An employer can dismiss employees if the company runs into financial problems or if there is a reorganisation. This is called economic dismissal. Because this has a large impact on employees, strict rules and procedures apply.
In this article we explain when economic dismissal is permitted, how the procedure works, and what rights you as an employee have.
What is economic dismissal?
With economic dismissal, the employer terminates employment contracts for reasons related to business operations. Examples are:
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Poor financial situation.
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Reduction of work.
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Company closure or relocation.
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Organisational changes (reorganisation).
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Automation or digitisation causing jobs to disappear.
Permission via UWV
An employer cannot simply dismiss employees. In the case of economic dismissal, permission from the UWV is needed. The UWV tests whether the reason for dismissal is sufficiently serious.
If the UWV gives permission, the employer must still comply with the notice period.
The reflection principle
In reorganisations, the employer cannot choose who gets fired. The reflection principle applies:
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Employees are divided into age groups.
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Within each group, it is looked at who was hired last (“last in, first out”).
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This is how the dismissals are evenly distributed.
Obligation to reassign
The employer must investigate whether you within the company or group can be transferred to another suitable position. Only if this fails, dismissal may follow.
Dismissal compensation in case of economic dismissal
In the case of economic dismissal, you are entitled to the transition fee. Sometimes there is also a social plan, which contains agreements about:
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Additional compensation.
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Outplacement guidance.
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Training or retraining.
A social plan can be agreed upon through the works council or trade union and often offers more favourable conditions.
Settlement agreement instead of UWV procedure
Sometimes an employer chooses to agree on a dismissal arrangement via a settlement agreement (VSO) instead of through the UWV. This is faster and avoids procedures.
👉 Note: you can then negotiate extras, such as a higher dismissal compensation or longer payment.
Examples from practice
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Example 1: A company had to downsize due to falling turnover. A worker lost his job through the reflection principle. He received a transitional compensation and outplacement through the social plan.
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Example 2: An employer offered a VSO to avoid a UWV procedure. The employee received 2 extra months’ salary in addition to the transitional compensation.
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Example 3: An employee was wrongly dismissed as the only one, while the reflection principle was not properly applied. The judge restored the employment.
Checklist for economic dismissal
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📑 Check whether there is a valid economic business reason.
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⚖️ Test whether the reflection principle has been correctly applied.
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📅 Check for reassignment possibilities.
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💶 Check your entitlement to transition pay and social plan.
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📝 Always have a VSO legally checked.
Common mistakes
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Thinking that dismissal during reorganisation is always valid.
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Not checking whether the reflection principle has been correctly applied.
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Agreeing too quickly to a VSO without negotiation.
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Not taking into account the notice period.
Frequently asked questions (FAQ)
1. Can my employer dismiss me due to reorganisation?
Yes, but only with permission from UWV and after applying the rules.
2. What is the reflection principle?
A method to fairly determine which employees are dismissed, divided over age groups.
3. Do I have a right to compensation for economic dismissal?
Yes, at least the transition fee and often extra through a social plan.
4. Can I refuse to sign a termination agreement?
Yes, you are never obliged to sign.
5. Could a lawyer help with economic dismissal?
Yes, a lawyer can check whether the rules have been correctly applied and negotiate for a higher compensation.
Why Arslan Lawyers?
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Specialising in employment law and reorganisations
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Checking whether UWV and cao rules have been correctly applied
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Negotiating for higher compensation through VSOs
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Guiding employees through procedures and social plans
Conclusion
Dismissal due to business economic reasons is subject to strict rules. Employers must ask permission from UWV, apply the reflection principle and investigate reappointment. As an employee, you have a right to protection and often also to additional compensation. Therefore, always have your situation assessed by a labour law attorney.
