A corporate reorganization or the threat of redundancy on economic grounds is a life-altering event. For expats and international employees in the Netherlands, it also brings a unique combination of complex challenges: What happens to your Highly Skilled Migrant (HSM) visa, how do you preserve your 30% tax ruling, what are your rights regarding a Settlement Agreement (VSO / Vaststellingsovereenkomst), what rules apply when moving work abroad (offshoring or nearshoring), and how strictly does the UWV (Employee Insurance Agency) evaluate employer plans?
The Netherlands features one of the strictest systems of preventive dismissal protection in the world. An employer cannot simply dismiss employees under the guise of "reorganization". They must follow a rigid statutory process, consult employee representation bodies, and comply in detail with the UWV Execution Rules on Dismissal for Economic Reasons (version July 2025).
Below, employment law specialists Geelkerken & Geelkerken Advocaten explain exactly how redundancy on economic grounds works, how the UWV policy rules operate, why reorganizations are a legal minefield for employers, what rules apply when moving work abroad or hiring new personnel, and what a specialized employment lawyer can achieve for you during VSO negotiations.
1. What is Redundancy on Economic Grounds? (Article 7:669 Paragraph 3 Sub a DCC)
Under Article 7:669, paragraph 3, sub a of the Dutch Civil Code (DCC; Burgerlijk Wetboek), a reasonable ground for dismissal exists if job positions structurally lapse as a result of measures necessary for efficient business operations due to economic circumstances, evaluated over a future period of at least 26 weeks.
The UWV applies five main categories of economic grounds in its Execution Rules (July 2025 version):
- Poor or Worsening Financial Position (Profitability & Liquidity): The company faces structural losses or imminent cash flow shortages.
- Reduction in Workload: A structural decrease in turnover, orders, or available work.
- Organizational or Technological Changes: Digitalization, automation, restructuring, or strategic pivots.
- Relocation or (Partial) Closure of Business Operations: Shutting down or moving locations, branches, or divisions.
- Loss of Subsidies or Procurement Contracts: Common in healthcare, welfare, or educational sectors.
2. The UWV Policy Rules (July 2025 Version)
The UWV does not conduct a superficial review; it enforces the ministerial Dismissal Decree (Ontslagregeling) and its own Execution Rules (Uitvoeringsregels) with extreme rigor. Below are the key policy rules where employers frequently falter and where leverage exists for employees.
Three Primary Pillars of UWV Scrutiny:
- 1. Economic Necessity: Prognoses & Financial Data
- 2. Correct Order of Dismissal: Reflection Principle / Afspiegelingsbeginsel
- 3. Active Reassignment: Reasonable Window / Herplaatsing
A. Financial Core Data & The 26-Week Forecast (Section 1.2.2)
When an employer cites financial distress, they must supply full financial statements for the past three financial years, as well as interim figures for the current year.
The UWV additionally demands two crucial 26-week forward-looking forecasts:
- Profitability Forecast (Resultatenprognose): Demonstrates the impact of cost-cutting measures on the income statement under changed versus unchanged policies.
- Liquidity Forecast (Liquiditeitsprognose): Details actual cash flow (cash inflows and outflows) for the upcoming 26 weeks.
Group & Corporate Structures (Sections 1.2.2.3 & 1.5): If an enterprise is part of a corporate group or concern, the general rule dictates that economic necessity is assessed at the level of the specific legal entity (employer). However, if financial troubles are cited at the group level, the UWV requires consolidated financial data for the entire group. A "healthy parent company" cannot simply offload employees at a "weak subsidiary" without full financial disclosure.
B. Interchangeable Functions / Equivalent Roles (Article 13 Dismissal Decree & Section 2.10)
The UWV evaluates reflection per category of interchangeable functions (uitwisselbare functies). Functions are deemed interchangeable if they are comparable in terms of duties, required knowledge, skills, competencies, level, and remuneration.
- Objective Assessment: The UWV inspects the formal job description and what the employer can contractually require—not how an individual employee happens to perform their day-to-day work (except when the actual work is totally different from the description).
- Salary Grade as an Indicator: A difference of more than one salary grade is strong evidence for the UWV that functions are not interchangeable.
