Do you work through a temp agency and consider signing a permanent contract with the same or a new employer? Then it’s important to know how the law deals with temporary contracts and the switch to a permanent employment. In this article, we explain how the chain rule works and when you can claim a contract for an indefinite period.

What is the chain rule?

The chain rule states that a contract for an indefinite period arises after three successive temporary contracts or after a period of 36 months. This applies if the interval between the contracts is a maximum of six months. This means that if you have had three or more contracts for a fixed term with the same employer within three years, you automatically get a permanent contract.

But what exactly counts as a fixed-term or permanent contract, and why does this distinction matter?

A fixed-term contract is a temporary agreement with a clear end date. It offers flexibility for both employer and employee—setting expectations about when the work relationship will end, while allowing you to negotiate salary, benefits, and other conditions for that specific period.

A permanent contract, on the other hand, has no predetermined end date. This type of agreement provides more security, as employment continues until either party decides to terminate it. With a permanent contract, you should pay attention to your entitlements, such as annual leave, notice periods, pension schemes, and health insurance. Employers, meanwhile, need to consider their obligations, including compliance with working hours, overtime pay, and the costs associated with sick leave or parental leave.

Understanding the differences between these contracts—and how the chain rule bridges them—is essential. It helps you know when you’re entitled to more rights and security, and ensures you’re aware of the implications before you sign your next employment agreement.

Ending a fixed-term contract early: is it possible?

You might wonder what happens if you want to end a fixed-term contract before the agreed end date. In the Netherlands, this is possible under certain conditions.

• Mutual agreement: Both you and your employer can always decide together to end the contract early. This is called “termination by mutual consent.” Make sure you clearly document this decision to avoid misunderstandings.
• Notice period or termination clause: Sometimes, the employment contract itself includes a clause that allows early termination. For example, if there’s a notice period specified, either side can end the contract sooner by following these terms. Always check your contract carefully to see if such a provision is included.
• Legal consequences: Ending a fixed-term contract early without following the correct procedure can have financial or legal consequences, such as compensation for damages. That’s why it’s always a good idea to review your contract—and when in doubt, consult with a legal expert or the FNV union for advice.

This flexibility ensures both employers and employees have options, provided all agreements and legal obligations are met.

Transition from temp worker to permanent employment

If you’ve worked as a temp worker and then get offered a contract by the hirer (the company you worked for via the temp agency), it’s important to know that your previous contracts can count towards determining your employment history. This affects whether you’re entitled to a permanent contract or a higher severance pay when the employment contract ends.

Successive employer: when do contracts count?

The law states that contracts with different employers can be seen as successive if the work with the new employer is comparable to that with the previous employer. This means that if you first worked as a temp worker for a company and then join them directly, these contracts can be added together. As a result, you may be entitled to a permanent contract or a severance pay sooner.

Conditions for successive employer

1. Employer’s initiative: The new employer must approach you to perform the same tasks. So the initiative must come from the employer.

2. Comparable tasks: The tasks you will perform at the new employer must broadly match the work you did via the temp agency. There should be no major differences in tasks or responsibilities.

3. Interval: The period between the different contracts should not be longer than six months, otherwise the contracts start to ‘count again’.

Early termination of a fixed-term contract: What employers need to know

But what if you—or your employer—want to end a fixed-term contract before the official end date? Dutch law generally considers fixed-term contracts binding for the agreed duration. However, there are certain situations where early termination is possible.

When is early termination possible?

1. Termination clause present: The contract must specifically include an early termination clause. If so, either party can end the employment early, though the notice period stated in the contract still applies.
2. Mutual agreement: Both employer and employee can agree at any moment to end the contract early—this should always be recorded in writing.
3. Immediate dismissal for urgent cause: In cases of gross misconduct (think theft, violence, or other serious breaches), an employer may dismiss the employee immediately. Normal rules for instant dismissal apply here.

If none of these conditions are met, early termination is usually not allowed unless a permit is obtained through the UWV (the Employee Insurance Agency) or the subdistrict court. This is only granted under specific circumstances, such as long-term illness or economic reasons.

Consequences of premature termination

Ending a fixed-term contract without a valid reason or without following the required procedures can result in the employer owing the employee compensation for the remainder of the contract. To avoid surprises, always check your employment contract for any early termination provisions and ensure you follow the right legal steps.

Employers who are uncertain should consult a legal expert before proceeding, to prevent costly mistakes and ensure compliance with Dutch labor regulations.

Impact for employers and employees

Employers should be aware that if they hire an employee who has previously worked for them as a temp, this person may be entitled to a permanent contract sooner. For employees, this means that when moving from temp work to full-time work, they may be entitled to dismissal protection and a higher severance pay sooner.

