Redundancy: when may your employer dismiss you for business reasons?

Redundancy in the Netherlands is about the job, not the employee. An employer who wants to end a contract for business economic reasons (bedrijfseconomisch ontslag) has to show that the position itself has disappeared, then follow a fixed procedure. Under article 7:671a of the Dutch Civil Code (BW), that procedure runs through UWV unless you agree to a settlement. The main exception: if you sign a settlement agreement, no UWV permission is needed, but you keep a two-week right to withdraw.

When does a dismissal count as redundancy?

Dutch law lists the grounds for dismissal exhaustively in article 7:669 of the Dutch Civil Code. Redundancy is the first of them: the job has to lapse for business economic reasons. A fall in turnover, a reorganisation, the closure of a location, automation, eliminating specific tasks or moving activities abroad can all qualify. What matters is the position, not the person filling it.

That distinction has practical consequences. If the employer’s real complaint is inadequate performance, redundancy is the wrong route: that ground requires a properly built dismissal file for underperformance, not a set of financial figures. Employers who blur the two usually lose on exactly that point.

Does the employer need permission first?

Yes. For business economic reasons an employer cannot simply give notice. It must first obtain consent from UWV, the Dutch employee insurance agency, under article 7:671a of the Dutch Civil Code. In those UWV proceedings the employer has to show three things: that the position has genuinely lapsed, that the right employee was selected, and that reassignment was considered. The subdistrict court is not involved here — that route is reserved for other grounds for dismissal, such as a disrupted working relationship.

There is one way around the procedure, and it is the most common outcome in practice: ending the contract by mutual consent in a settlement agreement. No permission is then needed. Both routes have their own advantages, which we compare in our article on the settlement agreement versus UWV dismissal.

Who is selected: how does the reflection principle work?

An employer does not get to choose whom to let go. Selection follows the reflection principle (afspiegelingsbeginsel), set out in the Dutch Dismissal Regulation. Within each category of interchangeable jobs at a business location, employees are divided into five age groups: 15 to 25, 25 to 35, 35 to 45, 45 to 55, and 55 and over. Redundancies are spread across those age groups in proportion to their size, and within each group the employee with the shortest service goes first.

The effect is that the age distribution of the department stays roughly the same after the reorganisation. An employer who instead keeps the employees it considers strongest has applied the wrong test, and that is one of the most frequent reasons a dismissal request is refused.

Does reassignment come before dismissal?

Yes. Article 7:669 also requires the employer to explore reassignment opportunities. Within a reasonable term, and taking any training into account, it must check whether another suitable job is available — not only in your own department but across the company and, where staff are exchanged between them, at group companies. Suitable vacancies that were open during that period and were not offered to you are a serious weakness in the employer’s case.

What notice period applies?

If UWV grants consent, the employer terminates the contract with the notice period of article 7:672 of the Dutch Civil Code: one month for service under five years, two months under ten years, three months under fifteen years, and four months from fifteen years, unless the employment contract or a collective labour agreement provides otherwise. The time the UWV procedure took may be deducted, but at least one month of notice always remains.

What are you entitled to?

The statutory minimum is the transition payment (transitievergoeding) of article 7:673. It accrues from the first day of employment at one third of a gross monthly salary per year of service, calculated pro rata for part years, up to a maximum of €102,000 gross in 2026, or one annual salary if that is higher. Our article on transition compensation works through the calculation.

A redundancy package in a settlement agreement is a different matter, because there everything is negotiable: the termination date, a payment on top of the statutory minimum, whether the notice period is observed or bought off, a contribution towards legal costs, outplacement, a reference, and whether the non-compete clause is released. That last point is worth more than most employees realise — see our article on non-compete clauses under Dutch employment law.

When does collective redundancy apply?

If an employer intends to make twenty or more employees redundant within one UWV work area over a period of three months, the Collective Redundancy (Notification) Act (Wet melding collectief ontslag) applies. The employer must notify UWV and consult the trade unions, and a waiting period of one month follows before contracts may be ended, unless the unions have agreed in writing. The works council has its own right to advise on the reorganisation. What that means for the individual employee is set out in our article on individual arrangements in Dutch collective dismissals.

What about your settlement agreement and unemployment benefit?

If you sign a termination agreement, you keep a reflection period of two weeks in which you can withdraw your consent without giving reasons, under article 7:670b. That becomes three weeks if the agreement does not mention the right. The wording of the agreement also decides whether UWV will grant unemployment benefits: it has to be clear that the initiative came from the employer, that the reason is business economic, and that there is no urgent cause. A single careless sentence can cost you the benefit, which is why the text deserves a legal reading before signing rather than after.

What if your right to stay depends on your job?

For internationals the stakes are higher, because a residence permit is often tied to a specific employer acting as recognised sponsor. Losing the job affects the permit, and a highly skilled migrant generally has a search period of three months to find new employment with another recognised sponsor. Check the rules for your permit type with the IND before you sign — our guide to the highly skilled migrant scheme covers the sponsor requirements, and our immigration law practice can assess your position alongside the employment side of the case.

What should you check as an employee?

• Has the employer substantiated the business economic reason with figures, or only asserted it?
• Was the reflection principle applied to the right category of interchangeable jobs?
• Were any suitable vacancies open in the company or the group during your notice period?
• Is the transition payment calculated from your actual start date and full gross salary?
• Does the settlement agreement describe the reason in terms that protect your unemployment benefit?
• Are the non-compete and relationship clauses released?

What should you check as an employer?

• Document the business economic reason with financial figures and a forecast; UWV assesses the reason under article 7:669(3)(a) BW.
• Define the categories of interchangeable jobs per business location before you apply the reflection principle.
• Record which vacancies you checked for reassignment, within the company and the group, and why they were not suitable.
• Count the redundancies per UWV work area: twenty or more within three months means notifying UWV and the unions.
• Calculate the transition payment and the notice period under article 7:672 BW before you start the procedure.

What can we do for you with redundancy?

Our employment lawyers act for both employees and employers.

• We review your settlement agreement within the two-week withdrawal period, including the wording that protects your unemployment benefit.
• We check the reflection principle and the reassignment efforts against the Dismissal Regulation.
• We calculate your transition payment and the notice period that applies.
• We draft the defence (verweer) in the UWV procedure or the employer’s dismissal request.
• We negotiate the package: termination date, payment, release of the non-compete clause.

Summary

• Redundancy is about the job, not your performance: the employer must prove the position itself has lapsed under article 7:669 BW.
• Without a settlement agreement, the employer needs UWV’s consent, which also checks the reflection principle and reassignment.
• The transition payment is the statutory floor; a settlement agreement can add much more, including release of a non-compete clause.
• Twenty or more redundancies within one UWV work area and three months trigger collective redundancy rules and a one-month waiting period.
• You have two weeks to withdraw from a signed settlement agreement, or three weeks if the agreement does not mention that right.

Frequently asked questions