An employer may decide to terminate the business or be faced with bankruptcy. In both cases, dismissal for employees may be unavoidable. Still, this does not mean that you are without rights: even in the event of a business closure or bankruptcy, rules and compensation apply.
In this article, we explain how dismissal works in these situations and what you are entitled to.
Dismissal in the event of business closure
An employer may close the business, but must still follow the dismissal rules.
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Dismissal must go through UWV approval to be arranged.
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The reflection principle determines which employees are dismissed.
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The employer must conduct a redeployment investigation.
👉 In this case you are entitled to the transition payment, unless there is a bankruptcy (see below).
Dismissal in the event of bankruptcy
If the employer goes bankrupt:
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The employment contracts will be terminated by the trustee.
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The UWV will take over the wage payments through the wage guarantee scheme.
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You are not entitled to a transition payment, because there are no financial resources.
UWV Wage Guarantee Scheme
The UWV pays in the event of bankruptcy or suspension of payments:
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Outstanding wages for up to 13 weeks prior to the bankruptcy.
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Holiday allowance and vacation days for the current and previous year.
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Wages for the notice period (maximum 6 weeks).
Difference between business closure and bankruptcy
| Situation | Procedure | Transition payment | UWV wage guarantee |
|---|---|---|---|
| Business closure | UWV procedure + reflection principle | ✅ Yes | ❌ No |
| Bankruptcy | Trustee terminates contracts | ❌ No | ✅ Yes |
Practical examples
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Example 1: A retail chain closed voluntarily. The employees were dismissed via the UWV and received a transition allowance.
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Example 2: A hospitality business went bankrupt. The trustee terminated the contracts. The UWV paid outstanding wages, but there was no transition allowance.
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Example 3: During a factory closure, an employee received additional compensation under the social plan on top of the transition allowance.
Checklist for dismissal in case of closure or bankruptcy
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📑 Check whether there is a closure or bankruptcy.
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⚖️ In case of closure: pay attention to the correct application of the reflection principle.
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💶 Claim the transition allowance in case of closure, or wage guarantee in case of bankruptcy.
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📝 Check whether you are entitled to a social plan.
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📞 Consult an employment lawyer in case of a dispute with the bankruptcy trustee or employer.
Common mistakes
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Thinking that bankruptcy automatically means that all rights lapse.
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Not applying for wage guarantee with the UWV.
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In the event of a business closure, agreeing to dismissal without severance pay.
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Not doing a legal review of the social plan.
Frequently asked questions (FAQ)
1. Am I entitled to severance pay in the event of bankruptcy?
No, only in the case of a business closure without bankruptcy.
2. What does the UWV pay in the event of bankruptcy?
Back pay, holiday allowance, vacation days, and wages for the notice period.
3. Can my employer simply close and dismiss employees?
Yes, but termination must go through the UWV and comply with the rules.
4. What is a social plan?
An arrangement in the event of reorganization or closure that sets out agreements on compensation and support.
5. Can I contest dismissal in case of bankruptcy?
In practice, almost never, because the company ceases operations.
Why Arslan Advocaten?
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Specialized in dismissal, bankruptcy and wage disputes
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Assist employees with UWV and trustee procedures
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Check whether you are entitled to transition compensation or a wage guarantee
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Negotiate extras through a social plan
Conclusion
Dismissal due to business closure or bankruptcy has major consequences, but you do have rights. In case of closure you are entitled to a transition payment; in case of bankruptcy, to a wage guarantee through the UWV. Always have your situation legally reviewed to avoid missing out on compensation.
Frequently Asked Questions
What rights do employees have if their employer closes the business?
Employees are entitled to a transition payment, and the dismissal process must follow the UWV approval and the reflection principle. It’s important to ensure the correct procedures are followed and to claim your rights accordingly.
What happens to my wages if my employer goes bankrupt?
In case of bankruptcy, the UWV’s wage guarantee scheme will cover outstanding wages, holiday allowance, and wages for the notice period, but you are not entitled to a transition payment. The trustee will handle the termination of employment contracts.
How can I differentiate between a business closure and bankruptcy regarding my employment rights?
A business closure involves UWV approval and may entitle you to a transition payment, while bankruptcy involves the trustee terminating contracts and the UWV providing wage guarantees without a transition payment. Each situation has different procedures and entitlements.
What should I do if I face dismissal due to business closure or bankruptcy?
Check whether the correct dismissal procedures have been followed, claim your entitlement to transition pay or wage guarantees, and consult an employment lawyer if you encounter disputes or need advice on your rights.