- Working Conditions: Night shifts, high-stress environments, or specialized regulatory authorizations can make a role unique.
C. Priority Order and the Reflection Principle (Afspiegelingsbeginsel) (Articles 11 & 17 Dismissal Decree)
An employer can never arbitrarily select which employees to make redundant. The law enforces a mandatory order of termination across interchangeable roles:
- Group 1: Agency workers, Freelancers/ZZP'ers, Seconded staff. Must be terminated first before any regular staff.
- Group 2 (AOW-Age): Employees who have reached the Dutch state pension age.
- Group 3 (On-Call): Employees on zero-hour contracts (nulurencontracten).
- Group 4 (Fixed-Term < 26 Wks): Temporary contracts expiring within 26 weeks after the UWV decision.
- Group 5: Permanent contracts and temporary contracts > 26 weeks.
Only after Groups 1–4 are cleared is the Reflection Principle applied.
Exceptions to Reflection:
- Indispensable Employee (Onmisbare werknemer, Art. 11 par. 5): The employer must prove the employee possesses such unique knowledge/skills that their departure would severely jeopardize operations.
- Disabled Employees (Arbeidsbeperkten, Art. 11 par. 6): May be exempted under specific statutory quota rules.
D. Prohibition of Outsourcing & Cheap Replacement (Articles 5 & 6 Dismissal Decree)
The UWV will refuse a dismissal permit if the employer eliminates job positions only to outsource the exact same work to cheaper flex-workers, pseudo-freelancers (schijnzelfstandigen), or agency staff. The nature and scope of the work must genuinely change, or outsourcing must verifiably serve operational efficiency.
E. New Since July 2025: Transfer of Undertakings (Chapter 6)
In its July 2025 update, the UWV added a dedicated chapter on Transfer of Undertakings (Overgang van Onderneming, Art. 7:662 DCC). Redundancy triggered solely by a transfer of business is prohibited by law. Where reorganization intersects with mergers, acquisitions, or outsourcing, the UWV rigorously checks whether a hidden transfer is occurring.
3. Employer Document Checklist: What Must Be Submitted to the UWV?
If VSO negotiations fail or an employee refuses to sign, the employer must submit a formal application to the UWV using Forms A, B, and C. Under the UWV Execution Rules (July 2025), the employer must assemble an extensive evidentiary dossier:
|
Category |
Mandatory Documents & Evidence Submitted to UWV |
|
Financial Substantiation |
• Consolidated financial statements for the past 3 financial years. |
|
Workload Reduction Evidence |
• Historical 18-month breakdown of order books, turnover, or client volume. |
|
Organizational Evidence |
• Formal board resolution / management decision to reorganize. |
|
Selection / Reflection Evidence |
• Complete workforce roster of the company/branch as of reference date. |
|
Reassignment Evidence |
• Roster of all open vacancies across company and corporate group globally. |
4. Moving Work Abroad (Offshoring/Nearshoring), Company Relocation & Hiring New Staff
In today's globalized economy, employers frequently attempt to close Dutch departments and relocate work to lower-cost countries (offshoring or nearshoring to India, Poland, Portugal, etc.) or shift duties to another international branch. Simultaneously, employers sometimes claim a role is redundant while actively recruiting for 'new' positions.
A. Offshoring and Nearshoring Work Abroad
- UWV Scrutiny (Sections 1.2.4, 1.2.5 & 1.3.2): An employer possesses entrepreneurial discretion to structure their business efficiently. However, when moving work abroad, the UWV strictly evaluates whether the measure genuinely serves efficient business operations and whether the duties in the Netherlands are structurally eliminating.
- Prohibition on Cheap Replacement (Article 5 Dismissal Decree): If the core nature and volume of the work do not change, but the employer relocates the tasks abroad solely to replace permanent Dutch employees with cheaper offshore workers or freelancers, the UWV will refuse the dismissal permit! Dutch law prevents the evasion of employment standards via offshore replacement.
- The 'Person Follows Work' Principle (Section 1.2.5): When relocating activities, an employer must explore whether employees can move with the work. While international relocation is rarely feasible due to tax/immigration barriers, the employer must legally justify why the position on the Dutch entity must lapse.
