Employing employees in the Netherlands can be a daunting task for foreign companies due to the country's strict labor laws and regulations. However, with the right knowledge and preparation, the process can be smoother. This blog aims to provide a comprehensive guide on how to employ employees in the Netherlands, covering topics such as understanding labor laws, preparing to hire, the hiring process, compliance and record-keeping, and managing employees.

The Netherlands is a hub for international businesses and one of the most attractive countries for foreign investment in Europe. If you’re a foreign company planning to establish a presence in the Netherlands, hire employees in Netherlands is likely to be one of your priorities. However, before you start hiring, it’s crucial to understand the country’s labor laws and regulations to ensure a smooth and legal process. This blog aims to provide a detailed guide on how to employ employees in the Netherlands, covering all aspects from preparation to management.

Understand the Labor Laws and Regulations in the Netherlands

As an employer in the Netherlands, you must comply with a range of labour laws and regulations. Some of the key regulations include minimum wage, working hours, vacation entitlements, and sick leave. It’s essential to understand these regulations to avoid any legal issues in the future. Moreover, there are different types of employment contracts in the Netherlands, such as fixed-term and indefinite contracts, with specific rules and requirements for each. The Dutch government also places a strong emphasis on equal treatment, non-discrimination, and employee rights, making it essential to have a comprehensive understanding of these laws.

Preparing to Hire Employees in the Netherlands

Before hiring employees, it’s crucial to assess your business needs and ensure that you have the necessary resources to support your employees. This includes a solid HR infrastructure, payroll management system, and benefits package. Additionally, you’ll need to register your business with the Dutch Chamber of Commerce, obtain a Dutch tax number, and set up a Dutch bank account to pay your employees.

Hire Employees in Netherlands: Temporary or Permanent?

When it comes to hiring staff, there are regulations that apply to both permanent and temporary employees. However, there are certain considerations to keep in mind if you’re planning to hire temporary staff through an agency or secondment supplier. Here’s what you should take into account:

1. Verify the agency or secondment supplier’s registration: Before working with a supplier, make sure they are properly registered in the Dutch Business Register. Failure to do so may result in fines. You can check their registration using the KVK Waadi check.
2. Check for work permits: If you’re hiring temporary workers from outside the EEA/Switzerland, ensure that the intermediary has arranged the necessary work permits for them.
3. Avoid tax liabilities: The Dutch Tax and Customs Administration may hold you liable for payroll tax and turnover tax owed by your intermediary. To prevent this, you can request the organization that provides employees to you to set up a blocked account (G account).
4. Consider social insurance coverage: If the temporary worker you hire is foreign, they may still be covered by social insurance in their own country. In such cases, you may not be required to pay social security contributions for them. Request an A1/certificate of coverage from your intermediary to confirm this.

Additionally, it’s beneficial to work with an SNA-certified company as it reduces the risk of claims from the Dutch Tax and Customs Administration if the company fails to meet its obligations.

Here are some general steps to follow while hiring in Netherlands:

1. Screen future employees: Consider conducting background checks for workers in integrity-sensitive positions, including regular staff, interim personnel, self-employed professionals, temporary staff, interns, and volunteers.
2. Verify and register employee identities: Verify the identities of all workers using original identity documents and keep copies in your records.
3. Register as an employer: If you’re employing personnel for the first time, register as an employer with the Dutch Tax and Customs Administration to fulfill your payroll tax obligations.
4. Establish a contract of employment: Specify the employee’s salary, determine if a Collective Labor Agreement applies, outline working hours and rest times, and address employee pension schemes in the employment contract.
5. Ensure minimum wage and holiday allowance: Pay at least the Dutch minimum wage and provide a holiday allowance to all workers, including temporary workers, flex workers, and foreign personnel.
6. Provide a safe work environment: Ensure a healthy and safe workplace for your employees by adhering to the rules and regulations set by the Netherlands Labour Authority or your sector organization.
7. Conduct a risk inventory and evaluation (RI&E): Create an RI&E to identify workplace risks and implement measures to address them.
8. Deduct social insurance premiums: Deduct social insurance premiums for employees working permanently in the Netherlands, and consider becoming a self-insurer for the occupational disability insurance scheme.
9. Verify health insurance coverage: Ensure that your employees have a standard Dutch health insurance policy. If not, the Dutch National Health Care Institute will provide insurance, and you will be responsible for reimbursing the premiums.
10. Prioritize recruitment within the EEA: Recruit personnel initially from the European Economic Area (EEA) and/or Switzerland. Only if suitable personnel cannot be found within the EEA are you permitted to recruit from other countries.
11. Obtain work permits: If you’re hiring non-EEA or non-Swiss employees for less than 3 months, apply for a work permit from the Employee Insurance Agency (UWV). For longer-term employment, apply for a combined permit for residence and work, known as the Single Permit.
12. Provide suitable accommodation: When employing foreign staff requiring work permits, ensure that you provide appropriate accommodation in compliance with the relevant rules in your municipality.

