Dismissal Due to Reorganisation in the Netherlands

If your employer announces a reorganisation, your job may be at risk. Dismissal due to reorganisation (bedrijfseconomisch ontslag) is one of the most common reasons for ending an employment contract in the Netherlands. However, your employer cannot simply dismiss you: there is a strict legal procedure that must be followed, including obtaining permission from the UWV (the Dutch Employee Insurance Agency). As an employee, you have important rights throughout this process, including the right to severance pay, the right to a proper selection procedure, and in some cases the right to a social plan. In this article you will learn everything about the reorganisation dismissal procedure, your rights, and the steps you can take to protect your interests.

What is dismissal due to reorganisation?

Dismissal due to reorganisation (bedrijfseconomisch ontslag) occurs when your employer terminates your employment contract for economic or organisational reasons. The legal basis is Article 7:669 paragraph 3 sub a of the Dutch Civil Code (BW), which defines business economic reasons as a valid ground for dismissal. These reasons relate to the business, not to you personally — it is not about your performance or behaviour, but about the employer's need to reduce staff for economic or organisational reasons.

Unlike dismissal for personal reasons (such as underperformance or a disrupted working relationship), dismissal due to reorganisation follows a different procedural route. The employer must request permission from the UWV, not from the subdistrict court. This route is prescribed by law and cannot be bypassed — unless the employer and employee agree to terminate the contract by mutual consent through a settlement agreement.

It is important to understand that your employer cannot simply announce a reorganisation and dismiss you. The law imposes strict requirements regarding the grounds, the selection of employees, the redeployment obligation, and the procedure itself. If your employer does not comply with these requirements, the dismissal can be challenged.

The UWV dismissal procedure

To dismiss employees for economic reasons, the employer must request a dismissal permit (ontslagvergunning) from the UWV. This procedure is regulated in the Dismissal Decree (Ontslagregeling) and works as follows:

Step 1: Application by the employer

The employer submits a written application to the UWV, explaining the business economic reasons, providing financial documentation, demonstrating compliance with the reflection principle, and showing that redeployment is not possible. The application must be thoroughly substantiated.

Step 2: Your written defence

The UWV forwards the employer's application to you, and you have 14 days to submit a written defence (verweer). This is your opportunity to challenge the grounds, the selection, or other aspects of the application. You can argue, for example, that the economic reasons are not genuine, that the reflection principle was not correctly applied, or that redeployment options exist that the employer has overlooked.

Step 3: Possible second round

If necessary, the UWV may allow a second round of arguments from both sides, typically with a shorter response time of 7 days.

Step 4: UWV decision

The UWV assesses the application and decides whether to grant the dismissal permit. The UWV checks whether the economic grounds are sufficiently substantiated, whether the reflection principle has been correctly applied, whether the employer has fulfilled the redeployment obligation, and whether no dismissal bans apply. The UWV aims to decide within 4 weeks, though the process may take longer if a second round of arguments is needed.

Step 5: Termination by the employer

If the UWV grants permission, the employer must terminate the employment contract within 4 weeks after the decision, observing the applicable notice period. The employer may deduct the duration of the UWV procedure from the notice period, but the remaining notice period must be at least 1 month.

Economic grounds for reorganisation

The employer must demonstrate that there are genuine business economic reasons for the reorganisation. The Dismissal Decree (Ontslagregeling) recognises the following grounds:

• Poor or deteriorating financial results: the employer must provide financial documentation (annual accounts, interim figures, forecasts) showing that the company is in financial difficulty or that results are declining significantly.
• Loss of work or reduction in orders: a structural decline in the amount of work available, not merely a temporary dip. The employer must show that the reduction is expected to last at least 26 weeks.
• Organisational or technological changes: the employer restructures the organisation, merges departments, automates processes, or otherwise changes the business in a way that makes certain positions redundant.
• Business closure: the employer ceases all or part of the business activities.
• Relocation of the business: in limited circumstances, moving the business to a different location can constitute a ground for reorganisation.

The UWV assesses whether the economic grounds are genuine and sufficiently substantiated. The employer must provide concrete evidence, not merely assertions. If you believe the employer's financial picture is not as dire as presented, or that the reorganisation is a disguise for getting rid of specific employees, this is something your lawyer can challenge in the UWV procedure.

The reflection principle (afspiegelingsbeginsel)

One of the most important protections for employees in a reorganisation is the reflection principle (afspiegelingsbeginsel). This principle determines which employees are selected for dismissal and is designed to ensure a fair and objective selection. It is regulated in Articles 11 to 15 of the Dismissal Decree.

