Netherlands – Employer of Record
COVID-19 Status Update: Globalization Partners HR specialists for the Netherlands report that the government has encouraged social distancing, suggested non-essential businesses close, and is advising against unnecessary travel. The government has asked that everyone in the Netherlands stay at home as much as possible, and work at home if possible. In late March, the Netherlands extended the ban on all public gatherings from April 6 until June 1 to curb the spread of COVID-19. At that time, Prime Minister Mark Rutte warned that if the ban did not work the next step would be a full lockdown. As the situation develops in country, and with most employees now working from home, Globalization Partners is advising our clients on how to preserve employees while keeping business intact, and how to empower employees to work from home and stay productive.
Globalization Partners provides a PEO solution in the Netherlands for clients that want to hire employees and run payroll in the Netherlands without first registering a branch office or subsidiary. Registered and licensed under the appropriate labor laws in country which are required for employment secondment in the Netherlands, our Global Employer of Record Platform™ enables clients to run payroll in the Netherlands while HR services, tax and compliance management matters are lifted from their shoulders onto ours.
Table of Contents
- Employment Contract Netherlands
- Working Hours in the Netherlands
- Vacation in the Netherlands
- Holidays in the Netherlands
- Bonus Payments in the Netherlands
- Employee Benefits in the Netherlands
- Pension in the Netherlands
- Additional Benefits in the Netherlands
- Sick Leave in the Netherlands
- Maternity / Paternity Leave in the Netherlands
- Probationary Period in the Netherlands
- Severance and Termination in the Netherlands
- Taxes in the Netherlands
- Bottom Line on Benefits Costs in the Netherlands
- Why Globalization Partners
Once our client finds the candidate to whom they want to issue an offer, Globalization Partners issues a locally compliant employment contract in the Netherlands in accordance with Dutch labor law. The employment contract is compliant with the applicable collective bargaining agreement (CBA for Temporary Agency Workers), and put on our locally-compliant payroll. The employee works full-time and exclusively on your behalf in the Netherlands to fulfill your in-country requirements. We ensure that best HR practice is followed, leaving the employee to focus on managing the activity you wish to implement in the Netherlands rather than manage his or her own payroll, or otherwise negotiate with local lawyers and accountants on your company’s behalf.
When negotiating terms of an employment contract with an employee in the Netherlands, it may be useful to keep the following in mind:
Employment Contract Netherlands
Although a Dutch employment contract may be agreed upon orally, it is highly recommended that parties sign a written employment contract prior to the employee beginning his or her work. The absence of a written and signed employment contract can be disadvantageous to an employer since there are certain provisions that are only valid when agreed upon in writing. An employment contract compliant with labor law in the Netherlands is provided to all employees engaged under Globalization Partners’ Netherlands PEO.
An employment contract should spell out all the terms and conditions of the employment, such as employee’s compensation, benefits, duration of the contract and other details. An employment contract in the Netherlands should always state the salary and any compensation amounts in Euro rather than a foreign currency.
For companies in the Netherlands, there is often a company Collective Bargaining Agreement (CBA) and/or a CBA for the specific industry. Globalization Partners’ local subsidiary is WAADI registered, which means we are registered as a temporary agency and the collective bargaining agreement protects employees accordingly.
Working Hours in the Netherlands
Employers must comply with the Working Hours Act of 23 November 1995 which states that the maximum length of a shift is 12 hours per day and 60 hours per week.
The regular working hours in the Netherlands are 40 hours. They can be increased to 48 hours under the condition that those will be the normal working hours.
Vacation in the Netherlands
According to the applicable CBA for employees hired via Globalization Partners’ Netherlands PEO, 25 holidays per year. However, employers can decide to offer more than 25 vacation days. The holiday year runs from January 1st to December 31st.
