international employment law firm alliance L&E Global

6. Cost-Reduction Strategies

To what extent can employers implement the following cost-reduction strategies as a result of COVID, and what are the primary limitations on each? 

  • Furloughs

It is not possible to oblige an employee to take unpaid leave. Referring to question 7, it will usually be considered paid sick leave or paid short-term care leave.

  • Salary reductions

In the Netherlands, there are 3 ways to alter the terms of employment (such as the salary):

    1. With the explicit consent of the employee;

And unilaterally:

    1. By using the so called “unilateral changes clause” that was agreed upon in the employment agreement, employee handbook or collective bargaining agreement. With such a clause, the employer reserves the right to change the employment contract unilaterally if the importance to the employer if doing so is so great as to outweigh, by the standards of reasonableness and fairness, the employee's interests which are harmed by the changes. It is possible that the circumstances due to COVID-19 could lead to such importance to the employer. However salary reduction is generally not permissible, which is confirmed in recent case law.
    2. In the absence of such a clause, a unilateral change can be reached if the employer makes a reasonable proposal which the employee (acting as a “good employee”) can not refuse. It is possible that circumstances due to COVID-19 can lead to such a reasonable proposal , but still salary reduction is generally not permissible.
  • Redundancy

Financial problems due to COVID-19 can lead to redundancy. This can be reasonable ground for dismissal on poor business conditions. Employers who make use of the NOW-subsidy, will  be suspended from their subsidy if they terminate employees during the same time period.

  • Facility closure

Financial problems due to COVID-19 can lead to facility closures. This can also be a reasonable ground for dismissal based on poor business conditions.

Any questions

Ask our member firm Palthe Oberman in Netherlands