In an asset deal, employees automatically transfer to the new owner under the Transfer of Undertakings Act (WOO). Their employment contracts, salaries and accrued rights remain fully intact. The transfer occurs by operation of law without the need for employees' consent, with all existing terms and conditions of employment respected.
This automatic transition protects workers from arbitrary changes in their working conditions during mergers and acquisitions. For employers, this means taking over all personnel obligations, including accrued holidays, pension rights and any collective agreement provisions.
What is an asset deal and how is it different from a share deal?
An asset deal involves the purchase of specific assets and activities, while a share deal involves the transfer of the company's shares. In asset deals, the selling company remains, but only selected assets and liabilities are transferred to the buyer.
The distinction has direct implications for staff. In a share deal, only the owner of the shares changes, so employment contracts automatically remain with the same employer. In asset deals, an assessment must be made whether there are transfer of undertaking according to the WOO criteria.
The law applies three core requirements for transfer of undertaking: transfer of an economic entity, preservation of that entity's identity, and continuity of operations. This assessment is actually made on a situation-by-situation basis, with not all criteria having to be met. In service provision, personnel transfer is often decisive for establishing transfer.
Asset deals are often chosen to gain specific tax advantages or to acquire only desirable parts of a company. For staff, however, this means no difference in protection compared to other transaction structures.
What rights do employees retain in an asset deal?
Employees retain all existing employment rights in an asset deal. This includes contractual rights, accrued pension rights, holidays, and protection against dismissal. The WOO ensures that the transition does not adversely affect individual employment conditions.
The protection extends to all aspects of the employment contract. Salaries remain unchanged, as do fringe benefits such as bonus schemes, lease cars and other benefits. Seniority is fully recognised by the new employer, which is important for severance payments and promotion opportunities.
Collective bargaining agreements play a crucial role in this protection. Around eighty per cent of Dutch employees are covered by a collective agreement with specific provisions in the case of mergers and acquisitions. These collective agreement provisions remain in force for one year after the transition, after which there may be a transition to another collective agreement.
Pension rights deserve special attention. Accrued pension entitlements pass to the new employer, who is obliged to offer an equivalent pension scheme. If this is not possible, compensation should be offered that does not disadvantage the employee.
How exactly does the transition of staff in an asset deal work?
Staff transfer is automatic at the time of transfer of the company. Employees do not have to sign new contracts, as their existing employment contract transfers to the new employer by operation of law. This transition occurs without any interruption of employment.
The process starts with identification of which employees are transferring. This includes all employees working primarily for the business unit to be transferred. Timing is crucial: the transition takes place at the legal transfer moment, not at the moment of contract signature.
Communication to employees should be timely and complete. Both the selling and acquiring parties have information duties towards employees and any works councils. This communication should start at least one month before the transfer.
Practicalities such as IT systems, access passes and workstations require careful coordination. The new employer must ensure that employees can be fully operational from day one. This includes transfer of personnel files and relevant administration.
New contract documentation is not formally required, but many employers choose to send confirmation letters confirming the transition and continuity of employment conditions. This creates clarity and avoids misunderstandings.
What happens to salaries and working conditions during an asset deal?
All salaries and benefits remain unchanged in an asset deal. The new employer takes over the entire employment contract, including salary levels, holidays, bonus schemes and other benefits. Deterioration of terms and conditions is not allowed by law.
The principle of favour plays an important role in any harmonisation of employment conditions. If the new employer applies different (better) terms of employment, employees may benefit. However, deteriorations are excluded during the initial period after takeover.
Accrued rights such as holidays, ADV hours and bonus entitlements will carry over in full to the new situation. The new employer is obliged to honour these rights according to the original conditions and timing.
With different collective agreement regimes, transition to the new employer's collective agreement can take place after one year. Again, the favourability principle applies: individual conditions that are more favourable than the new collective agreement remain in force. Transitional arrangements are often agreed to allow gradual harmonisation.
Variable remuneration and bonuses require specific attention. Ongoing bonus periods should be settled according to the original terms, even if payment takes place after the transfer. This also applies to commission schemes and other performance-related remuneration.
Can employees be fired because of an asset deal?
Dismissal purely because of an asset deal is prohibited by law. The WOO contains a specific dismissal prohibition that protects employees from termination of employment as a direct result of the business transfer. This protection applies to all affected employees.
Exceptions to this ban on dismissal are very limited. Dismissal is possible only on account of economic, technical or organisational reasons involving a change in staffing levels. These reasons must be objectively demonstrable and must not result directly from the transfer itself.
The burden of proof is on the employer to show that dismissal is not related to the asset deal. This requires thorough documentation of the real reasons for termination of employment. Timing plays a crucial role here: dismissals shortly after transfers are critically assessed.
Reorganisations after an asset deal are possible, but must comply with all regular procedures. This means full consultation with works councils, preparation of a social plan if required, and compliance with all dismissal procedures under regular labour law.
Collective agreement provisions can provide additional protection on top of legal safeguards. Many collective agreements contain specific provisions for reorganisations and mergers, including minimum levels for severance payments higher than the statutory transitional compensation.
How long does the transition of staff in an asset deal take?
The legal transfer of staff takes place at the time of transfer of the business, but the practical transition extends over a period of three to six months. This timeline includes full integration into systems, processes and corporate culture of the new organisation.
The first phase involves immediate operational continuity. Employees must have access to all necessary systems and resources to continue their work from day one. This phase typically takes two to four weeks and requires intensive preparation.
Administrative integration will follow in the second phase. This includes transfer to new HR systems, payroll and other support processes. Payroll transition is often the most critical element, as salary payments should not be interrupted.
Cultural integration represents the longest phase of the transition process. Employees have to get used to new procedures, management style and corporate culture. This phase can take six months to a year, depending on the differences between the two organisations.
Key milestones in the process include the first salary payment by the new employer, completion of IT migration, and formal integration into new organisational structures. Regular communication and feedback moments help monitor progress.
A successful staff takeover in asset deals requires careful planning and professional guidance. The complexity of employment law issues, combined with practical challenges, makes expert support indispensable for a smooth transition. For advice on your specific situation, please contact with us.
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