How to effectively tackle dismissal for economic reason…in 7 steps

Is your company in dire straits? Or do recent developments call for a change of course? If so, you may be considering laying off staff. In that case, it is required that you can provide a well-founded reason for dismissal, also known as a business economic circumstance. In this article, we will show you how to achieve a dismissal on economic grounds in 7 steps.

Identify the economic reason for dismissal

Dismissal on economic grounds starts with the determination of the specific economic reason(s). The economic reasons are further elaborated in the implementing rules of the UWV. In short, it mentions the following circumstances:

1. A poor or deteriorating financial situation, such as persistent declines in turnover, liquidity problems or a high level of debt
2. Actual overstaffing due to a reduction in work, for example due to a significant decrease in orders or the loss of a major customer
3. Technological or organizational changes resulting in job losses, e.g. due to digitalization, automation or strategic reorientation
4. A company relocation leading to the loss of local jobs
5. Terminating the activities of the entire company
6. The cancellation or reduction of a wage cost subsidy that is intended for a particular employee.
Substantiate the dismissal: the evidence is crucial

A legally valid dismissal then requires a solid substantiation. Therefore, start by gathering relevant evidence, which underlines the necessity of the dismissal.

Financial reports, trend analyses, and policy plans are essential here. Keep in mind that the relevant documents should not only reflect the current situation, but also provide insight into the future situation.

Demonstrate that jobs are structurally lost

Show that the jobs will be lost for a period longer than 26 weeks. This is an essential condition for dismissal on economic grounds. Keep in mind that the period only starts from the moment the UWV has made a decision on the application for dismissal.

Assuming a treatment period of 4 weeks, this means that you have to look 30 weeks ahead.

Follow the legal order of dismissal

Apply the reflection principle to determine which employees are eligible for dismissal. This principle is intended to ensure that the age structure remains the same as much as possible as a result of the reorganization. If you have any interest in this we can sent you an article on the reflection principle.

Pay attention to dismissal prohibitions

In certain situations, dismissal prohibitions apply, such as in the event of illness or pregnancy of employees. You will only receive a dismissal permit if there are no dismissal prohibitions in your case.

Determine if you have an obligation to relocate

Before you proceed with dismissal, it is important to investigate whether reassignment is possible. This means that you should look for other suitable positions within the company, possibly with the necessary training. You can read how to do this in our article on the reassignment obligation for employers.

The application for dismissal: this is how you go about it

Make sure that the application for dismissal is submitted to the UWV completely and accurately. So including all required attachments and documentation.

Is there a collective labor agreement within your company or industry in which a dismissal committee has been established? Then you should not apply for the dismissal from the UWV, but from the relevant dismissal committee.

Transition payment in the event of dismissal on economic grounds

In the event of dismissal for economic reasons, you as an employer are in many cases obliged to pay a transition payment. This applies to both permanent and temporary workers.

However, is there a bankruptcy or suspension of payments? Then you are not obliged to pay a transition fee.

Steps to be taken in the event of a reorganization

The reorganization process involves more than just determining the economic reason for dismissal. It is important that you go through all the steps carefully for a successful reorganization.

Need help?

Are you faced with the challenging task of laying off employees for economic reasons? If so, make sure you avoid legal issues and unnecessary costs. Our specialized lawyers can support you in this. Feel free to contact us for advice and guidance. Our experienced team is ready to assist you with every step of the reorganization.