Dismissal due to a bad or worsening financial situation

Geopolitical developments, like the trade war and the associated rise in costs, causes many companies to feel compelled to reduce their staffing. This may be done if there are ‘commercial reasons’ within the meaning of the law and the UWV Implementation Rules.

There are various commercial reasons. Most dismissals are based on commercial or technological changes.  Examples are overlapping activities at several departments, the wish to centralize certain activities, a different efficiency move or the automation of certain activities (e.g. with the help of robots, machines or AI).  

A bad financial situation at the employer can also be a commercial reason and consequently a ground for dismissal. If an employer has to dismiss the employee for that reason, it has to obtain permission of the UWV. In general, it is hard to substantiate this ground for dismissal because the employer has to supply much detailed information about the financial situation and the bar is set high. 

In a case of the Court of Amsterdam of 15 April 2025, the employer therefore did not win. The employer, an international supplier of data connections and internet connections, had asked permission to dismiss one employee: the company’s General Counsel. In this article you will read more about this case and find tips on the best way to substantiate this ground for dismissal as an employer. 

You can find the exact information an employer has to provide the UWV with in order to substantiate this ground for dismissal in the UWV Implementation Rules.  

The court held the following in this case about the bad financial situation: 

• That the employer had indeed sent financial documents from 2021, 2022 and 2023, and that these showed a negative operating profit, but that it was precisely the situation in 2024 and the prediction for 2025 that mattered in this case.
• That the employer had substantiated insufficiently, on the basis of the documents for 2024 and 2025, that the financial situation was so bad that the General Counsel had to be dismissed.
• That this was mainly because the employer had submitted only numerical prognoses  without a further explanation.
• That these numerical prognoses had moreover been prepared by the Board rather than by an external expert. As a consequence thereof, the numbers were not transparent and verifiable; and
• That the employee had only been hired in 2023, and the employer already knew at that time that the financial situation of the company was bad. 

The employer had also breached its re-employment efforts. This is a regular error in this kind of dismissal cases. The employer had only had one conversation about re-employment with the employee and had not demonstrated any other efforts. Moreover, this employer – a large international organisation – could have been expected to examine whether the employee would be interested in a position at another group company. The employer had not done this. 

We can learn from these rulings that it is important to: 

• Supply all information requested by the UWV in time and in full. Precisely in the case of an application for dismissal based on a bad financial situation, employers have to make sure to do this, because the information requested is a lot and detailed.
• To explain what the UWV must gather from the information and to what extent this information is relevant to the necessity to have the position be made redundant. Merely submitting figures is not enough. You also have to explain the link between these figures and making the employee’s position redundant.
• Numerical prognoses for the future financial situation, to be prepared by an external expert so that the figures are sufficiently reliable and verifiable; and
• Paying attention in the substantiation of the ground for dismissal to the fact that the employee was hired in a period when the company was already in trouble. The UWV wants to understand to what extent the financial situation at the time differed from the present situation, and what impact this has on the position of the employee. 

• Show the UWV what efforts you as the employer have made to re-employ the employee.
• Plan several re-employment talks and prepare reports thereof.
• Inquire after the employee’s wishes regarding a possible vacancy abroad, even if this is at another company, so that you can take this into account in your search for a suitable position. 

Would you like to learn more about dismissal on the ground of a bad or worsening financial situation? Please contact Ilse Baijens.