Holidays in the Netherlands
In addition to the above holidays, The Netherlands celebrates 10 public holidays for which employees are given the day off, including:
- New Year’s Day
- King’s Day
- Easter Sunday* and Monday
- Liberation Day – official public holiday every 5 years; again in 2020
- Ascension Day
- Pentecost Sunday*
- Whit Monday
- Christmas Day
- Boxing Day
*Only a free day if Sunday is a normal working day
Bonus Payments in the Netherlands
All employees in the Netherlands are legally entitled to 8% vacation allowance in addition to their base salary. This vacation allowance is accrued monthly and is typically paid out once a year, normally in the month of May.
Employee Benefits in the Netherlands
An employer in the Netherlands is required to contribute 6.65% (2017) of the employee’s base salary towards the Healthcare Insurance Act (Zorgverzekeringswet). This contribution is calculated over the employee’s base salary and then paid to the Dutch Tax Department.
All persons residing and working in the Netherlands are legally required to privately arrange for at least the basic healthcare package. Costs for this basic healthcare package generally vary from between 95 to 125 EUR per month, depending on the level of the employee’s ‘own risk’.
The basic health insurance package has a comprehensive structure and includes the bulk of essential medical care, medications and medical aids which are consistent with the state of the art and medical practice. Some physiotherapy and dental care services are covered under the package. (“Healthcare in the Netherlands” Ministry of Health, Welfare and Sport, 2016)
All allowances for medical and other insurance are taxable benefits.
Pension in the Netherlands
Per the previously mentioned CBA, an employee over the age of 21 must participate in the industry’s collective pension plan. During the first year of the employment, the employee will participate in the ‘Basic Plan’. The premium is 2.6% of the employee’s monthly salary. This premium is paid by the employer. After the first year, the employee will participate in the ‘Plus Plan’. The premium is 12% of the employee’s monthly salary. The employer pays 8% of this premium and the employee pays 4% of this premium.
In light of the above, it is essential that employees provide the employer with a detailed and accurate employment history to ensure that they are offered and registered with the correct Pension Plan.
Additional Benefits in the Netherlands
Employers often provide additional benefits to their employees in the Netherlands. One common benefit is a travel allowance for a leased car, or 100% of the cost of train/bus fare for commuting.
Sick Leave in the Netherlands
In the Netherlands, if the employee is unable to work due to illness and/or other incapacity for work, the employer is legally obliged to continue paying the employee’s salary for a maximum of 104 weeks.
The employee is entitled to continued payment of 91% of his or her salary during the first 52 weeks of illness and/or other incapacity for work, whereby the minimum entitlement is the statutory minimum wage and the maximum entitlement is the maximum daily wage. During the second 52 weeks of illness and/or other incapacity for work, the employee is entitled to continued payment of 80% of his or her salary, whereby the minimum entitlement is the statutory minimum wage and the maximum entitlement is the maximum daily wage.
Maternity / Paternity Leave in the Netherlands
Female employees are entitled to 16 weeks of maternity leave in the Netherlands. They may take leave from 6 weeks before the expected birth date of the baby, and are entitled to at least 10 weeks of maternity leave after giving birth, even if the child is born later than when it was due.
Male employees in the Netherlands are entitled to up to 2 days of paid paternity leave and 3 days of unpaid parental leave.
Male and female employees in the Netherlands are entitled to unpaid parental leave when caring for a child younger than eight.
- Employees are entitled to parental leave for each child separately.
- An employee is entitled to up to 26 times his/her weekly working hours.
- The normal arrangement is that for 6 months an employee works half of his/her normal hours.
- For example, if an employee works 32 hours per week, then for 6 months s/he will work 16 hours per week and take 16 hours of parental leave per week.
Probationary Period in the Netherlands
If included in the terms of an employment contract in the Netherlands, a probationary period of maximum one (1) month can be agreed to with the employee under the condition that the employee is offered an employment agreement for more than 6 months. If the employee is offered an employment agreement for a period of 2 years or longer (including indefinite), a maximum probationary period of 2 months can be agreed to with the employee.
Severance and Termination in the Netherlands
At-will employment is not a recognized concept in the Netherlands.
Fixed term employment agreements in the Netherlands can in principle only be prematurely terminated if this possibility is explicitly included in the employment agreement and prior permission has been received from the Employee Insurance Agency (UWV) or a petition to the cantonal court for the dissolution of the employment agreement has been granted by the cantonal court.
