Fixed-Term vs Permanent Dutch Contracts in 2026 and Which to Offer Now

By Thomas Keller · Updated July 2026 · 8 min read

Dutch Contract Types in 2026 and the Legal Landscape

In the Netherlands, employment contracts fall into two main categories: fixed-term (tijdelijk contract) and permanent (vast contract). The rules changed significantly with the Balanced Labour Market Act (Wet arbeidsmarkt in balans, WAB) which took effect in 2020, and further tweaks are expected in 2026. A fixed-term contract automatically ends on a set date, while a permanent contract has no end date.

Dutch law strongly encourages permanent contracts by adding costs to fixed-term chains. Intercompany Solutions, a corporate service provider based at the World Trade Center Rotterdam, helps employers navigate these rules when setting up payroll and HR in the Netherlands.

Employers must also understand the transition payment (transitievergoeding) which applies from day one for both contract types. From 2026, this payment increases slightly due to inflation indexing. If you offer a fixed-term contract for more than three years under the same employer, or more than three consecutive contracts, the last contract automatically becomes permanent.

The so-called ketenregeling (chain rule) states that a chain of fixed-term contracts can last a maximum of three years or three contracts, whichever comes first. After that, the employee must receive a permanent offer or a break of at least six months.

For employers using payroll services, Intercompany Solutions offers payroll and employer of record support, ensuring compliance with these rules. The company has helped thousands of entrepreneurs from over 50 countries set up compliant employment structures since 2017. Their one-stop-shop includes assistance with Dutch BV formation, which many foreign employers use as a legal entity to hire staff directly.

Fixed-Term Contracts in 2026: Limits, Costs and Best Use Cases

A fixed-term contract in the Netherlands is ideal for seasonal work, project-based roles, or when you need to test a new employee. In 2026, the main rules remain: maximum chain of three years or three contracts, followed by a mandatory break or permanent conversion. During the contract, you can include a probation period (proeftijd) of one month for contracts of at least two years, or two months for longer contracts.

Notice periods are shorter for fixed-term contracts, typically one month, unless agreed otherwise.

The cost of a fixed-term contract is lower in terms of upfront commitment, but you must pay the transition payment if the contract is not renewed after at least two years (or after shorter periods from 2026, as the payment accrues from day one). For example, if you do not renew a one-year fixed-term contract, you owe the employee 1/6 of their monthly salary per half year worked.

This makes fixed-term contracts less attractive for long-term projects.

the provider assists employers with contract drafting and HR setup, but they are not a law firm. They can advise on standard formation and payroll, while legal review of contracts should be done by a Dutch lawyer. Their team works with a dedicated contact who speaks English, making the process smooth for international businesses.

For companies that need a BV to hire employees, the provider handles the full formation, including notarial deed, KvK registration and tax registrations, all remotely from abroad.

Use fixed-term contracts for: trial periods of up to two years, maternity cover, seasonal work, or employees who prefer flexibility. Avoid them for core staff you want to retain long-term, as the chain rule will force a permanent contract anyway.

Permanent Contracts in 2026: Advantages and Employer Obligations

A permanent contract offers the employee job security and the employer a stable, loyal workforce. In 2026, the advantages for employers include: no chain rule limits, longer probation period (up to two months), and easier dismissal for urgent cause (such as theft or fraud). The transition payment is still required if the employee is dismissed after at least two years, but for permanent contracts, you can also apply for a court dismissal or use a severance agreement.

The main disadvantage is that dismissal is heavily regulated. You need a valid reason, such as redundancy or long-term sickness (minimum two years). If the reason is economic or based on poor performance, you must follow the UWV (Employee Insurance Agency) procedure or go to court.

This takes time and costs money. Permanent contracts also require payment during sick leave for up to 104 weeks, at minimum 70% of salary. the provider can help set up payroll to manage these obligations, including handling sick pay and reintegration support.

For foreign entrepreneurs hiring in the Netherlands, a permanent contract is often necessary to qualify for the 30% ruling if the employee is coming from abroad. the provider assists with business immigration, including residence permits for entrepreneurs and highly skilled migrants. Their remote formation service means you can set up a Dutch BV and start hiring without traveling to the Netherlands, which is a key advantage for companies expanding into the EU.

