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Netherlands – Employer of Record
AVASO provides a PEO solution in the Netherlands for customers 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 solution enables customers to run payroll in the Netherlands while HR services, tax and compliance management matters are lifted from their shoulders onto ours.
Table of Contents
- Hiring in the Netherlands
- Employment Contracts in the Netherlands
- Probation Period in the Netherlands
- Working Hours in the Netherlands
- Holidays in the Netherlands
- Vacation Days in the Netherlands
- Netherlands Sick Leave
- Maternity/Paternity Leave in the Netherlands
- Employee Benefits in the Netherlands
- Additional Benefits in the Netherlands
- Pension Plans in the Netherlands
- Termination/Severance in the Netherlands
- Paying Taxes in the Netherlands
Hiring in the Netherlands
Once our customers finds the candidate to whom they want to issue an offer, AVASO issues a locally compliant employment contract in the Netherlands in accordance with Dutch labor law, from negotiations and statutory rights to parental leave. The employee works full-time and exclusively on your behalf in the Netherlands to fulfill your in-country requirements. We ensure that best HR practices are 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 Contracts in the 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 AVASOs’ 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.
Probation 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.
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.
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 – public holiday, but not bank holiday
- Ascension Day
- Pentecost Sunday*
- Whit Monday
- Christmas Day
- Boxing Day
*Only a free day if Sunday is a normal working day
Vacation Days in the Netherlands
Statutory annual holidays include 20 days. Common practice is to offer 25 holidays, especially for skilled labor. The holiday year runs from January 1st to December 31st.
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 90% 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. AVASO PEO in the Netherlands is insured for this scenario.
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.
Fathers are entitled to 5 days of paid leave. This leave is paid fully by the employer, and must be taken within 4 weeks after the date of birth. Additionally, fathers are entitled to a maximum of 5 additional weeks of “partner leave,” which is paid for by the social security system (UWV) at 70% of the normal income (based on prior earnings, but capped at a certain level).
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.
- It is entirely up to the employee how they rearrange their working 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.
Health Insurance in the Netherlands
An employer in the Netherlands is required to contribute 7% (2021) over a maximum of € 58,311 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 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.
Netherlands Supplementary Benefits
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.
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.
Pension Plans in the Netherlands
AVASO is required to provide a pension plan to its employees in the Netherlands. Under AVASOs’ pension plan, the employer contributes 13% of the employee’s pensionable salary, while the employee contributes 4% of his/her pensionable salary. The limits to the pensionable salary are subject to annual indexation under Dutch law, with the current range defined as any earnings above approximately €14,000, up to a cap of approximately €110,111 (January 2020). The professional’s base pay and annual statutory holiday allowance (8% of gross base salary) are included in the pensionable salary amount.
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 in the month of May.
Termination/Severance 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. 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. For employees on an indefinite contract, notice periods are always one (1) month.
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 equal to 1/3 months’ salary for each year of employment, capped at EUR 84,000 for 2021.
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 employee 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 2021 income tax rates for “Box 1”, employment income, business profits, and income from home ownership, are as follows: 37.65% up to €68,507, and 49.50% for all income above €68,507.