on all pay slips.

Consequences for premiums: low and high AWf premium, how does the WW premium differentiation work?

The AWf premium (WW premium) has a low AWf premium (2.64% in 2023) and a high AWf premium (7.64% in 2023). Which premium the employer has to pay for the employee depends on the type of employment contract which is concluded with the employee. The rates are set every year.

The employer pays the low AWf premium for the employee if the employment contract meets the following conditions:

  • It is a permanent or non-defined employment contract.
  • The employment contract is not an on-call contract
  • The contract is in writing.

Putting an employment contract in writing can be done in a number of ways.

  1. The employer stores the agreement on paper.
  2. The employer stores the agreement digitally. There are 2 options here:
    – It is a written contract signed and scanned.
    – It is a digital contract with a qualified electronic signature from the employer and the employee.
  3. The employer has emailed the employment contract to the employee and they have expressed their agreement to the contract by email.
  4. The employer stores the employment contract in the HR system.

The obligation to give notice

The employer is obliged to inform the employee in writing at least one (1) month before the end date of the temporary employment contract whether the employment contract will be extended or not. In practice, this means that the employer may also give notice by e-mail or even include a notice clause in the employment contract. Even if the employer intends to extend the temporary contract, he is obliged to notify the employee in writing (i.e. at least one month before the end date). In that case, the employer must also indicate in the notice the conditions under which it intends to extend the employment contract. By giving notice the employee can start looking for a new job in time.

However, the notice obligation does not apply to employment contracts with a duration of less than six months or to temporary employment contracts for the duration of a project.

If the employer does not comply with the obligation to give notice, the employee is entitled to a notice fee. This compensation is equal to one gross monthly salary (without holiday allowance). If the employer does give notice but is late, the employee is entitled to a pro rata severance payment. The employee must claim this compensation no later than two months after the end of the employment contract. If the employer then does not voluntarily pay the notice compensation, the employee must petition the subdistrict court for this within the same two months. If the employee allows this period to lapse, the right to a severance payment lapses.

Chain rule

The chain rule is the statutory regulation that determines the maximum number of temporary employment contracts that may be concluded consecutively before an employment contract for an indefinite period of time arises.

The main rule states: a maximum of three fixed-term contracts may be concluded in a row within a three-year period. At the fourth contract or on the day after the expiry of the three-year period, an employment contract for an indefinite period automatically arises.

Only if there is a period of more than six months between two contracts, a new chain is created (and three temporary contracts may again be concluded in a three-year period).

Note: a collective agreement may deviate from the standard chain rule. A collective agreement may agree that a maximum of six temporary contracts (instead of three) can be concluded during 48 months (instead of 36 months).

The chain rule does not apply in the following situations:

  • There is a period of more than 6 months between the 3 contracts. The chain is then broken and starts again.
  • For temporary workers with an agency clause.
  • The employee is younger than 18 and works less than 12 hours per week on average.
  • BBL apprenticeships and trainees.
  • Substitute teachers or education support staff during illness.
  • Employees of AOW age. In these cases, you may give a maximum of 6 temporary contracts in a 4-year period before it becomes permanent employment.

Intervals adjusted to 5 years?

The current form of chain provision is part of the Labour Market in Balance Act. That law is supposed to offer security and protection to workers. But new legislation is in the pipeline to prevent abuse of the 6-month intervals. The new waiting period should become 5 years from 1 January 2024, including for temporary workers.

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