By Globalization PartnersMarch 2021
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The Netherlands, also commonly referred to as Holland after the country’s western region, is more than just tulip fields and wooden shoes. It’s the world’s 17th-largest economy and is an attractive place for international business expansion. If you’re interested in recruiting in the Netherlands, start with our guide to hiring Dutch employees. We’ll cover key points for international employers and tips for hiring in the Netherlands to better prepare you for the recruiting process.
Before you start hiring new employees in the Netherlands, you should understand the following aspects of the country’s labor market and laws:
1. The Dutch labor force
The Dutch labor force is well-educated and possesses numerous skills that international companies may find valuable. In 2019, the Netherlands tied with Finland for having the most digitally-skilled population in the European Union (EU). Half of the population from the ages of 16 to 74 possesses above-basic skills when it comes to the internet, computers, and software. This is notably higher than the average for the EU, which is 33 percent.
The Netherlands is the world’s second-largest agricultural exporter, but only 2 percent of the labor force works in agriculture. The country is at the forefront of several key industries, including agri-food, chemicals, energy, logistics, and high-tech systems and materials (HTSM). The Dutch financial services sector is especially notable since its assets are four times the size of the Dutch GDP.
The Netherlands is also known for having an impressively low unemployment rate. For recruiters, this means you may have fewer active job seekers and have to recruit passive job seekers on sites like LinkedIn. Or, you may need to make more of a concerted effort to get an applicant to sign on with your company since they may have other options to choose from.
2. Languages in the Netherlands
The Netherlands’ official language is Dutch, a West Germanic language that is also an official language in the nations of Belgium, Sint Maarten, Suriname, Aruba, and Curacao. Some regions in the Netherlands have their own official dialects or languages, such as Frisian and Papiamento.
In the Caribbean Netherlands, the official language is English. English is also considered an official language in Amsterdam, though Dutch is still the standard for most written communications. Throughout the country, fluency in English is very common. In fact, the Netherlands ranks first on the Education First English Proficiency Index, making the Dutch the most proficient second-language English speakers in the world.
If your company communicates in English, this makes the Netherlands a desirable place to expand since you’re likely to find multilingual workers with whom you can communicate seamlessly. Note that while you may not need a translator to help with interviews or other communications with your employees, you may still need a translator to help you create official documents in Dutch.
3. Collective labor agreements
In addition to following national employment laws, many employers in the Netherlands must also follow the terms of a collective labor agreement, known in Dutch as a collectieve arbeidsovereenkomst (CAO). These are sets of employment terms agreed upon by an employer or employer’s organization and one or more trade unions. Just under one-fifth of all Dutch employees belong to a trade union, and union membership is on a downward trend. However, over 80 percent of employees are covered by a CAO.
In some cases, the Minister of Social Affairs determines that an agreement applies to the whole of a certain trade or industry. This means a collective agreement could apply to your company, even if you’ve never negotiated with any trade unions. The terms of CAOs are typically reviewed every few years, and the terms may be updated.
If an employment relationship is not subject to a CAO, you should set legally compliant employment terms within an employment contract. Certain terms must be in writing, which we’ll cover later in this guide.
4. Working time
The law doesn’t specify what constitutes a standard workweek, but in most cases, it is 36, 38, or 40 hours. The Working Hours Act places limits on working hours, setting the maximum length for any working shift at 12 hours. Employees can work up to 60 hours in a week, but this cannot be the norm. During a four-week period, an employee shouldn’t average more than 55 hours per week, and during a 16-week period, their weekly average shouldn’t exceed 48 hours.
The Working Hours Act also requires employers to give breaks at certain intervals and sets rules for working on Sundays and other nonstandard times. Keep in mind that a CAO may set additional restrictions on working time.
5. Time off policies
The minimum amount of paid holiday leave employees are entitled to by law is four times their weekly working hours. In other words, a full-time employee who works 40 hours per week should receive 160 hours, or four weeks, of vacation leave. Unused vacation days roll over into the next year but must be taken within the first half of that year.
