Termination of employment contracts: underperformance or reorganization?

Underperformance: A step-by-step termination process

When an employee fails to meet performance expectations despite support and improvement efforts, underperformance may be grounds for termination. The process always starts with setting clear expectations: is the job description well-defined? Have conversations taken place to understand the root causes of the underperformance?

It’s crucial to properly document performance and establish a concrete improvement plan with clear objectives. Regular evaluations and feedback are essential throughout. If, after the improvement period, there is still no progress, the organization can proceed to request termination through the subdistrict court or the Employee Insurance Agency (UWV).

A key point to consider is that the absence of clear expectations in the job description can cause delays. That’s why it’s important to have a solid foundation in place so you can act efficiently when underperformance occurs.

From individual underperformance to organizational restructuring

In some cases, the underperformance of a single employee may signal the need for a broader organizational reassessment. If one employee consistently fails to meet expectations, it may also point to deeper issues within the organization—unclear responsibilities, vague goals, or roles that no longer align with the company’s strategic direction.

For example, if a manager repeatedly fails to lead their team effectively, it might not only reflect their shortcomings but also reveal structural problems in the organization—perhaps overlapping responsibilities or inefficient communication lines. In such cases, underperformance may become the starting point for a broader restructuring, where not only the manager’s role is re-evaluated, but also other departments or functions are realigned to improve overall efficiency.

Reorganization: when structures change

Reorganizations often arise from strategic shifts or declining business performance. Unlike underperformance, which focuses on individual employees, reorganizations address which roles and departments are essential for the organization’s future.

• Strategic realignment: A reorganization driven by strategic change aims to adapt the organization to new market conditions, technologies, or customer needs. It may also follow mergers, acquisitions, or increased competition. Restructuring can involve eliminating roles, but also creating new positions that support the new strategy. Employees may be more open to these changes, especially if they see opportunities for growth or reassignment to strategically important roles.
   
• Deteriorating financial results: When financial performance declines, a reorganization may be necessary to restore financial health. This often involves cutting costs, divesting loss-making units, or centralizing processes. In such cases, job cuts, outsourcing, or temporary measures like salary reductions or investment delays may be unavoidable. The focus is on restoring profitability, which can lead to layoffs and severance payments. This type of reorganization can create uncertainty among employees, as it is typically presented as essential for the company’s survival.

Legal and procedural considerations

In both strategic and financially driven reorganizations, the legal and procedural approaches are often similar—such as filing for collective dismissal with the UWV and applying the Dutch “reflection principle” (afspiegelingsbeginsel) to determine who can stay or go. What differs, however, is how the reorganization is communicated: strategic changes emphasize future-readiness, while financially driven reorganizations focus on recovery and stability.

The importance of clear communication

Whether a termination stems from underperformance or a reorganization, the process requires careful planning, transparent communication, and legal knowledge. As HR consultants, we understand the complexity of these transitions and can support organizations through every phase of contract termination and restructuring. We help organizations make the right decisions and implement necessary changes with care and expertise. Get in touch with us for expert advice and guidance on taking the right steps.