In the Netherlands, indefinite employment agreement can also in principle only be terminated if prior permission has been received from the Employee Insurance Agency (UWV) or a petition to the cantonal court for the dissolution of the employment agreement has been submitted to and granted by the cantonal court.
Both the Employee Insurance Agency and the cantonal court will require a reasonable ground for termination. This means that there is a pre-emptive test of the ground for termination. The employer will need sufficient evidence of the reasonable ground.
If permission has been received from the Employee Insurance Agency, the employer may notify the employee with regard to the termination with effect from the following working day and must then observe a notice period of one (1) month as per article 15 of the applicable CBA. If the cantonal court approves the employer’s request for dissolution, the court will determine the date of termination.
Parties are however also free to mutually agree to the termination of the employee’s employment agreement via a settlement agreement.
Assuming a fixed term employment agreement allows for premature termination, the employee who wants to terminate his or her own employment agreement must observe a notice period which varies from 7 to 28 calendar days, depending on the agreed upon duration of the employment agreement. The same notice periods apply to the employee with an indefinite employment agreement.
In the event of a fixed term employment agreement for a period exceeding 6 months, the employer is legally obliged to notify the employee at least one month prior to the end date of the employment agreement, in writing, as to whether or not their employment agreement will be renewed and if so, under what terms and conditions. Non-fulfilment of this obligation can lead to a penalty equal to a maximum of one months’ salary.
Employees in the Netherlands who have been employed for at least 24 months are entitled to a (statutory) transition allowance in the event the termination of their employment is initiated by the employer. The amount is calculated as follows:
for the first 10 years of service: 1/6 months’ salary for each period of 6 months;
for the service period, thereafter: 1/4 months’ salary for each period of 6 months;
Example: an employee with 14 years of service is entitled to a severance fee equal to ((1/6 * 20) + (1/4 * 8) =) 5.3333 months’ salary.
Taxes in the Netherlands
The Netherlands has a well-developed Social Security system which includes national insurance programs covering all residents, and employees’ insurance programs applicable to employees only.
- The employees’ insurance programs are funded mainly through employer contributions but employees contribute as well.
- The employee insurance programs include the Sickness Benefits and Health Insurance Act, long-term incapacity for work, and unemployment.
- The employer contributions for social security amount to approximately 21.2% for 2015.
There are three different types of income or ‘boxes’ of income in the Netherlands, each with a different tax rate. Box 1 comprises income from entrepreneurship, income from employment, and income from a principal residence. Box 2 applies only to individuals who own a significant shareholding in an entity. Box 3 applies to passive investment income. The overall tax burden from Box 1-3 is then reduced by certain credit amounts for the taxpayer and his/her partner.
Income tax rates in the Netherlands are progressive. The 2015 income tax rates for “Box 1”, employment income, business profits, and income from home ownership, are as follows:
|Of more than||But less than|
|€ 0||€ 19,823||36.5%|
|€ 19,822||€ 33,589||42%|
|€ 33,589||€ 57,585||42%|
Bottom Line on Benefits Costs in the Netherlands
Generally, we recommend budgeting 22% for benefits on top of the gross salary to determine the total employer’s cost including benefits in the Netherlands.
This information is provided as generally accepted information and is not intended as advisory services.
Why Globalization Partners
Establishing a branch office or subsidiary in the Netherlands to engage a small team is time-consuming, expensive and complex. Labor law in the Netherlands has strong worker protections, requiring great attention to detail and an understanding of local best practices. Globalization Partners makes it painless and easy to expand into the Netherlands. We can help you hire your candidate of choice, handle HR matters and payroll, and ensure that you’re in compliance with local laws, without the burden of setting up a foreign branch office or subsidiary. Our Netherlands PEO and Global Employer of Record Platform provides you peace of mind so that you can focus on running your business.
If you would like to discuss how Globalization Partners can provide a seamless employee leasing or PEO solution for hiring employees in the Netherlands, please contact us.