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Hiring in the Netherlands
When negotiating terms of an employment contract with employees in the Netherlands, make sure to keep the following in mind.
Employment contracts in the Netherlands
Although an employment contract in the Netherlands may be verbal, it is highly recommended that both parties sign a written employment contract prior to the new hire’s start date. Note that employers are, however, required to provide employees with specific information about the employment in writing, such as name and address of both parties, location of employment, job position, start of employment and duration, holidays, notice periods, salary, working hours, pension, and CBA (if applicable). The absence of a written and signed employment contract can be disadvantageous to employers since there are certain provisions that are only valid when agreed upon in writing.
Employment contracts in the Netherlands should always state the salary and any compensation amounts in euros rather than another currency.
Probation periods in the Netherlands
If included in the employment contract, a probationary period of maximum 1 month can be mutually agreed upon, provided that the employment agreement extends beyond 6 months. If the employment agreement is for a period of 2 or more years (including indefinite), then the maximum probationary period can be extended to 2 months.
During the probationary period, both the employer and employee may end the employment contract without a notice period or reason, as long as the grounds for termination are neither discriminatory nor illegal.
Working hours in the Netherlands
Employers are required to adhere to the Working Hours Act of November 1995, which specifies that the maximum duration of a single shift is 12 hours per day and 60 hours per week.
Holidays in the Netherlands
In the Netherlands, there is no law that says that employees must be given a day off on certain holidays. However, the country typically celebrates these public holidays:
- New Year’s Day
- Good Friday
- King’s Day
- Easter Sunday and Monday
- Liberation Day
- Ascension Day
- Whit Sunday and Whit Monday
- Christmas Day
- Boxing Day
The employment contract should clearly state which holidays employees are entitled to a day off.
Vacation days in the Netherlands
The statutory minimum holiday entitlement is 20 days for a standard 5-day workweek. But in practice, employers commonly offer 25 vacation days. The holiday year runs from January 1 to December 31.
Sick leave in the Netherlands
In the Netherlands, if employees are unable to work due to illness and/or other incapacity, the employer is legally obliged to continue paying the worker for a maximum of 104 weeks.
During the first 52 weeks of illness, employees are entitled to continued payment of at least 70% of their salary. The minimum entitlement is determined by the statutory minimum wage and the maximum entitlement is based on the maximum daily wage. During the second 52 weeks, employees are also entitled to continued payment of at least 70% of their salary, but the minimum wage requirement does not apply in this instance. Keep in mind that applicable CBAs may provide for higher compensation rates, and it is common for employers to offer more generous terms.
Maternity/paternity leave in the Netherlands
Pregnant employees are entitled to 16 weeks of maternity leave in the Netherlands. Employees may take leave 6 weeks prior to the expected birth date and at least 10 weeks of maternity leave after giving birth, even if the child is born later than the initial due date. During these 16 weeks, employees are entitled to full base pay, capped at the maximum daily rate wage, which is paid through the Employee Insurance Agency (UWV).
Non-birthing parents (or individuals registered as the civil partner) are entitled to 5 days of paid leave (for full-time employees). This leave is paid by the employer and must be taken within 4 weeks after the child’s birth. Additionally, non-birthing parents are entitled to a maximum of 5 additional weeks of “birth leave” (for full-time employees), which is paid by the social security system (UWV) at 70% of the normal income (calculated based on prior earnings but capped at a certain level).
Employees, regardless of gender, in the Netherlands are entitled to unpaid parental leave when caring for a child under the age of 8.
- Employees are entitled to parental leave for each child separately.
- Employees are entitled to parental leave equivalent to a maximum of 26 times their weekly working hours.
- It is entirely up to employees to determine how to distribute their working hours.
- For example, if an employee works 32 hours per week, then for 6 months they may work 16 hours per week while taking 16 hours of parental leave per week.
Parents also receive a UWV benefit amounting to 70% of their daily wage (up to 70% of the maximum statutory daily wage) during 9 weeks of parental leave. The condition is that they take these 9 weeks in the child’s first year of life.
Health insurance in the Netherlands
Employers in the Netherlands are required to contribute 6.68% (2023) over a maximum of EUR 66,956 gross annual salary towards the Healthcare Insurance Act (ZVW or Zorgverzekeringswet). This contribution is calculated over the employee’s base salary and then paid to the Dutch Tax and Customs Administration.
All people 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 between EUR 110 and EUR 140 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. Some physiotherapy and dental care services are covered under the package as well.
All allowances for medical and other insurance are taxable benefits.
The Netherlands supplementary benefits
Companies often provide additional benefits to employees in the Netherlands. One common benefit is a travel allowance for a leased car, or 100% coverage of train/bus fares for commuting.
Generally, we recommend budgeting 22% for benefits on top of the gross salary to determine the total employer’s cost.
Pension plans in the Netherlands
The limits to the pensionable salary are subject to annual indexation under law in the Netherlands, with the current range defined as any earnings above approximately EUR 16,322, up to a cap of approximately EUR 128,810 (January 2023). Employees’ base pay and annual statutory holiday allowance (8% of gross base salary) are included in the pensionable salary amount.
Bonuses
All employees in the Netherlands are legally entitled to an 8% vacation allowance on top of their base salary. This vacation allowance is accrued monthly and is typically paid out once a year in the month of May.
Although a common practice, there are generally no rules governing the payment of bonuses in the Netherlands. Employers are free to determine whether to pay a bonus as well as establish the terms and conditions.
Termination/severance in the Netherlands
Fixed-term employment agreements in the Netherlands can be prematurely terminated only if this possibility is explicitly included in the employment agreement and prior permission has been granted by the Employee Insurance Agency (UWV) or the cantonal court.
In the Netherlands, indefinite employment agreements can also only be terminated if prior permission has been received from the Employee Insurance Agency (UWV) or the cantonal court, depending on the reason for termination.
Both the Employee Insurance Agency and the cantonal court will require a reasonable ground for termination. The employer will need sufficient evidence to support the request for dissolution.
If permission is received from the Employee Insurance Agency, the employer may notify the employee of the termination with effect from the following working day and must then observe a notice period. If the employer’s request is approved, the cantonal court will determine the date of termination.
However, parties are free to mutually agree to terminate the employee’s employment agreement via a settlement agreement.
In the case of a fixed-term employment agreement that allows premature termination, the employee wishing to end the agreement must adhere to a notice period, which varies depending on the initial agreed-upon duration of the employment agreement. For employees on an indefinite contract, the minimum notice period depends on the length of service:
- 1 month for employees with up to 5 years of service
- 2 months for employees with 5 to 10 years of service
- 3 months for employees with 10 to 15 years of service
- 4 months for employees with 15+ years of service
In the event of a fixed-term employment agreement for a period exceeding 6 months, the employer is legally obliged to notify the employee in writing at least 1 month prior to the end date whether or not their employment agreement will be renewed, and if so, under what terms and conditions.
Employees in the Netherlands are entitled to a statutory transition allowance if the termination was initiated by the employer. The amount is equal to 1/3 months’ salary for each year of employment, capped at EUR 89,000 (2023) or 1 year’s salary, whichever is greater.
Paying 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 employees’ insurance programs include the Sickness Benefits and Health Insurance Act, long-term incapacity for work, and unemployment.
Income tax rates in the Netherlands are progressive. The 2023 income tax rates for “Box 1,” employment income, business profits, and income from home ownership, are as follows: 36.93% up to EUR 73,031, and 49.50% for all income above that.
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