Right to Redundancy Payment Upon Dismissal for Economic Reasons

Transition payment in a redundancy dismissal

Are you being dismissed for business economic reasons? In that case, you are generally entitled to a transition payment. Read below to find out what this means for you.

Are you facing dismissal because your employer is reorganising, cutting costs, or scaling back activities? In most cases you are simply entitled to a transition payment. Yet many employees do not know exactly what their position is, how the procedure works, or what amounts they can expect. This article explains it step by step.

Dismissal for economic reasons occurs when a company dismisses an employee due to financial difficulties or restructuring.

Dismissal for business-economic reasons is not about your performance or conduct, but about circumstances within the company itself. Think of declining turnover, a structural reduction in work, automation, or the closure of a site. It is always a matter of a duurzame verandering: a temporary reduction in work due to an exceptional situation does not give your employer the right to dismiss you.

Examples of valid business-economic grounds include:

• A persistently poor financial situation within the company
• Organisational changes such as a merger or demerger
• Relocation or complete closure of (part of) the business
• Loss of work due to technological changes or automation
• Structural cost-cutting measures resulting in the permanent elimination of positions

Your employer must always be able to substantiate these reasons with concrete figures and a plan. Without adequate substantiation, the UWV will not grant permission.

How does the dismissal procedure work

In practice, there are two routes for dismissal on business-economic grounds. The first is the formal UWV dismissal procedure: your employer applies to the UWV for a dismissal permit. The UWV then assesses whether the economic reasons have been sufficiently substantiated, whether the mirror-image principle (afspiegelingsbeginsel) has been applied correctly, and whether redeployment to another suitable position is genuinely not possible.

The second route is dismissal by mutual consent by means of a settlement agreement. Many employers deliberately choose this route because it is faster and offers more certainty than a UWV procedure. As an employee, it is important for you to know that in such a case you should never simply sign without having the contents properly assessed (whether by yourself or with assistance).

The mirror-image principle protects you

Can your employer simply select you for dismissal? No. Where there are several comparable positions, the employer must apply the mirror-image principle (afspiegelingsbeginsel). This means that employees are divided into age categories, and within each category the employee with the shortest length of service is the first to be considered for dismissal. This prevents arbitrariness and ensures a balanced spread across the different age groups.

If the mirror-image principle has not been applied correctly, you can challenge this, even after the UWV has already granted permission.

Your right to a transition payment

Are you being dismissed for business-economic reasons and is it your employer who has taken the initiative? In principle, you are entitled to a transition paymentThis applies from your very first working day, even in the case of a short period of employment.

The amount is calculated on the basis of two factors: your gross monthly salary and the length of your employment. The formula is straightforward: for each complete year of employment you accrue one third of your gross monthly salary. Partial years are counted on a pro-rata basis — accurate to the day.

In 2026 the statutory maximum transition payment has been set at € 102.000 bruto. If you earn more than € 102,000 per year, your gross annual salary applies as the upper limit.

Exceptions and collective agreement provisions

There are situations in which you cannot claim a transition payment, even in the case of dismissal for business-economic reasons. Examples include dismissal after reaching the statutory retirement age (AOW age), or where the company has gone bankrupt.

A particular point of attention in the case of dismissal for business economic reasons is the collective labour agreement (cao). Some collective labour agreements stipulate that employees who are dismissed for business economic reasons receive a vervangende voorziening in place of the statutory transition payment. Such a provision must be aimed at preventing or shortening unemployment, or must include a reasonable financial compensation. Please note: this applies exclusively to dismissal for business economic reasons. For all other grounds for dismissal, you can always claim the statutory transition payment, even if your collective labour agreement suggests otherwise.

What you can check and do yourself

Are you facing dismissal for business-economic reasons? These are the steps you can take immediately:

• Check the ground for dismissal: is there genuinely a structural and lasting change, or is it a matter of temporarily reduced work?
• Ask for the substantiation: your employer must demonstrate the business-economic necessity with concrete documents such as annual accounts and forecasts.
• Have the mirror principle (afspiegelingsbeginsel) reviewed: are you actually the right person to be considered for dismissal?
• Check whether redeployment has been explored: has a reasonable effort been made, within a reasonable period of time, to find a suitable alternative role for you, with training if necessary?
• Calculate the transition payment: are the figures your employer mentions correct, and has everything been taken into account in the calculation?
• Teken niet direct: with a settlement agreement, you have the right to have the document reviewed before you sign it.
• Keep an eye on deadlines: if you wish to challenge a granted dismissal permit before the subdistrict court, you have only two months in which to do so.

Why Employment Lawyer Eindhoven

Dismissal on economic grounds often comes as a sudden and overwhelming shock. At Arbeidsjurist Eindhoven we know the local labour market and understand exactly what to look out for: from the correct application of the proportional selection principle to the calculation of your transition payment and the assessment of a settlement agreement. We help employees in Eindhoven and the Brabant region to make full use of their rights, without it having to be a great deal of hassle.

Would you like to know how strong your position is? Get in touch for a no-obligation initial consultation — we are happy to think things through with you.

Frequently asked questions

Am I always entitled to a transition payment in the event of dismissal on economic grounds?

In principle, yes, provided the initiative for the dismissal lies with your employer. That right applies from the very first working day. There are exceptions, such as dismissal after you have reached the state pension age or in the event of bankruptcy. Also check whether your collective labour agreement provides for an alternative arrangement, as this may in certain circumstances replace the statutory transition payment.

What is the maximum transition payment in 2026?

In 2026 the statutory maximum transition payment is €102,000 gross. If you earn more than €102,000 per year, your gross annual salary serves as the upper limit. The payment is calculated on the basis of your gross monthly salary and the exact length of your employment: one third of a gross monthly salary for each full year of service.

Is my employer free to choose who is dismissed in a reorganisation?

No, not simply as they please. Where there are multiple interchangeable roles, your employer must apply the proportional selection principle. Employees are divided into age categories and, within each category, the person with the shortest length of service is the first to be considered for dismissal. If your employer has not applied this correctly, you can challenge the dismissal.

Can I challenge a dismissal decision made by the UWV?

Yes. If the UWV has granted a dismissal permit and you disagree with that decision, you can submit a petition to the subdistrict court within two months. The court can then assess whether the grounds for dismissal are sound and whether you are entitled to a higher or additional payment.

What if my employer offers a settlement agreement instead of a UWV procedure?

This is a commonly used route in cases of dismissal for economic reasons. You are never obliged to sign immediately. Always have the agreement reviewed by an employment lawyer, so that you know whether the transition payment has been calculated correctly, whether there are any unfavourable clauses, and whether there is room to negotiate.

We are happy to think along with you. For advice tailored to your situation, we would be glad to talk. No rights can be derived from the content of this page and it may contain inaccuracies.