The Netherlands has 10 public holidays, but employers aren’t legally required to give their workers leave on these days. Some CAOs may call for certain holidays off, however.
Dutch employment law provides terms for many types of leave to help employees dealing with special circumstances. If an employee must miss work because of an illness, employers must pay at least 70 percent of their wages for up to two years. For the first year, if 70 percent of an employee’s wages fall below minimum wage, the employer must pay minimum wage. Employers must pay 100 percent of an employee’s wages if they are off due to pregnancy or birth, but this will be reimbursed to the employer through the governmental Employee Insurances Institute (UWV).
The Netherlands uses the euro as its currency. The Dutch government sets minimum wage rates and adjusts them biannually. These rates are stated in terms of pay for a day, week, or month of work rather than as hourly pay. There is one minimum wage for employees 21 and over. For younger workers, their minimum wage depends on their age. The lowest minimum is for 15-year-old workers, and it increases each year with age.
As with other employment terms, CAOs may set their own terms requiring higher minimum wage rates for workers in a particular industry or group. There are no legal policies on overtime pay, so employees must look to their CAO or their employment contract for information on whether they can receive a higher rate of pay for hours worked above a certain threshold.
Another thing international employers should take note of is that an extra month’s worth of pay as an end-of-year bonus is mandated by some CAOs. All Dutch employees are legally entitled to an annual holiday allowance, usually paid out in May, of 8 percent of their annual base salary. When agreeing on an annual gross salary, make sure employees know whether the stated total includes the holiday allowance.
7. Taxes and social insurances
Employers are tasked with withholding salaries tax from their employees’ paychecks as an advance payment of income tax. Employers also withhold national insurance, employee insurance, and healthcare insurance contributions on behalf of the Tax and Customs Administration. Employers make employee insurance contributions to help cover the Netherlands’ unemployment benefits, work and income, and invalidity insurance. The government reviews employers’ contribution rates biannually.
Employers in a sector with a sector pension fund are also obligated to offer their employees a pension scheme. Or, a CAO may specify that you must offer a pension plan to your employees.
The Cost of Hiring a Dutch Employee
The average hourly cost of labor in the Netherlands as of 2019 was 36.40 euros. That’s a bit higher than the average of 27.70 euros for the European Union but is still relatively affordable and in line with labor costs in several other competitive European markets. Research average salaries in your industry to get a more specific idea of how much it will cost you to hire Dutch employees.
Labor expenses aren’t the only cost of hiring an employee in the Netherlands. You also need to factor in the one-time costs involved in the recruitment process. A recruitment survey found that the average cost per hire in the Netherlands is 4,494 euros, including personnel costs.
When you’re expanding into the Netherlands for the first time, recruitment costs may include:
- Paying a hiring agency or expanding your HR staff
- Advertising job positions
- Incorporating your business in the Netherlands
- Traveling to and from the Netherlands to set up your business or conduct interviews
- Outsourcing background checks to a third-party company
- Hiring local experts to help you draft contracts and set up payroll
- Training new employees
What Does a Company Need to Hire Employees in the Netherlands?
To hire new employees in the Netherlands, you first need to establish your company’s presence in the country and fulfill certain obligations as a Dutch employer. There are various options you can choose for establishing your entity in the Netherlands, but most international companies choose to create a Besloten Vennootschap (BV), or private limited liability company, to serve as their Dutch subsidiary. Another option to consider is a public limited liability company, or Naamloze Vennootschap (NV).
It takes about a month to set up a subsidiary in the Netherlands, assuming everything goes smoothly. To establish your subsidiary and qualify as an employer, you must:
- Have your Articles of Association notarized
- Register your business with the Dutch Chamber of Commerce (KvK)
- Register with the Trade Register and Tax Office
- Open a corporate bank account and deposit the necessary starting capital
- Register as an employer with the Dutch Tax and Customs Administration
- Conduct a risk inventory and evaluation
Many of the steps for establishing a business in the Netherlands require a civil-law notary, so make sure you partner with a Dutch notary who can help you complete these steps.
