Definitive Guide to Hiring in Netherlands

Hiring in Netherlands

Hiring employees compliantly in Netherlands means doing it yourself or using an Employer of Record like Global Expansion. You should be careful using independent contractor agreements in Netherlands so that you don’t run afoul of employment laws. To hire an employee compliantly and offer them mandatory benefits and compliant agreements, you can:

(a) Establish your own new legal entity, banking, accounting and payroll service in Netherlands; or

(b) use an Employer of Record like Global Expansion who can handle all of the details for you.

Labor Laws in Netherlands

Employment laws in Netherlands are uniquely suited to the country’s way of life, and crucial to understand if you want to employ local talent in this country. Get the details on Netherlands employment laws and Netherlands policies here.

Employee Probation Period

• Dutch law allows for a probationary period of a maximum of two months for permanent contracts. For fixed term contracts much stricter rules are in place and a maximum of one months’ probation is permissible. A probation period can only be concluded for contracts of over six months in duration.
• During the probationary period, the employer may terminate the contract without notice. Termination may, however, not be discriminatory.
• Probation periods must be concluded in writing. A verbal agreement on probation is null and void. If the probation period is not in line with the law, then any probation clause is deemed null and void ab initio. This means that no probationary period is applicable.

Annual Leave in Netherlands

• The legal minimum number of vacation days in the Netherlands per year is four times the amount of days worked per week.
• This typically means 20 holidays in the case of a full time employee working a five-day week (4×5 working days=20 Netherlands vacation days).
• However, it is common practice in the Netherlands for a full time employee to be entitled to approximately 25 holiday days per year

Holidays in Netherlands

Netherlands has 10 public holidays: -

Maternity Leave Netherlands

• If you are employed in the Netherlands and you become pregnant then you are legally entitled to at least 16 weeks paid maternity leave.
• Expectant mothers start their maternity leave from 4 to 6 weeks before the due date. This period before the birth, and the 10-12 weeks after, are financially covered by the maternity allowance (zwangerschapsuitkering).

Paternity Leave Netherlands

• As of January 1, 2019, partners of mothers who have just given birth are legally entitled to 1 workweek of paid leave (partnerverlof or geboorteverlof).
• It doesn't matter whether the partner works full-time or part-time.
• To have additional time with their new child, fathers and partners also have the option to take (usually unpaid) extra parental leave or (paid) holiday leave after the birth of their child.
• The amount and duration of this leave can vary greatly and should be discussed with the employer

Sick Leave in Netherlands

• Under Dutch Labor Law, Employers are obliged to continue payments for at least 70% of the Employees’ wages during 104 weeks of sickness / disability.
• The 70% of the Employees’ wages is capped to a maximum daily wage.
• If the amount is lower than the statutory minimum wage, the employer is obliged to supplement it to the minimum wage in the first year of illness.
• Exception by law: Organ donors, pregnant or recently delivered women who are ill in the second year will receive 100% of their daily wages instead of 70%.

Working Hours in Netherlands

• Employees aged 18 and over can work a maximum of 12 hours per day and 60 hours per week.
• However, they cannot work that maximum number of hours every week, but rather a maximum average of:
  • 48 hours over a 16-week period, or
  • 55 hours in up to 4 consecutive weeks
• Most CAOs specify a 40-hour maximum working week.

Overtime in Netherlands

• Overtime hours count towards the statutory maximum hours your employee can work for you, which is 12 hours per day or 60 hours per week.
• The Act does not state how much extra pay your employee must receive for overtime.

