A fixed-term employment contract expires automatically (by operation of law) at the expiry date. A dismissal permit or a dissolution from the court is not necessary. There are, however, a few rules the employer has to take into account regarding entering into and the termination of fixed-term contracts.
As a rule (there are a few exceptions, for example regarding employment contracts that last less than six months) the employer must inform an employee who works on the basis of a fixed-term in writing no less than one month before the end date of the contract about whether or not the contract is to be extended or not and, if it is extended, under what conditions. The penalty for not giving timely such notice is a compensation equal to the salary for the unobserved period with a maximum of one month salary. Please note that even in case of no compliance with the above, the employment contract for a fixed-term ends nevertheless.
There is a limit to the use of fixed-term contracts in a row (the so-called ‘chain rule’ or in Dutch the ‘ketenregeling’). This chain rule means that there may be no more than three consecutive fixed-term contracts between the same (or closely-related) parties with a total duration of two years or more. Breaks (of no employment contract) of six months or less in between contracts are considered as continued employment. As soon as there are more than three consecutive contracts, or two or more contracts exceeding a total duration of two years (including the period of breaks of six months or less), the most recent contract automatically converts into a contract for an indefinite time.
A fixed-term contract may include a provision allowing premature termination, but an employer wishing to use this option needs a dismissal permit or a court order. If parties did not agree to a clause regarding premature termination, neither of them may terminate the contract before it expires with the exception of termination of the employment contract by mutual consent.
A non-compete clause (as well as a business contract clause) is not permitted in a fixed-term contract unless it is required for compelling business reasons. The employer has to expressly clarify (to the court’s satisfaction) these compelling reasons in the employment contract.
A fixed-term contract with a duration of maximum six months may not include a trail period. In the chapter ‘Probation period’ more information can be found on the length of a trial period.