What if you want to start employing one or more Dutch employees right away and don’t want to establish an entity in the Netherlands? There is a valuable solution you can consider in this scenario: an Employer of Record (EOR), also known as a professional employment organization (PEO).
As the name suggests, an EOR serves as your employee’s official employer on paper. This also means the EOR bears the responsibility of legal compliance throughout the employment relationship and manages HR tasks like onboarding, payroll, and even termination. Though employees are technically employed by the EOR, in effect, they work for your company. You can manage them as you would your own employees, giving them tasks to complete and benefitting from their talents and skills.
If you choose to partner with an EOR, you do not need to establish an entity or spend time figuring out the Netherlands’ employment and tax laws, so you can get straight to hiring.
Steps to Hiring in the Netherlands
Hiring someone in the Netherlandsinvolves a process that will likely resemble the hiring process you’re used to at home. However, certain hiring practices in the Netherlands may differ in some ways, even if subtly, from the local practices you’re used to. Therefore, you should consider the following steps for how to hire in the Netherlands, which take the country’s unique qualities into account.
1. Posting job ads
Start by creating detailed job ads to target top candidates. Though many Dutch workers are proficient in English, you may want to post job ads in Dutch or provide a Dutch translation. The top sites active job seekers use to find jobs in the Netherlands are Indeed, LinkedIn, De Nationale Vacaturebank, and Monsterboard. You can also look for websites or publications specific to your industry for job postings. You can have applicants apply through these sites or direct them to your website.
2. Screening applicants
Read through application materials or use a software program to help you narrow your candidate pool. Background checks are allowed in the Netherlands, and employers are obligated to at least verify the identity of any workers they employ and keep a copy of their original identity document on file.
For more involved checks, you can either handle the process internally by contacting past employers, institutions, and references, or you can outsource background checks to a private investigating agency. For jobs that require a confidential security clearance, candidates must undergo a security screening from the General Intelligence and Security Service (AIVD).
3. Interviewing candidates
Invite the most qualified applicants to attend an interview with your hiring manager or interview panel. If you’re hiring remote Dutch employees, you may want to host interviews over a phone or video call. Keeping things virtual saves you from having to travel to the Netherlands and gives you an idea of how effectively a prospective employee communicates virtually — an important skill for any remote worker. When you schedule virtual interviews, don’t forget to factor in the possible difference between Central European Time and your time zone.
4. Extending job offers
Dutch job seekers will not expect you to offer them a job on the spot at their interview, though you can do this if you feel confident about a particular candidate. Otherwise, it’s normal to wait a week or more while you interview other candidates and decide who would be the best fit for your company’s needs. When you extend job offers, you should at least provide basic information about the salary and job responsibilities, or you can share the full contract for employees to sign.
5. Onboarding Dutch employees
If you haven’t already given employees a contract to look over and sign, make sure you do this during onboarding. Note that contracts do not need to be in Dutch. They can be in any language as long as both parties understand the content. Dutch employment contracts must include the following information:
- Names and personal addresses of employer and employee
- Work/office location
- Job description
- Typical working hours
- Payment periods and salary amount
- Employee’s start date
- Holiday entitlement
- Notice period
- Whether a CAO applies
If applicable, the contract should also specify information regarding:
- Length of contract in the case of fixed-term contracts
- Length of the trial period
- Non-competition or non-solicitation clause
Hire Dutch Employees With Globalization Partners
Whether you’re interested in hiring remote employees in the Netherlands or testing out the market before you set up your Dutch subsidiary, Globalization Partners offers the EOR solution you need. Our team in the Netherlands can onboard your new employees and handle all the technicalities of employment so you enjoy a simpler, more streamlined international employment arrangement. Take a moment to learn more about our EOR solution in the Netherlands and consider whether this may be the ideal solution for your expansion goals.