Laying off employees in times of corona: what you need to know

If your business is suffering from a fall in revenue and a lack of work, you should probably prepare yourself for lay-offs. From a legal perspective, we would like to remind you of five key aspects of Dutch employment law that you need to keep in mind.

Laying off employees: exercising due care

You would rather not think about having to lay off employees, but you might have to anyway. What happens then? There are a number of aspects of Dutch employment law that you need to consider.

1. Redundancy permit or settlement agreement?

First of all, you need to think about how many people you have to lay off and how you want to go about making them redundant. If an employee agrees to be made redundant, it is usually sufficient to sign a settlement agreement with them. A settlement agreement formalises the arrangements you and the employee have made in the context of terminating their employment contract. Subject to meeting certain conditions, the employee can apply for unemployment benefits from the Employee Insurance Agency (Dutch acronym: UWV).

An alternative strategy would be to apply for a redundancy permit for economic reasons from the Employee Insurance Agency. This is a more complex process. You are expected to document the permit application by submitting a range of financial information, such as financial statements and forecasts. Once you have been granted the permit, you can terminate an employment contact. When choosing between these alternatives, please remember that you cannot terminate an employee’s employment contract while they are on sick leave (see point 5 below). In addition, you need to make allowance for the collectively agreed rules for reorganisations as well as for the reporting obligation that may be in effect for group redundancies.

2. Reflection principle

The next step is to decide how to distribute the job losses proportionally among your employees. This is referred to as the reflection principle. This principle requires you to categorise the employees you plan to make redundant, for instance by age group, non-exchangeable job group and effective date of employment (please note: the first-in, last out principle no longer applies). In doing so, you should also consider how you plan to distribute the work among the employees who will be left behind.

3. Notice period

Dutch law prescribes the length of the notice period, which is usually stipulated in the employment contract and/or collective labour agreement. You will of course still owe employees their salary for the duration of the notice period. Do not forget to consider the total of leave days the redundant employees have accrued.

4. Severance pay

If the Employee Insurance Agency has granted you a permit to lay off employees, you are required to offer them severance pay based on their salary and their period of service.

If you and a redundant employee have signed a settlement agreement, you are not required to offer them severance pay, but they will usually demand it from you based on the calculation method used by the Employee Insurance Agency.

5. No lay-offs during sick leave

You are not permitted to lay off any employees with a chronic illness or who are on long-term sick leave. You will also have to hold off on letting go employees who report sick.

If you expect employees to report sick, it may be advisable to notify the Employee Insurance Agency of your lay-off plans before you discuss them with your employees. This will prevent your plans from being blocked by employees reporting sick.

We are here to help

As you can see, there are many aspects to consider when laying off employees for economic reasons. Our HR specialists of accon■avm Employer Services can help. They work in close collaboration with our legal experts and are happy to provide more information or offer advisory services.

Please do not hesitate to get in touch with your contact person at accon■avm Employer Services or send an email to international@acconavm.nl. We will get back to you as soon as possible.