Severance Pay: What Counts and When

In the Netherlands, severance payments—sometimes called transition compensation—can be due whether you have a fixed-term or permanent contract. The amount and eligibility may be specified in collective agreements or set out in the Dutch Civil Code. Most employment contracts will outline the rules for termination and any associated severance pay, but it’s also possible for individual arrangements to be made in your employment contract.

A common scenario is dismissal by notice, where either the employer or employee ends the contract. If the employer initiates the termination, a severance payment is usually required. If the dismissal happens without proper cause, the employee may be entitled to a higher compensation, depending on the circumstances.

It’s also important to recognize that the rules for severance pay can differ between fixed-term and permanent contracts. Therefore, both employers and employees should carefully check which rules apply to their situation before making decisions or entering into negotiations about severance.

Seeking legal advice from an experienced employment lawyer can help clarify your rights, ensure all statutory requirements are met during the termination process, and protect your interests if a dispute arises. This is especially important when your employment history includes multiple contracts or transitions from temp to permanent roles, as your eligibility for severance or a permanent contract might be affected.

Notice requirements and possible liabilities when ending a permanent contract

If you have a permanent contract and wish to resign, it’s important to know the rules to avoid unnecessary surprises. In the Netherlands, employees must observe a notice period when ending permanent employment. This notice period is typically statutory—one month—unless your contract or the applicable collective agreement (CAO) states otherwise.

Here’s what to keep in mind:

• Notice period: You should always check your employment contract and the CAO to determine the exact notice period. Failing to comply with the correct notice period can lead to financial penalties, such as having to compensate your employer for damages.
• Written resignation: Make sure you resign in writing. This provides clarity for both parties and prevents misunderstandings.
• Immediate resignation: Only in exceptional circumstances—such as severe misbehavior by the employer—can you resign immediately, without a notice period. In such cases, it’s wise to seek legal advice before taking action.

Potential liabilities can arise if you leave without respecting the notice period. Your employer may claim damages equal to the salary over the period you failed to work. Therefore, always follow the notice period requirements and consult your contract and CAO. If you’re unsure about your rights or how to proceed, consider seeking advice from an experienced employment lawyer.

Early Termination of a Fixed-Term Contract: What to Consider

Ending a fixed-term contract before its official end date brings important legal and practical challenges for both employers and employees. Dutch law is clear: generally, a fixed-term contract cannot be terminated early unless specific conditions are met.

When Is Early Termination Allowed?

There are a few key situations where a fixed-term contract may be ended prematurely:

• Contractual Agreement: If the employment contract contains an explicit early termination clause, both parties must follow the agreed process. This clause usually outlines notice periods and conditions for early exit.
• Mutual Consent: Both the employer and employee can agree in writing to end the contract early.
• Government Approval: In special cases, such as business closures or reorganization, an employer can request permission from the UWV (Employee Insurance Agency) to terminate the contract ahead of time. This usually requires strong justification, such as economic reasons or long-term incapacity for work.

Implications for Employers

Employers must be careful when considering early termination:

• Legal Consequences: Premature termination without a proper legal basis or agreed clause can lead to a requirement to pay compensation for the remainder of the contract period.
• Notice Requirements: Failure to follow notice obligations may expose employers to claims for payment in lieu of notice.
• Building Trust: Handling terminations without proper procedure can negatively impact employer reputation and employee relations.

Considerations for Employees

For employees, early termination can affect job security and entitlement to compensation:

• Compensation Rights: If an employer ends a fixed-term contract early without legal grounds, the employee may be entitled to compensation, often equivalent to the remaining term of the contract.
• Unemployment Benefits: The reason for contract termination also affects eligibility for unemployment benefits through UWV.
• Negotiation: Employees are encouraged to seek legal advice before accepting early termination to understand their rights and potential compensation.

Key Takeaway

Both employers and employees should always review the specific terms of their contract and relevant legal requirements before moving forward with early termination. When in doubt, seeking guidance from a labor law specialist ensures compliance with Dutch rules and helps protect both parties’ interests.

Can you terminate a permanent contract yourself?

Employees often wonder whether they can end a permanent contract under Dutch law without being liable for penalties or compensation. The short answer is: yes, but there are important rules to follow.

If you wish to end your permanent contract, you generally need to observe a notice period, which is usually stated in your employment agreement or follows the legal minimum. As long as you give proper notice, you aren’t typically required to pay damages or a penalty, unless your employment contract includes a specific clause to that effect (such as an early termination penalty, which is rare).

