Navigating the storm: guides for reorganisations
The world is changing rapidly and to stay ahead of the competition, companies need to remain agile. To steer a company through difficult times or reposition it for future growth, reorganisations are sometimes unavoidable.
The process of reorganisation requires a clear vision, legal rigour and clear communication. In this blog, we list the main ground rules for reorganisations. On request, Penrose also provides a detailed step-by-step roadmap for reorganisations, so that you as director or HR officer are well prepared. If you are interested, you may contact us at info@penrose.law.
Good preparation is half the battle
Good preparation is half the battle. It is essential that you get proper advice in advance on the applicable laws and regulations in the field of dismissal law; on the role of the works council (OR), trade unions and the UWV.
We recommend starting with a good strategic plan. Part of that plan are the organisation’s long- and short-term vision; an overview of the positions that will be abolished and the employees who will have to be made redundant; a realistic cost estimate, a time schedule and a clear communication plan.
Keep the following in mind:
Advance consultation:
If the company has a Works Council, it will in most cases have to be asked for its opinion on the proposed reorganisation (a reorganisation is quickly considered an ‘important’ decision on which, under Article 25 of the Works Councils Act, advice must be sought in advance). Note that the request for advice must be made in writing and in time so that the Works Council can still exercise substantial influence.
If there is no Works Council but at least 25% of the workforce is proposed for dismissal, the staff representative body (‘Personeelsvertegenwoordiging’) must be asked for advice, or – in the absence of a staff representative body – a staff meeting must be convened at which the proposed decision to reorganise is presented to all employees.
If the reorganisation involves a collective dismissal (that is, if the company will have to let go of at least 20 employees in one UWV area), the trade unions and the UWV will also have to be informed in advance.
Determining the order of dismissal:
There are strict rules determining which employees may be dismissed. These rules are detailed in the Dismissal Implementation Rules, accessible on the UWV website: https://www.uwv.nl/nl/ontslag/uitvoeringsregels. In our step-by-step roadmap for reorganisations, we have elaborated and explained the aforementioned rules for you.
In short, it comes down to determining who should be proposed for dismissal within the category of interchangeable jobs, based on the principle of proportionality (‘afspiegelingsbeginsel’).
This means that it must first be determined whether the role(s) that will be made redundant is/are interchangeable with other roles. Roles are considered ‘interchangeable’ if they are mutually comparable in terms of content, the knowledge, skills and competences required for the role, the level, the remuneration and any temporary nature.
Within the category of interchangeable positions, the appropriate order of redundancy must be followed, whereby external employees are dismissed first, with the exception of payroll employees.
Only if this does not lead to the desired reduction in the number of jobs will other groups of employees be considered. The determination of who should be proposed for redundancy is based on the so called principle of proportionality (‘afspielingsbeginsel’).
The principle of proportionality stipulates that employees within the category of interchangeable positions are divided into age groups (15 to 25; 25 to 35; 35 to 45; 45 to 55; and 55+), after which redundancies are to be distributed evenly across the various age groups, ensuring that the age composition of employees within the category of interchangeable positions remains as consistent as possible following the reorganisation.
Once the number of redundancies per age group has been established, the following groups of employees within the age group are to be dismissed in succession:
- Employees who have reached their pensionable age;
- Employees on zero-hour contracts;
- Employees with fixed-term contracts that expire within six months; and
- Employees with temporary contracts that do not expire within six months and employees with permanent contracts.
Within the last group, the principle of ‘last in, first out’ applies.
In some situations, the principle of proportionality does not apply. For example, if the company or an entire branch of the company closes down; if the redundant position is ‘unique’ and therefore filled by one person only; or if the entire category of interchangeable positions is to be eliminated.
Ill employees are protected by the statutory prohibition on termination during illness (‘opzegverbod bij ziekte’) and they are in principle left out. This is different if the UWV dismissal request had already been submitted before the sickness report or if the company is closing down.
The execution:
Investigate whether redundant employees can be redeployed in another suitable position. If no suitable positions are available (and it is not foreseen that they will become available shortly), a redundancy request can be submitted to the UWV.
Most employers however prefer to terminate employment agreements by mutual agreement. To this end, prepare the (legal) documentation well. Think of draft settlement agreements, covering letters, interview manuals, etc.
Meet with the relevant employees one day after the UWV dismissal request has been submitted and hand over the draft settlement agreement. Most employees are open to termination of the employment contract by mutual agreement, if the terms are reasonable. It is also not unusual to negotiate those terms. Remember that termination can be drastic and give employees time to seek (legal) advice.
For employees who accept the termination proposal, the UWV dismissal request may be withdrawn. For employees who do not agree, those proceedings can continue.
In conclusion: communication is key!
Employees are more likely to agree to a termination proposal if they understand why the reorganisation is necessary and what processes have been followed.
Don’t forget communication to the rest of the organisation too! These can also be difficult times for remaining employees. By working together, communicating openly and maintaining a clear vision, the reorganisation can be turned into an opportunity for growth and renewal.
Get timely legal advice!
Our reorganisation roadmap will guide you step by step through complicated reorganisation processes. If you are interested in the step-by-step roadpmap for reorganisations, you may send an e-mail to info@penrose.law.
Also realise that reorganisations require tailor-made solutions and that prevention is better than cure. It is therefore advisable to seek legal advice at an early stage. Penrose’s employment law lawyers will be happy to assist you.