B. Hiring New Staff or Advertising Vacancies
- Violation of the Reassignment Duty (Article 7:669 par. 1 DCC): If open vacancies exist for interchangeable or suitable alternative roles across the company or international corporate group, the UWV must reject the redundancy application. The employer is legally obligated to offer retraining or reassignment to redundant staff first.
- Repackaged Roles / 'Musical Chairs' (Section 3.1.5): Employers sometimes eliminate an existing title and create a 'new' title with an updated buzzword. If a 'new' role overlaps by more than 50% with an 'eliminated' role, the UWV treats the function as interchangeable. The employer cannot force existing staff to 're-apply' for their own jobs through a competitive selection process.
C. What Can an Employee or Lawyer Do Against This?
- Exposing Redundancy Abuse to the UWV: In the formal defense statement (verweerschrift), we demonstrate that the work has not disappeared but is being improperly offloaded to cheaper offshore labor (violating Art. 5 Dismissal Decree).
- Submitting Vacancy Evidence: We compile active job postings across the global concern (LinkedIn, career portals) to prove a breach of the reassignment obligation.
- Claiming Fair Compensation (Billijke Vergoeding): If an employer acts with gross negligence or bad faith (e.g., concealing vacancies or fraudulently replacing staff), the court can award a substantial penalty on top of severance: a fair compensation (billijke vergoeding) ex Art. 7:681 DCC.
- Generating Immense VSO Leverage: Once an employer realizes their offshoring or recruitment scheme will be blocked by the UWV, their willingness to offer a very high settlement package in a VSO increases dramatically.
5. The Role of Employee Representation (Works Council / PVT) & Collective Redundancy (WMCO)
An employer cannot reorganize in secret; they must engage with statutory employee representation.
A. Advisory Rights of the Works Council (Ondernemingsraad - OR, Art. 25 WOR)
In companies employing 50 or more workers, the employer is legally mandated to request formal written advice from the Works Council (OR) regarding major reorganizations, downscalings, or relocations.
- Timeliness: The request for advice must be submitted when the plans are still in a draft stage, so the OR's opinion can meaningfully influence the decision.
- The 1-Month Suspension Period (Art. 25 par. 6 WOR): If the employer adopts a reorganization decision that deviates from the OR's advice, they must suspend execution for one month. The OR can appeal the decision to the Enterprise Chamber of the Amsterdam Court of Appeal (Ondernemingskamer).
- Premature UWV Applications (Section 1.2.9): If an employer files UWV dismissal applications before the Works Council procedure is fully completed or during the 1-month suspension window, the UWV will declare the application premature and automatically reject it!
B. Collective Redundancy Notification Act (WMCO - Chapter 5)
If an employer intends to dismiss 20 or more employees within a 3-month period within a single UWV region, the WMCO applies:
- The employer must notify the trade unions and the UWV in writing in advance.
- A mandatory one-month waiting period applies after notification before UWV applications can be processed or VSOs finalized (unless trade unions agree otherwise).
6. Why Reorganizations Are a Legal Minefield for Employers
Many employees assume an employer holds all the cards during a restructuring. In reality, executing a lawful reorganization is exceptionally complex, costly, and error-prone for management.
- Strict Evidentiary Burden: The UWV rejects vague statements like 'market conditions are tough'. Every claim requires CPA-verified financial reports, BEFORE/AFTER organograms, and granular 26-week forecasts.
- Reflection Matrix Mistakes: A single incorrectly categorized job title or a forgotten ZZP contract in Group 1 invalidates the entire reflection calculation, leading to total rejection by the UWV.
- The 'Musical Chairs' & Reassignment: The employer must prove that no alternative suitable roles exist or will become available across the entire global group within the reassignment window (1 to 4 months).
- Compounding Salary Costs: A UWV process takes 2 to 3 months. Throughout this period, the employer must pay 100% of all salaries. A rejection forces the employer back to square one, incurring massive wasted wage costs.
To avoid these delays, regulatory exposure, and immense costs, employers have a powerful incentive to reach an amicable agreement via a Settlement Agreement (VSO).