Remember to consult with our  legal professionals and stay updated on the latest regulations to ensure compliance with labor laws.

Compliance and Record-Keeping

Once you’ve hired employees, it’s essential to maintain compliance and accurate record-keeping. This includes keeping track of employees’ working hours, vacation entitlements, and sick leave, as well as maintaining a comprehensive personnel file. Moreover, the Dutch government requires employers to register their employees with various organizations, such as the Dutch Tax Authority, the Social Security Bank, and the Employee Insurance Agency.

Managing Employees in the Netherlands

Managing employees in the Netherlands requires a proactive approach that focuses on communication, support, and development. You should establish clear job expectations, provide regular feedback, and offer opportunities for training and development. Additionally, you should ensure that you have adequate measures in place to address any employee grievances, such as a grievance procedure and an employee representative council.

Hire Employees in Netherlands: Collective Labor Agreements in the Netherlands

Collective Labour Agreements, also known as Collective Arbeidsovereenkomst (CAO) in Dutch, heavily regulate employment in the Netherlands. CAOs are employment arrangements negotiated by companies or employment organizations with labour unions.

In the Netherlands, collective labour agreements might cover an entire trade or sector. This implies that your company might face a CAO even if you haven’t bargained with trade unions or joined an employment organisation.

To prevent penalties and other legal implications, foreign enterprises recruiting employees in the Netherlands must understand which CAOs apply to them and state it in their employment contracts.

Payroll in the Netherlands

Payroll in the Netherlands is quite simple, with a few notable exceptions:

• Wages are paid by the day, week, or month rather than by the hour, and different ages have different minimum wages. Biannually, rates are reviewed and fixed.
• In the Netherlands, payroll runs on a monthly cycle, with wages paid at the end of the month.
• Unless their CAO specifies otherwise, all Dutch employees are entitled to an annual holiday payment. Employers must provide this information in their employment contracts.
• Employees in the Netherlands are not entitled to severance pay unless they are terminated for reasons other than mutual dismissal or due to misbehavior.

Employment Tax in the Netherlands

The Netherlands offers the advantage of a dynamic employment tax system that undergoes annual reviews and adjustments. These tax measures include income tax and social security contributions, which are significant for both employees and employers. Here’s an overview of the current income tax rates in the Netherlands:

1. Income up to €69,398: Taxed at a rate of 37.07%.
2. Income over €69,398: Taxed at a rate of 49.5%.

Both the employer and the employee are responsible for paying social security tax in the Netherlands. This tax is divided into two schemes:

1. Employee Insurance: Covers unemployment, sickness, and incapacity to work. Employers contribute to this scheme by making payments to the Dutch Tax and Customs Administration.
2. National Insurance: Provides benefits such as old age pension, long-term care, orphan’s pension, and widow/widower’s pension. Employers deduct these contributions from their employees’ gross salaries.

The evolving nature of employment tax in the Netherlands can be advantageous for businesses. However, it also poses a risk of noncompliance. It is crucial for employers to stay vigilant and regularly monitor any changes in the annual tax rates to ensure they remain compliant with the regulations.