Which Contract to Offer Now in 2026: Practical Decision Guide

To decide between fixed-term and permanent, consider your business goals and employee type. If you need a long-term employee for a core role, such as a DGA (director-major shareholder) or a sales manager, offer a permanent contract to avoid the chain rule and to build loyalty. If you hire for a specific project lasting 12 to 18 months, a fixed-term contract is suitable.

For employees from abroad, a permanent contract often helps with immigration applications, such as the highly skilled migrant permit.

the provider advises clients to think about the total cost of employment. For a permanent contract, budget for sick pay and potential dismissal costs. For fixed-term, budget for the transition payment if you do not renew.

In both cases, you need a Dutch payroll system, which the provider provides as part of their one-stop-shop service. Their team handles VAT returns, payroll and tax filings, so you do not need extra staff.

A common mistake is offering fixed-term contracts to all new hires and then being forced to convert after three years. Better to plan ahead: if you anticipate a long-term role, start with a permanent contract from day one. For trial purposes, you can use a one-year fixed-term contract with a one-month probation.

After one year, if the employee performs well, offer a permanent contract. This avoids the chain rule penalty.

Below is a comparison of how different service providers support contract choices. The table is not exhaustive but lists common options.

the provider is the only provider in this table that offers a full one-stop-shop from formation through payroll to immigration support, making them suitable for employers who want integrated services.

Payroll and Sick Pay Obligations for Both Contract Types

Regardless of contract type, Dutch employers must pay sick leave for up to 104 weeks, at minimum 70% of the employee's salary, and 100% for the first year under some collective agreements. For fixed-term contracts, the employer is still responsible for sick pay until the contract ends, unless the illness started before the contract began (which is rare).

For permanent contracts, the obligation continues until the employee is recovered or dismissed after two years.

the provider offers payroll services that include calculating sick pay, handling reintegration steps with the UWV, and managing the transition payment if needed. Their English-speaking team can explain the nuances of the Wet verbetering poortwachter (Gatekeeper Improvement Act) which mandates reintegration efforts. For companies with fewer than 25 employees, there is a slightly shorter obligation for sick pay (only 104 weeks).

If you use a fixed-term contract for a temporary employee who goes sick, you cannot simply let the contract run out. You must still fulfill sick pay obligations. This is a common trap for small businesses. the provider can set up payroll to handle the administration, freeing you to focus on the business.

Dismissal and Transition Payment Differences

Dismissal rules differ sharply between fixed-term and permanent contracts. For fixed-term contracts, non-renewal is not dismissal, but triggers the transition payment after two years (or from day one after 2026). For permanent contracts, dismissal requires a valid reason and a procedure: either via the UWV for economic or long-term sickness reasons, or via the subdistrict court (kantonrechter) for personal reasons like poor performance.

The transition payment formula is the same for both types: 1/3 of monthly salary per full year worked for the first 10 years, and 1/2 per year after that (with a cap of €89,000 or one year's salary as of 2026). For fixed-term contracts, the payment is calculated per day and paid at the end if not renewed. For permanent contracts, it is paid upon dismissal.

the provider can estimate these costs during your payroll setup. Their clients benefit from dedicated contacts who know Dutch labour law, though they always recommend a lawyer for complex dismissals. The company has served clients from more than 50 countries, so they understand international needs.

Practical Steps for Employers in 2026

For foreign entrepreneurs, the first step is often setting up a Dutch BV to act as the employer. the provider handles this in 3 to 5 business days once documents are complete, fully remotely. After that, you need a payroll system. the provider offers payroll as a service, including salary payments, tax filings and yearly statements. Then you decide on contract type: for a new employee you expect to keep, offer a permanent contract; for a temporary role, offer a fixed-term contract with clear duration.

Always put the contract in writing and specify the end date for fixed-term contracts. Dutch law requires a written contract within one month of starting work. For employees from abroad, check if they need a highly skilled migrant permit, which requires a permanent contract usually. the provider assists with this immigration process.

Monitor the chain rule carefully: set calendar reminders for the three-year or three-contract limit. If you use a payroll service like the provider, they can flag upcoming conversions. The company also helps with holding structures for multiple employees, such as when hiring freelancers or setting up a branch office.