Termination of Employment in Netherlands

• Essentially, the employer requires prior permission by the work placement branch of the Employee Insurance Agency (UWV WERKbedrijf) or the sub-district court before it can terminate the employment agreement.
• Since 1 July 2015, the UWV procedure has been the compulsory route if the employment contract is to be terminated for economic reasons or in the case of incapacity for work due to illness for longer than two years.
• The court procedure is the compulsory route if the employment contract is terminated for performance-related or other personal reasons. In both situations, parties are allowed to appeal (and appeal in cassation) the decision of the UWV/court with the competent higher court and claim reinstatement.
• In The Netherlands, the employer has generally five ways to terminate the employment agreement:
  • Termination by mutual consent- by means of a settlement agreement
  • In cases of termination by mutual consent, it is common to sign a settlement agreement that outlines the conditions of termination. A settlement agreement is often used by the (former) employee to safeguard entitlements to unemployment benefits, if any, as much as possible. In the event parties reach an amicable settlement, the employee will be entitled to a two-week period after reaching agreement about the settlement to “reflect” on the settlement (three weeks in the event the employer does not notify the employee in writing of this right within two working days after reaching agreement about the settlement agreement)
  • Termination proceedings before the UWV WERKbedrijf (Employee Insurance Agency);
  • Termination proceedings before the cantonal court.
  • Termination with consent of the employee
  • Urgent dismissal

Employees can be dismissed without notice or prior approval for “urgent cause,” i.e., a cause of such a nature that no employer could reasonably be expected to continue the employment relationship any longer. Examples of urgent cause include serious incompetence, for instance obstinately refusing to obey the reasonable instructions of the employer

Notice Period in Netherlands

• The statutory notice period for an employee is 1 month.
• However, you may have agreed on a longer or shorter notice period with the employee.
• If so this must be explicitly stated in the contract of employment.
• If your employee's notice period is more than 1 month, the employer's notice period has to be at least twice as long.
• The maximum notice period for an employee is 6 months.

Severance in Netherlands

• Employees are eligible for the severance payment, when they have worked for the employer for at least 24 months and have been terminated by the employer, the employment relationship has been terminated on mutual consent at the employer’s initiative, a fixed term employment contract has not been renewed by the employer or when the employee has terminated the employment relationship due to misconduct of the employer.
• The payable amount must be 1/6 of the monthly wage of the employee for each 6-month period, which the employee has worked for the employer, plus ¼ of the monthly wage for each 6-month period worked above 10 years.
• Though, the severance pay can never be higher than 77,000 EUR, or one annual wage, if the annual wage is higher than 77,000 EUR.
• In enterprises with more than 25 employees, the severance pay for employees, who are 50 or older and who have worked for the employer for at least 10 years, must be equal to half their monthly wage for each 6-month period they have worked for the employer, Art. 7:673a CC.
• Under special circumstances, based on the principles of fairness and taking into account negligent conduct of either the employer or the employee prior to the termination, the court can decide to increase or lower the severance pay.
• A different entitlement to severance pay can be set by collective agreement (Art. 7:673b CC).

Netherlands Salary and Wages

13th / 14th Month Salary in Netherlands

• Yes (Mandatory)
• There is no statutory requirement to pay the 13th or 14th month salary.
• However, there is a collective agreement where employers have to pay the 13th month in May which allow employees to plan for their holidays.
• The holiday payment is composed of deduction of approximately 8% that employers take each month from the employee's earnings and give back in May.
• Some employers may decide to spread the amount due throughout the year.

• Everyone who lives in the Netherlands must pay into the Dutch social security system, regardless of employment, although a number of exceptions exist, such as working as a civil servant at an embassy or short-term contract workers.
• Some foreigners may be subject to pay social security in both the Netherlands and their home country, unless a social security bilateral agreement exists that enables an exemption from paying taxes in your home country.
• Social security in the Netherlands is divided into two strands:
  • National insurance (volksverzekeringen) is required for all those living in the Netherlands and covers social benefits.
  • Employee insurance (werknemersverzekeringen) is required for those that work in the Netherlands and provides employment-related benefits.
• The Social Insurance Bank (Sociale Verzekeringsbank, or SVB) oversees the implementation of the national insurance system, while the Institute for Employee Insurance (Uitvoeringsinstituut Werknemersverzekeringen, or UWV) handles unemployment benefits in the Netherlands and other work-related insurance programs.
• Dutch national insurance covers four areas:
  • Dutch pension system (AOW)
  • Child benefits (AKW)
  • Survivor benefits (Anw)
  • Long-term care (Wlz).
• Dutch Employee Insurance covers three areas: -
  • Unemployment Benefits
  • Sick leave
  • Disability benefits

