Employment law in the Netherlands is not contained under a single law. Instead it is governed by statutory regulations codified in (among other laws) the Dutch Civil Code, then furthermore governed by (among other things) in a Collective Labour Agreement (if applicable), internal regulations (if applicable) and the individual employment contract itself.
Employment law provides strong labor conditions and protections for employees, so employing people will generally be an important investment and commitment. However, options such as using Collective Labour Agreements and temp agencies are popular options for more flexible workforce arrangements. For these and many other reasons, the following are only guidelines in the broadest sense, and professional legal services are recommended when employing in Netherlands.
The official website for employment information is at the Ministry of Social Affairs and Employment.
There are several key areas to be aware of within Netherlands’s employment regulatory framework, especially for companies that plan to initiate a full local office and human resources department. These challenges can be mitigated by use of a locally sourced payroll provider who is familiar with all of the Netherland laws and rules for both Netherland employees as well as foreign nationals.
Any probationary period must be laid down in writing. In the case of an open-ended employment contract or a contract fixed for two or more years, the maximum period is two months. Otherwise, the maximum period is one month.
However, the notice period may be reduced under a Collective Labour Agreement.
Unless agreed otherwise, the notice period starts running at the beginning of the month following the month in which notice is given.
Terminating employees can be a difficult process in the Netherlands. In the absence of mutual agreement or clause, the employer must generally acquire a permit to be obtained from the Dismissal Authority, before they can terminate a contract of employment. This can take several months and it is not guaranteed to obtain the required permit or not.
Another option is to ask the Court to dissolve the employment contract. Apparently, this option is actually less time consuming. However there is a risk the court may find in favor of the employee and award them compensation.
The use of a mix of fixed and indefinite term contracts and hiring employees via temp agencies is reportedly considered one good method to acquire a more flexible workforce.
There is no statutory rule for severance pay in the Netherlands. However, in the case of a termination hearing ordered by a court, the Court may award a ‘compensation payment’ applying a formula contained in the 1996 Recommendations issued by the Association of Dutch Sub district Courts:
The number of days of paid statutory annual leave is equivalent to the number of working days a week multiplied by four, i.e. in most cases 20 days of leave (five work days a week). Workers on leave receive pay from their employer, plus a ‘bonus’ equivalent to 8% of annual earnings. Accumulation of leave entitlement is possible; employees can “save up” their days of paid leave.
Maternity Leave (zwangerschapsverlof)
Maternity leave is sixteen weeks. Leave must start four weeks before birth and up to six weeks can be taken the birth, with ten weeks after the birth. Paternity leave is available for two working days within four weeks after the birth of the child.
Parental leave (ouderschapsverlof)
Parental leave is twenty-six times the number of working hours per week per parent per child. For example, a full-time job of 38 hours a week gives a leave entitlement of 988 hours (i.e. 26 weeks). Leave is unpaid and has to be taken part time; full-time is only possible if the employer agrees.
Employees in the Netherlands are however also entitled to several kinds of special leaves, including:
The pension scheme in the Netherlands is a “collective pension scheme” where contributions are financed from employee-contributions paid on income at a rate of 17.9%, and from tax revenue. The employer may voluntarily make a contribution.
Companies entering the Netherlands can make a decision whether to use their own resources or to use a Global Employment Organization to handle employment and payroll responsibilities. A GEO solution is particularly beneficial when a company is looking to setup an office quickly with a manageable cost. The complexity of employment regulations in Netherlands makes the use of a GEO advisable to ensure full compliance with employment laws, including the drafting of local employment contracts for workers.
The company that is expanding into Netherlands contracts with the GEO to employ and payroll their staff on their behalf. The GEO then assumes the legal responsibility for these employees, sponsoring them on work permits if necessary, complying with local employment law and running their monthly payroll. This is especially useful to fulfill all of the specific withholding requirements for pensions and benefits, as well as documenting termination, probation periods and leave requests.