7. Settlement Agreements (VSO) & Strategic Negotiations
In Dutch practice, employers rarely jump straight to the UWV. Instead, they present a Settlement Agreement (Vaststellingsovereenkomst - VSO). A VSO is a voluntary contract terminating employment by mutual consent. Never sign a VSO immediately without specialized legal review.
Core Strategic Focus Areas in VSO Negotiations:
- Financial compensation and termination date
- Tax & Visa protection (30% ruling and HSM)
- Unemployment (WW) & Secondary terms (legal fees, outplacement, non-compete/solicitation waivers, reference letter, etc.)
Key Negotiation Points for Expats and Employees:
- Severance / Transition Payment (Beëindigingsvergoeding): Statutorily, employees are entitled to the standard transition payment (1/3rd gross monthly salary per year of service). In VSO negotiations, we negotiate severance multipliers or lump-sum enhancements based on legal arguments (e.g., doubts about UWV viability or contractual grounds). For fixed-term contracts, we frequently negotiate the full remaining contract value.
- Preserving the 30% Tax Ruling: For expats, the 30% ruling is essential. To preserve the 30% ruling, salary must qualify as 'income from active employment'. Irrevocable garden leave can be reclassified by the Dutch Tax Authority as income from past employment, causing the 30% ruling to lapse. It is crucial that the VSO specifies that the employee 'remains available for handover duties and queries upon request until the termination date'.
- Aligning Highly Skilled Migrant (HSM) Visas & Search Windows: After the official termination date in the VSO, a highly skilled migrant receives exactly 3 or 6 months to secure a new job with a recognized sponsor. We negotiate extended termination dates (e.g., keeping you on active payroll through the end of the year), postponing the start of your search window.
- Termination Date and Notice Period (Einddatum en Opzegtermijn): The employer's statutory notice period must be properly observed.
- Securing Unemployment Benefits (WW-Uitkering): The VSO must be drafted 'WW-proof'. This requires that the initiative for dismissal rests with the employer, no urgent cause exists, and statutory notice periods are respected.
- Employer Coverage of Legal Expenses (Legal Budget): Employers virtually always offer a legal budget in the VSO (typically €1,000 to €2,500+ grossed up or ex VAT), allowing you to retain an attorney at no net cost. We invoice the employer directly.
- Outplacement, Bonus, PTO, and Laptops: Full cash payout of accrued paid time off (PTO), pro-rata performance bonus, 8% holiday allowance, and retention of company laptops at tax residual value.
8. Step-by-Step UWV Redundancy Procedure Timeline
If no VSO is reached, the formal UWV procedure unfolds as follows:
[Week 1: Employer Files Forms A, B, and C with UWV] ➔ [Week 2: Completeness Check & Service to Employee] ➔ [Week 3-4: Employee/Lawyer Submits Defense Statement (14-day Window)] ➔ [Week 5-6: Optional Second Round (Repliek/Dupliek)] ➔ [Week 7-8: Final Binding Decision]
- Defense Statement (Verweerschrift): Our attorneys draft a formal defense statement challenging economic necessity, reflection errors, or reassignment failures to secure rejection or buy time.
- If Approved: The employer may terminate observing notice (minus processing time, with at least 1 month remaining). The employee receives the statutory transition payment.
- If Rejected: The dismissal is blocked, and the employee remains employed with 100% salary entitlement.
Why Choose Geelkerken & Geelkerken Advocaten?
The employment law team at Geelkerken & Geelkerken Advocaten in Amsterdam specializes in representing highly skilled professionals, executives, and expats facing corporate reorganizations and redundancies. We possess deep expertise in the UWV Execution Rules and extensive experience navigating the international tax, visa, and cross-border dynamics surrounding the 30% ruling and offshoring.
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Contact Details:
Geelkerken & Geelkerken Advocaten
Herengracht 478 | 1017 CB Amsterdam | Netherlands
Phone: +31 (0)84 883 52 20 | Mobile: +31 (0)6 317 84 807
Email: gerard@geelkerkenlaw.nl | Website: www.geelkerkenlaw.nl