How the reflection principle works

The reflection principle works in three steps:

1. Identify interchangeable positions: the employer must first determine which positions are interchangeable (uitwisselbare functies). Positions are interchangeable if they are comparable in terms of content, required skills and competencies, level, and remuneration. This is assessed objectively, not based on the individual qualities of the employees.
2. Divide employees into age groups: the employees in the interchangeable positions are divided into five age groups: 15-24, 25-34, 35-44, 45-54, and 55 and older. The purpose is to maintain a balanced age distribution in the workforce after the reorganisation.
3. Last in, first out within each age group: within each age group, the employee with the shortest length of service is selected for dismissal first. The number of dismissals per age group must be proportional to the representation of that age group in the total workforce for the interchangeable positions.

Exceptions to the reflection principle

In limited circumstances, the employer may deviate from the reflection principle:

• Indispensable employees: the employer may retain an employee who would otherwise be selected for dismissal if that employee possesses specific knowledge or skills that are indispensable for the business. The employer must substantiate this thoroughly.
• Temporary workers first: before dismissing permanent employees, the employer must first terminate temporary workers (including agency workers) in the same interchangeable positions, unless this is not reasonably possible.
• Collective labour agreement (CAO) deviation: if the applicable CAO contains specific rules for selection in case of reorganisation, these may partially replace the reflection principle in some cases.

The redeployment obligation

Before dismissing you, your employer must make reasonable efforts to redeploy you within the company or, if applicable, within the group of companies to which the employer belongs. This redeployment obligation (herplaatsingsverplichting) is laid down in Article 7:669 paragraph 1 BW and is a mandatory condition for obtaining the dismissal permit from the UWV.

The employer must actively search for suitable alternative positions and must offer you reasonable retraining or additional training if this would enable you to fill another position. The redeployment period is equal to the applicable notice period. A position is considered suitable if it matches your education, experience, and capabilities, taking into account reasonable retraining.

If a suitable position is available and the employer does not offer it to you, the UWV should deny the dismissal permit. In your defence, you can point out positions within the organisation that the employer has not considered.

Social plan

In larger reorganisations, the employer may negotiate a social plan (sociaal plan) with the trade unions or the works council. A social plan is an agreement that sets out the terms and conditions for employees affected by the reorganisation. It typically includes provisions on:

• Severance pay: often higher than the statutory minimum, sometimes based on a multiplied formula.
• Redeployment and outplacement: support in finding new employment, such as coaching, training, or outplacement services.
• Supplementary benefits: a supplement to unemployment benefits for a certain period, bringing your income closer to your previous salary level.
• Early retirement arrangements: for older employees approaching retirement age.
• Hardship clause: a provision for exceptional individual circumstances.

If a social plan has been agreed with the representative trade unions, it is generally binding on all employees within the scope of the plan. Even if you are not a member of the trade union, the social plan applies to you. However, a social plan agreed only with the works council is not automatically binding and has a more advisory character.

Notice period after UWV permission

If the UWV grants the dismissal permit, the employer must terminate your contract by giving notice, observing the applicable notice period. The statutory notice periods are:

• Less than 5 years of service: 1 month
• 5 to 10 years of service: 2 months
• 10 to 15 years of service: 3 months
• 15 years or more of service: 4 months

The employer may deduct the time spent on the UWV procedure from the notice period, but the remaining notice period must be at least 1 month. For example, if your notice period is 2 months and the UWV procedure took 6 weeks, the employer can deduct the 6 weeks, but must still give you at least 1 month's notice.

The notice period typically starts on the first day of the month following the date the notice is given. If the employer fails to observe the correct notice period, you may be entitled to damages equal to the salary for the missing notice period.

Severance pay

If you are dismissed as a result of a reorganisation, you are entitled to the statutory severance pay (transitievergoeding). Since 1 January 2020, the severance pay is calculated as follows:

• One-third of a monthly gross salary per year of service.
• This applies from the first day of employment, with no distinction between the first 10 years and subsequent years (as was the case under the old system).
• The calculation is proportional for incomplete years.

In addition to the statutory severance pay, you may be entitled to a higher compensation if a social plan provides for it, or if you negotiate a settlement agreement with better terms. The statutory severance pay is the legal minimum — you cannot receive less, but you may negotiate more.

Dismissal bans during reorganisation

Certain dismissal bans (opzegverboden) apply even during a reorganisation. The UWV will not grant a dismissal permit if a dismissal ban applies to you. The most important bans are:

• Illness: if you are ill at the time the employer applies for the dismissal permit, the UWV will generally not grant permission. However, if you became ill after the UWV application was submitted, the ban does not apply. Also, if you have been ill for more than 2 years and the employer has fulfilled the reintegration obligations, the ban no longer applies.
• Pregnancy and maternity leave: you cannot be dismissed during pregnancy, maternity leave, or the first 6 weeks after maternity leave.
• Works council membership: members of the works council (ondernemingsraad) enjoy special dismissal protection and cannot be dismissed as part of a reorganisation if their position is interchangeable with other positions.
• Parental leave: dismissal during parental leave is restricted.