Immigration Netherlands

• The Netherlands has a streamlined visa and work permit system, meaning that all migrants from outside of the European Economic Area (EEA) who want to work in the country for longer than 3 months need to apply for a single Combined residence and employment permit (GVVA).
• There are 3 main pathways for hiring foreign workers in the Netherlands:
  1. The Combined residence and employment permit (GVVA)

     This is a combined work and residence permit for all non-European Economic Area nationals who plan to work in the Netherlands for longer than 3 months

  2. The Work Permit (TWV)

     This standard work permit must be combined with a residence permit, and is meant for workers who are not eligible for a combined GVVA permit. This includes: -

     • Non-EEA nationals who plan to work in the Netherlands for less than 3 months
     • Students
     • Seasonal workers
     • Asylum seekers
     • International company employees who have been seconded to the Netherlands
     • Nationals of Croatia
  3. European Blue Card:

     The European Blue card also allows migrants to live and work in the Netherlands (and some other EU countries) for longer than 90 days, but is aimed specifically at highly skilled workers. In order to qualify for a European Blue Card, you must have at least a Bachelor's degree, and an employment contract with a Dutch company in a job which pays at least €70,022.88.

Value Added Tax (VAT) in Netherlands

• Value-added tax (VAT), known in Dutch as Omzetbelasting or BTW, is payable on sales of goods and on services rendered in the Netherlands as well as on the importation of goods and on the ‘intra-European’ acquisition of goods.
• There are three VAT rates: 21%, 9%, and 0%. As of 2019, the reduced rate for prime necessities is increased from 6% to 9%.
• The main VAT rate is 21%.
• The reduced 9% VAT rate is applicable on certain prime necessities (and also on certain energy-saving insulation activities on houses).
• The special 0% VAT rate is applicable mainly to intra-EU supplies, exports, imports stored in bonded warehouses, services rendered in connection with the above, and certain other services.

Mandatory Benefits in Netherlands

• In the Netherlands the relationship between employees and employers is arranged under labor law.
• The statutory Benefits include annual holidays, public holidays, maternity and paternity leave, sick pay, 13th month pay, notice period, severance payment, and social security insurance.
• Social security insurance includes national insurance and employee insurance.
• National insurance includes Dutch pension system, child benefits, survivor benefits and long term care.
• Employee insurance includes unemployment benefits, sick leave, and disability benefits.

Payments And Invoicing

• Spouses are not taxed jointly; each individual is treated as a separate taxpayer for their personal income (such as employment income).
• In principle, the non-personal income is taxed separately on the spouse who is the beneficial owner of the income.
• Returns must normally be filed by 1 May following the end of the tax year. Returns prepared by a registered tax professional are generally covered by a tax return extension ruling.

Payroll Accrual in Netherlands

Country Accruals Additional Information

Description

Employee insurance contributions and national insurance tax are levied on residents and non-residents under a number of different regulations.

Payroll Accruals Additional Information

Accrued Benefits in Netherlands

Why use Global Expansion to hire in Netherlands

Establishing a branch office or subsidiary in Netherlands can be time-consuming, expensive and complex. With such a robust labor market in place, one must pay great attention to detail when structuring employment because Netherlands labor laws are complex.

The company also has a responsibility to comply with specific employment practices dictated by Netherlands law to maintain its good standing as an equal opportunity employer.

Global Expansion makes it easy for you to expand into Netherlands. We'll help you hire your candidate of choice, handle HR matters and payroll, and ensure that you comply with local laws without the burden of setting up a foreign branch office or subsidiary. In addition, you'll have complete control and direction over your employees.

We enable you to stay in control of everything. Our Netherlands Global Professional Employer Organization (PEO) and Employer of Record (EOR) solution provides you with peace of mind to focus on running your company and the security to enter new markets.