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Facing redundancy in the Netherlands

Facing redundancy is never easy. It hits even harder when you’ve poured your heart into your work and strived to be a good employee. But when economic challenges hit a company, job losses can sometimes be inevitable. It’s usually a tough and stressful experience. Knowing your rights and what to do will help you protect your interests and move on to the next step in your career.

Article provided by Russell Advocaten, an IN Amsterdam partner.

Understanding the reasons for dismissal

According to Dutch law, an employer can end an employment contract if there are valid reasons for dismissal. This can include financial or economic factors, such as restructuring within the company, or reasons relating to an employee’s performance or suitability for their role. Dismissal is subject to a strict procedure. Depending on the reason for dismissal, it requires involvement of either the UWV (Dutch Employee Insurance Agency) or a judge at the subdistrict court.

For instance, if the company’s financial situation leads to job cuts, the employer must obtain consent from the UWV. In cases of issues relating to a specific employee, such as inadequate performance, a subdistrict court judge may need to review the situation to approve the termination. Read more about poor-performance dismissal.

In many cases, companies and employees reach a mutual agreement to end the contract. A settlement agreement allows both parties to negotiate terms that work best for them, including a redundancy package and other benefits.

Step-by-step guide to the redundancy process

Before you can be legally dismissed due to redundancy, your employer must follow a number of steps:

  • Determine if the position is redundant

The employer must prove that your position is no longer essential due to structural changes in the company. This could mean eliminating specific tasks, merging roles or reorganising departments. The employer must be able to explain and justify why it is necessary for the business to eliminate your position.

  • Select which employee or employees are eligible for dismissal

If more than one person hold the same or similar roles, the employer can’t arbitrarily choose who to dismiss. Instead, they must follow the reflection principle (afspiegelingsbeginsel) and the last-in, first-out principle (anciënniteitsbeginsel). This is based on factors such as length of service and age distribution within the team. Generally, the employee with the least seniority in the role will be the first considered for redundancy. If an employer tries to dismiss an employee who doesn’t fit the selection criteria outlined by the reflection principle, the UWV will reject the dismissal request for that employee.

  • Explore reassignment opportunities

Even after determining that a role is redundant and selecting an employee for potential dismissal, the employer must actively look for alternative positions within the company that the employee may be qualified to fill. The employer must prove that no other suitable job for the employee is available within the company. They should offer any suitable vacancies that match the employee’s experience, training and abilities. If the company is part of a larger national or international group of companies, the employer also has to assess whether another suitable job is available within the group. If there is a suitable role available within the wider group, the employer must give the potentially redundant employee priority for that role over other employees. 

  • Consider a settlement agreement

In many cases, companies and employees choose to handle redundancy through a settlement agreement. This allows both parties to agree on the terms of separation, enabling them to avoid a lengthy process involving the UWV.

An essential part of the settlement is a (transition) compensation that is usually above the amount that is mandatory for cases of unilateral dismissal via the UWV. The minimum mandatory compensation is calculated as one-third of the monthly salary per year of service and is intended to support the employee financially while they seek new employment.

The employer must also take into account the appropriate notice period to set the termination date. Notice is effective from the end of the calendar month, with the statutory period determined by the length of the employee’s time at the company:

  • Less than 5 years: one month’s notice
  • 5-10 years: two months’ notice
  • 10-15 years: three months’ notice
  • 15 years and above: four months’ notice

Impact on residency status

When internationals move to the Netherlands for a specific role, their residence permit is usually tied to their job and employer. If you are dismissed for poor performance, this can directly impact your residency status. After dismissal, you usually have three months to find a new job while your permit remains valid. However, if you do not secure a new position within this period – or if your permit expires sooner – the Immigration and Naturalisation Service (IND) may revoke your permit. To stay in the Netherlands, it’s important to quickly find a new employer who is willing to act as your sponsor and complete the necessary procedures with the IND. If you are a resident of the Amsterdam Area and qualify as a highly skilled migrant, are a recent graduate or self-employed, you can also contact IN Amsterdam for help and advice.

Seek legal advice

Given the complexity of the redundancy process, seeking legal advice from Russell Advocaten is a smart step. Our team can thoroughly review your dismissal procedure, confirm that all necessary steps have been followed and assess any settlement agreement offered to you. If there is room for negotiation, we can help you get better terms in your contract to maximise your outcome. Many employers even cover the cost of legal consultation.