Challenging a reorganisation dismissal

If the UWV grants the dismissal permit and you believe the decision is wrong, you can challenge the dismissal by filing a petition with the subdistrict court (kantonrechter) within two months after the end of the employment contract. You can request:

• Reinstatement (herstel van de arbeidsovereenkomst): the court orders the employer to reinstate you, effectively reversing the dismissal.
• Fair compensation (billijke vergoeding): if the court finds the dismissal was unjustified (for example, because the reflection principle was not correctly applied or the redeployment obligation was not met), the court may award an additional compensation on top of the severance pay.

On the other hand, if the UWV denies the dismissal permit, the employer can file a petition with the subdistrict court to dissolve the employment contract. In that case, you will again have the opportunity to defend your position.

Settlement agreement as alternative

In practice, many reorganisation dismissals are resolved through a settlement agreement rather than the formal UWV procedure. The employer may offer you a settlement agreement to avoid the time and uncertainty of the UWV process. For you as an employee, a settlement agreement can also have advantages:

• Higher compensation: the negotiated compensation in a settlement agreement can be higher than the statutory severance pay, especially if the employer has a weak case or wants to avoid a lengthy procedure.
• Faster clarity: a settlement agreement provides immediate certainty about the terms of your departure, rather than waiting for the UWV procedure to complete.
• Additional benefits: you can negotiate terms that are not available through the UWV route, such as outplacement, a positive reference, release from non-compete clauses, or a legal costs contribution.
• Preserving unemployment benefits: a properly drafted settlement agreement preserves your right to unemployment benefits, just as a dismissal via the UWV would.

However, you should not accept a settlement agreement without having it reviewed. The employer may try to offer less favourable terms than what you would receive through the formal procedure. Have your agreement checked for free by our lawyers before signing.

Practical steps when facing reorganisation

If your employer has announced a reorganisation or you have been told that your position is at risk, the following steps can help protect your rights:

1. Stay informed. Attend all meetings, read all communications from the employer about the reorganisation, and keep copies of everything. Ask for information in writing if it is given verbally.
2. Check the reflection principle. Request information about which positions are considered interchangeable and how the age groups are composed. Verify that you are correctly categorised and that the selection is properly applied.
3. Ask about redeployment options. The employer has a legal obligation to explore redeployment. Ask what efforts the employer is making and whether there are positions you could fill, potentially with additional training.
4. Check for a social plan. If a social plan exists, study its contents carefully. Understand what you are entitled to under the plan and whether the terms are favourable compared to the statutory minimum.
5. Do not sign anything hastily. If the employer offers a settlement agreement, do not sign it under time pressure. You have the right to take time and seek legal advice.
6. Seek legal advice early. The earlier you involve a lawyer, the better your position. A lawyer can assess whether the reorganisation is genuine, whether the reflection principle is correctly applied, and whether you are receiving fair terms.

Frequently asked questions about reorganisation dismissal

Can my employer dismiss me directly in a reorganisation?

No. The employer must follow the UWV procedure to obtain a dismissal permit, or offer you a settlement agreement to terminate by mutual consent. Without a dismissal permit or your agreement, the employer cannot dismiss you for economic reasons. The only exception would be if the applicable CAO provides for a different procedure (a CAO dismissal committee), but this is rare.

How is the reflection principle applied?

The reflection principle ensures that dismissals are distributed proportionally across age groups within interchangeable positions. Within each age group, the employee with the shortest length of service is selected first. The goal is to maintain a balanced age distribution after the reorganisation. Your employer must demonstrate that this principle has been correctly applied.

Am I entitled to severance pay in a reorganisation?

Yes, you are entitled to the statutory severance pay (transitievergoeding) of one-third of a monthly salary per year of service. If a social plan applies, you may receive a higher amount. In a settlement agreement, the compensation is negotiable and may also exceed the statutory minimum.

Can I be dismissed if I am ill during a reorganisation?

In most cases, no. If you are ill at the time the employer applies for the dismissal permit, the UWV will generally deny the application. However, if you became ill after the application was submitted, the dismissal ban does not apply. If you have been ill for more than 2 years, the dismissal ban also no longer applies.

Should I accept a settlement agreement or go through the UWV procedure?

This depends on the specific terms offered. A well-negotiated settlement agreement can provide better terms than the formal procedure, including a higher compensation, outplacement support, and a favourable reference. However, you should never accept a settlement agreement without having it checked by a lawyer. The employer may be offering less than what you are entitled to.

What if my employer does not comply with the reflection principle?

If the reflection principle is not correctly applied, this is a strong ground for challenging the dismissal. In the UWV procedure, you can argue this in your written defence, and the UWV should deny the permit. If the UWV nonetheless grants the permit, you can challenge the dismissal in court within two months after the end of the employment contract.