However, keep in mind:

• Notice period: You must let your employer know in writing and respect the agreed-upon notice period (commonly one month).
• Contract terms: Always double-check your contract for any special arrangements, such as a probationary period, non-compete clause, or specific resignation requirements.
• Special cases: Some collective labor agreements (CAOs) or certain employment contracts may include additional requirements or extended notice periods.

If you resign without observing the required notice period, your employer could claim compensation. On the other hand, if you follow the proper procedure, you can usually terminate your permanent contract without facing extra costs or legal claims.

Are you unsure about your situation or the terms in your contract? Seeking advice from a labor law expert, such as an attorney specializing in Dutch employment law, is always a wise step. This ensures you protect your rights and avoid unpleasant surprises later.

Can an employer terminate a fixed-term contract early?

Sometimes the question arises: what happens if an employer wants to end a fixed-term (temporary) contract before the agreed end date? In the Netherlands, the answer depends on the specific agreements in the employment contract.

Generally, a fixed-term contract runs until the end date agreed upon by both parties. Early termination is only possible if this is explicitly stated in your contract. Look for a so-called “early termination clause”—without it, the employment is meant to continue until the end date.

If an early termination clause exists, the employer can only end the contract early for valid reasons, such as business circumstances or long-term incapacity for work. The employer must also obtain permission from the UWV (the Dutch Employee Insurance Agency) or, in some cases, the subdistrict court. This legal requirement is in place to prevent arbitrary dismissals and protect the rights of employees on fixed-term contracts.

If your contract does not allow for early termination and your employer tries to end it anyway, you are generally entitled to the full salary until the original end date. This offers significant protection to employees in the Netherlands.

• Tip for employees: Always double-check your contract for early termination provisions.
• Tip for employers: Consult a labor law specialist, like those at Arslan Lawyers, before taking action, to avoid legal pitfalls and unnecessary claims.

Understanding your contract and the law helps both employers and employees avoid unpleasant surprises and ensures proper protection of their rights.

Notice Period Requirements for Terminating Contracts

Whether you’re employed on a fixed-term or permanent contract, it’s essential to be aware of the notice periods under Dutch law. These rules are in place to protect both employees and employers when an employment relationship comes to an end.

Fixed-Term Contracts

In most cases, fixed-term contracts automatically expire on the agreed end date. However, if either party wishes to end the contract before this date, Dutch law typically requires at least one full calendar month’s notice. This advance warning must be given in writing, and failing to observe the correct notice period can lead to complications or even claims for compensation.

Permanent Contracts

For permanent contracts (also known as contracts for an indefinite period), written notice is also mandatory before termination can take place. The standard notice period for the employee is one month, unless stated otherwise in the employment contract or collective labor agreement (cao). For employers, the length of the notice period usually depends on how long the employee has been with the company:

• 0–5 years of service: 1 month
• 5–10 years of service: 2 months
• 10–15 years of service: 3 months
• More than 15 years: 4 months

Employers and employees should always review their contracts and the applicable cao for specific notice period terms. Not adhering to these requirements could result in disputes regarding unfair dismissal or breaches of contract.

What obligations do employers have under Dutch employment law?

Whether you are transitioning from a temp role or hiring directly, employers in the Netherlands have several key legal obligations toward their employees. Understanding these responsibilities helps ensure a smooth and fair employment relationship.

Employers must:

• Provide a safe and healthy workplace: This includes meeting all health and safety standards and doing everything reasonably possible to prevent workplace accidents or illness.
• Pay wages on time: Employees are entitled to receive their salary regularly and as agreed upon in their employment contract.
• Facilitate training and development: Where necessary, employers should offer opportunities for employees to learn new skills or keep up with developments in their field.
• Respect contract terms: Once agreed upon, the terms of employment—such as job security, working hours, and job descriptions—should be honored. Any changes generally require mutual consent.
• Adhere to equality and non-discrimination laws: All employees must be treated equally, regardless of gender, ethnicity, or any other characteristic protected by law. Equal pay for equal work is a cornerstone of Dutch employment practice.
• Contribute to social insurance and comply with collective agreements: Employers are required to make statutory contributions for things like health insurance, pension schemes, and unemployment benefits. If a Collective Labor Agreement (CLA) is in place, its rules also apply alongside the employment contract.

Importantly, employers cannot simply change the terms of employment without discussing these changes with the employee and obtaining consent. This protects both sides and fosters trust within the workplace.

Conclusion

The chain rule provides both opportunities and points of attention for employees switching from temp work to permanent employment. It’s important to fully understand how successive employer works and how your rights as an employee are influenced. If you have questions about the chain rule or would like advice about your specific situation, please contact one of the specialized labor law attorneys at Arslan Lawyers.