7 alternatives to firing your personnel

Firing personnel may seem like the way out of financial trouble. But have you already looked at alternatives, such as a termination with consent, retraining, and early retirement? Here are 7 alternatives to dismissal.

You are already cutting back on staff outings. You do not renew temporary contracts or replace staff members who leave. But it is still not enough to keep your business afloat. Saving on labour costs seems like the only option. But is it? Firing staff costs time and money (in Dutch). And you may not have to fire your staff at all, says Petra Hogewind-Wolters. She is a lawyer who specialises in employment law and a researcher at Leiden University. She discusses alternatives such as a severance package, retraining, or lending a worker to a fellow entrepreneur (secondment). See if one of these 7 alternatives might solve your problem.

1. Analyse sick leave

Is your absenteeism high? First analyse your sick leave. Try to bring it below 5% by, for example, improving working conditions or offering guidance. Try to prevent new sick leave by paying attention to the causes of sick leave, or by focusing on sustainable employability.

Have employees been incapacitated for work for more than 2 years? Consider applying for a dismissal permit from the UWV for them.

2. Termination by mutual consent

Another alternative is termination by mutual consent. “This happens a lot,” says Hogewind-Wolters. “You and your employee reach an agreement to part ways. You stimulate an organic process and do not have to go to court or the Employment Insurance Agency UWV.”

Termination by mutual consent is also called a severance package or termination agreement (in Dutch). If you and your employee come to such an agreement, you do not have to observe the grounds for dismissal, notice period, and statutory severance payments, such as the transition payment. The agreement states when the settlement takes effect, from which work the employee will be exempted, the amount of the compensation, compensation for holiday entitlement, cancellation of a non-competition clause, the retention of a lease car or laptop, and whether or not you provide wage compensation.

“By providing wage compensation, your employee will not suffer loss of income,” says Hogewind-Wolters. “For example, you provide a supplement to the unemployment benefit. UWV pays 75% in the first months, the employer 25%. You also state in the settlement agreement for how many months you want to give wage compensation.”

Your employee does not have to agree with the severance package. You can make it more attractive for them. For instance, by promising the employee:

  • guidance by a job coach or exemption from work.
  • they retain the right to unemployment benefits.
  • they spare themselves a legal dismissal procedure.
  • they get to leave on their own terms, perhaps have a farewell party and move on to the next job.

“Be careful if you dismiss an employee and start a reorganisation at the same time or shortly afterwards”, Hogewind-Wolters warns: “UWV will count the departing employee as one of the number to determine collective redundancy. In the event of collective redundancy, you end the employment of 20 or more employees within a period of 3 months. If this is the case, you must take into account the Notification of Collective Redundancies Act (Wet melding collectief ontslag, WMCO, in Dutch).”

3. Retraining and further training

Do you have too many employees for one type of work, and not enough for other activities? You can offer some employees additional training or retraining, so that they can do the other work for you. Retraining can be a long-term project, but also a short course.

Use retraining (in Dutch, pdf) to guide your employees towards other work, for example in promising sectors that need staff (in Dutch).

4. Lend your employees to another business

You can also lend an employee to a fellow entrepreneur. This is called collegial lending or secondment. It happens a lot in the construction industry. Or think of catering employees who temporarily work for another catering employer. The advantage is that your personnel costs are reimbursed. And by the time you have a new project, you still have your staff.

Collegial means lending you second your staff to another business. To arrange matters correctly, you have a lawyer draw up a secondment agreement between you and your fellow entrepreneur. The agreement specifies the period and activities, liability, working hours and holidays.

When you second your staff, you as a lender are obliged to register this business activity in the Business Register: the Waadi registration. This is set out in the Waadi Act. Check with the Waadi registration whether this applies to you.

5. Stop outsourcing work

Maybe you outsource tasks, like marketing, to an external agency. If you stop outsourcing these activities, your own staff can carry them out. Do take into account current contractual obligations. “Your own employees take over the activities. This saves on external costs and keeps your own staff at work. Use retraining and further training if necessary. It would be a shame to miss out on money because your marketing or accounting is not done properly," says Hogewind-Wolters.

6. Early or partial retirement

You can also encourage older employees to take early or partial retirement. Although, says Hogewind-Wolters: “The government does not encourage people to retire earlier, according to the RVU scheme. That makes this solution fiscally unattractive for an employer. However, due to a temporary relaxation of the RVU levy, early retirement may be attractive.” Hogewind-Wolters' advice is to have your bookkeeper or accountant calculate whether this alternative is fiscally attractive for you.

7. Government support during emergencies

Is your business temporarily closed due to an unexpected emergency, such as a lockdown or flooding? Check if the government offers financial support. For example, during the coronavirus crisis, the NOW scheme was a means to receive help. Temporary tax measures can also reduce financial pressure.

Has your business been affected by flooding? Check if you qualify for compensation under the Disaster Compensation Act.

Hogewind-Wolters’ advice is to carefully research what a scheme really means for you. “The NOW, for example, depended on your drop in turnover and did not cover all wage costs. You received an advance payment and any excess must be paid back later. So complete an application together with an advisor or accountant so that you can make a good estimate.”

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