When your corporation is being closed, restructured or transferred (to a foreign country), this can be classified as business economic circumstances. In general, as an employer you are free to do so. However, you are obliged to make clear that the termination is necessary and that there are no alternatives. Furthermore, you are not allowed to dismiss personnel arbitrary and you are obliged to offer the employees that you are going to dismiss a financial compensation, if possible.

Financial substantiation of the necessity
You have to substantiate that the terminations are necessary by explaining that there are no other alternatives. You will have to substantiate this with financial data, like the income statement, prognosis, balance sheet, turnover figures and a statement of an accountant.

No alternatives
You have to substantiate that there are no alternatives. Sometimes a part of the company will be split off. Practically this is a transition of business. In that case, you cannot dismiss your employees in connection with the transition of business.

Principle of reflection
In the case of an economic necessity, you cannot terminate employment contracts arbitrary. You have to comply with the principle of reflection. The employees will be categorized in the age groups 15-24 years, 25-34 years, 35-44 years, 45-54 years en 55 years and older. Next, per category will be reviewed which employees were hired last. These employees will qualify first for dismissal. The principle of reflection assumes a proportional division per age category.

No suitable position
You also need to substantiate that there is no suitable work for your employees within the company, a sister entity or parent entity.

How high can a termination compensation be?
In general you have to pay a termination compensation in case you dismiss employees due to business economic circumstances. If a social plan with the unions exists, that will be the basic criteria, even if the termination compensation is very low. If your corporation goes through rough times, it could be beneficial to compose a social plan together with the unions. Being able to maintain other positions by paying low termination compensation can be helpful.

In case the social plan is not composed together with the unions it is possible that a judge will derogate from the social plan. In that case your employees might be able to claim a higher termination compensation. Normally, the subdistrict court formula is the starting point for terminations due to business economic circumstances.

A lower termination compensation is possible when you make plausible that there are no means to pay for the termination compensation, also know as the habe nichts ('don't have anything') defence. But be careful; if your corporation is a subsidiary of a financially strong parent company, then it is possible that the parent company has to take responsibility for the termination compensation.