Leave Entitlements in the Netherlands

When foreign businesses establish operations in the Netherlands, it is essential to ensure compliance with the minimum statutory leave entitlements for employees. Here are some key leave entitlements that must be offered:

1. Annual Leave: The minimum annual leave entitlement is calculated as four times the number of weekly working hours. For example, if an employee works 40 hours per week, they are entitled to at least 160 hours of annual leave, which is equivalent to 20 days if they work eight hours per day.
2. Maternity Leave: Maternity leave in the Netherlands extends for a total of 16 weeks, which includes six weeks of pregnancy leave and 10 weeks of maternity leave.
3. Parental Leave: Employees with children up to eight years of age are entitled to parental leave, which is calculated as 26 times the number of weekly working hours. During the first nine weeks of parental leave, they receive 70% of their salary from the Employee Insurance Agency (Uitvoeringsinstituut Werknemersverzekeringen, UWV).
4. Sick Leave: Employees on sick leave are entitled to receive at least 70% of their salary and holiday allowance. However, it’s important to note that employment contracts or relevant collective labor agreement (CAO) terms may require a higher percentage.

Additionally, there are other special leave schemes available to Dutch employees, depending on the specific terms outlined in their respective collective labor agreements (CAOs).

Foreign businesses entering the Dutch market should ensure compliance with these statutory leave entitlements while trying to hire employees in Netherlands.

Hire Employees in Netherlands: Steps to Hiring in the Netherlands

Hiring employees in the Netherlands involves several steps and considerations. Here’s a breakdown of the process:

1. Set Up a Dutch Entity

   – Choose an appropriate corporate structure, such as a BV or NV.

   – Open a bank account.

   – Register with the Trade Register and Tax Office.

   – Notarize Articles of Association.

   – Set up employee insurance and conduct a risk evaluation. 

It’s advisable to engage a Dutch notary to assist with these steps.

2. Partner With an Employer of Record (EoR)

   – Consider partnering with an Employer of Record, a Dutch legal entity that can handle hiring, payroll, benefits administration, and compliance on your behalf.

   – An EoR allows you to start employing in the Netherlands quickly without establishing a physical presence or legal entity.

   – The EoR takes care of onboarding, day-to-day employment management, and ensures compliance with Dutch labor laws.

3. Engage Independent Contractors

   – Instead of hiring employees, you may choose to engage independent contractors for added flexibility.

   – However, it’s important to understand the criteria that distinguish employees from contractors in the Netherlands to avoid misclassification penalties.

   – Dutch legislation provides specific conditions to determine the classification of workers.

Simplifying Employment in the Netherlands

   – Making Company registration in Netherlands and navigating Dutch employment regulations can be complex and time-consuming.

   – Partnering with a vakilsearch can simplify the process.

   – Vakilsearch experts can handle various aspects of employment, including onboarding, payroll, benefits administration, compliance, and ongoing HR support.

   – By working with Vakilsearch , you can efficiently and compliantly hire employees in the Netherlands, reducing your administrative burden and ensuring adherence to local regulations.

FAQs

What are the regulations for trade union recognition?

The Dutch Constitution guarantees the right to freedom of association and assembly, including the right to form a trade union and conclude collective bargaining agreements. However, trade unions in the Netherlands have a relatively weak presence at the company level, and strikes are infrequent compared to international standards. Global employers typically do not face significant challenges from employee unions when operating in the Netherlands.

Does an employer have any additional obligations if they dismiss several employees simultaneously?

In the case of mass terminations involving at least 20 employees within one month, the Collective Redundancy Notification Act applies. Employers must adhere to specific rules and requirements outlined in the act. Failure to comply with these regulations may render the termination agreements void.

How does a PEO help global employers in the Netherlands?

Global employers who wish to access the diverse talent pool in the Dutch labor market can benefit from engaging the services of a Professional Employment Organization (PEO). A PEO takes on the legal responsibility for managing payroll, HR management, and even terminations on behalf of the global employer. This allows employers to effectively manage international teams and handle their payroll without the need to establish a physical business entity in the Netherlands. Note: It's important to consult with legal and professional advisors from legal service providers such as Vakilsearch to ensure compliance with specific regulations and requirements when it comes to engaging a PEO in the Netherlands