Netherlands PEO & Employer of Record

WeHG provides an International PEO and global Employer of Record service in the Netherlands to companies aiming to enter the Netherlands market or hire local/expat employees in this country.

Traditional approach requires establishing a subsidiary in Canada.  However, our solution offers you opportunity to start the operations in Canada within days therefore saving time and money.  WeHG would hire candidates on your behalf leaving you the full right to maintain all the operational control of their work. So legally they would be our employees, on our local payroll, 100% compliant but will work on your behalf. 

Netherlands fast facts

Population, million: 17,4
Land area: 41,865 km²
Capital: Amsterdam
Local currency: EUR

Hiring, Negotiating and Doing Business in Canada

Written employment contract

The employer must confirm the following to the employee electronically or in writing (Article 7:655, Civil Code):

• Name and residence of the parties.
• Place where the work will be carried out.
• Position and a description of it.
• Hiring date.
• If the employment contract is for a definite period, the time period.
• Holiday rights.
• If a notice period applies, the duration of the notice period.
• Salary and payment intervals and, if the remuneration depends on the results of the work to be performed, the amount of work to be rendered per day or per week, the price per item, and the reasonable time required to perform the work.
• Customary number of working hours per day or per week.
• Employee’s pension rights (if applicable).
• If the employee will work outside The Netherlands for a term exceeding one month, the:
  • duration of the employee’s work;
  • details of their accommodation;
  • application of Dutch social security legislation, or the bodies enforcing the legislation;
  • currency in which payments will be made;
  • allowances to which the employee is entitled; and
  • arrangements for his return, on condition that all this is done before the employee leaves.
• The application of a collective bargaining agreement (CBA) (if any).
• Whether the employment contract is a temporary employment contract, within the meaning of Article 7:690 of the Civil Code.

The employer must give these particulars within one month of the start of the employment, or earlier if the employment contract terminates earlier. An employer who fails to provide this or includes incorrect particulars is liable to the employee for any damage caused. The employer must sign the written particulars.

If a person performs work for three consecutive months, either weekly or at least for 20 hours per month for payment, the person is deemed to be performing the work on the basis of an employment contract (Article 7:610a, Civil Code).

Different forms of engagement: employment, contracting, work with private entrepreneur

Temporary and agency workers are often subject to different terms and conditions of employment under an applicable CBA for temporary workers. If not, temporary and agency workers must, in principle, be treated equally with permanent employees. The employer also has more flexibility in terminating the employment contracts of temporary and agency workers, compared to permanent employees.

Depending on the applicable CBA, after a certain period or number of contracts, a worker may be deemed to be a permanent worker of the temporary employment agency.

An employee who is misclassified as a temporary worker may in fact be entitled to receive full dismissal protection.

Netherlands Employment Contract

Types of employment agreements

An employment contract (arbeidscontract) is an agreement between an employee and an employer, containing working arrangements. It contains the rights and duties of the employer and employee.

There are two types of employment contract:

• fixed term contract (a temporary contract)
• contract for an indefinite period (a permanent contract)

Contracts can be agreed in writing or verbally. In the employment contract, you indicate whether a Collective Labour Agreement (CAO) applies.

Netherlands working hours

Employers must comply with the Working Hours Act of 23 November 1995. In brief, it stipulates that for an employee of 18 years and over the:

• Maximum length of a shift is 12 hours.
• Maximum length of a working week is 60 hours.
• Average working week must be 48 hours in every period of 16 consecutive weeks.
• Employee can at most work for 55 hours on average per week, in every period of four consecutive weeks.

It is possible to agree, through a CBA, that the employee will work longer.

In the event of a five-day work week, an employee must have 36 consecutive hours of non-work time after the end of the work week.

A longer work week is also possible, provided the employee has at least 72 consecutive hours of non-work time in a period of 14 days. This period can be split into two periods of at least 32 hours each.

Rest breaks

The following rules apply to rest breaks:

• If an employee works for more than five-and-a-half hours, they are entitled to at least 30 minutes of break time. This can be split into two 15-minute breaks.
• If an employee works for more than ten hours, they must have at least 45 minutes of break time. This can be split into several breaks, each of which must be at least 15 minutes.

Vacation leave in the Netherlands

The main rule is that an employee, for each year in which they are entitled to remuneration in the agreed work period, is entitled to holiday of at least either:

• Four times the weekly work period.
• If the work period is expressed in hours per year, a corresponding period.

For example, if the employee has agreed to a 40 hour working week (five days), they are entitled to at least four weeks holiday (20 days).

If the employee is employed for only part of the year, they acquire a proportionate amount of holiday. In the case of full or partial incapacity to work, employees still accumulate holiday in full.

Parties are free to negotiate more days’ holiday per year.

Netherlands Maternity Leave

A female employee is entitled to at least 16 weeks of pregnancy and maternity leave. She is entitled to continued payment of 100% of her salary, up to the maximum daily wage, for at least 16 weeks. In practice, employers usually, where appropriate, continue paying 100% of the salary of the female employee.

Netherlands Severance Laws

Termination of employment under Dutch law by mutual consent

In the vast majority of the cases, employers first try to solve the dismissal amicably by mutual consent by means of a settlement agreement. In this case you do not need prior approval of a public authority and this could save time and money.  

A settlement agreement contains among others the date on which the employment agreement ends and the severance to be paid out by the employer after this date. The settlement agreement should also contain supplementary arrangements about the termination of the employment.

Severance payment for the terminated employee under Dutch law

If an employer wishes to terminate an employment agreement that exists for two or more years, a mandatory transition fee (in Dutch: transitievergoeding) must be paid regardless of the applicable procedure of termination. The number of months of salary due is calculated based on the age of the employee and the number of service years.

• during the first 10 years of service, the transition payment amounts to 1/6 monthly salary per half year of employment
• after 10 years of service, the transition payment amounts to 1/4 monthly salary per half year of employment
• the total transition payment is maximized to EUR 75,000.–, or if the annual salary is higher than EUR 75,000.– the maximum amount equals the annual salary
• employees at age 50+ with more than 10 service years are entitled to one monthly salary per year of employment (transitional arrangement until 2020 that does not apply for small employers (less than 25 employees)
• no transition payment needs to be paid if an employee acted culpably
• collective labour agreements may deviate from this rule
• the subdistrict court may award an additional payment in case the termination of the employment amounts to culpable conduct or omission of the employer

The Netherlands Tax

Rate of taxation on employment income

Tax rates on employment income are progressive. There is a distinction between national insurance (NI) premiums and employee insurance (EI) premiums. NI premiums are included in income tax and are due, for example, for the state old-age pension.

For 2012, the income tax and NI premiums are:

• EUR0 to EUR18,945: 36.5% (where 31.15% NI).
• EUR18,945 to EUR33,863: 41.95% (10.8% tax and 31.15% NI).
• EUR33,863 to EUR56,491: 42% (tax only).
• EUR56,491 and above: 52% (tax only).

Social security contributions

Premiums are paid by the employer and are due, for example, for unemployment and disability. The amount of these premiums depends on the individual circumstances of the employee and the employer.

The employer contributions for social security amount to approximately 21%.

Health Insurance Benefits in Canada

By law, during an employee’s illness, the employer must pay at least 70% of the employee’s most recent gross base salary, for up to two years in a row. The purpose of holiday is to let employees recover from work. If an employee is ill, they cannot work, and therefore, in theory, they do not take holiday and/or cannot actually enjoy their holiday during this time. However, the following exceptions relate to holiday exceeding the statutory minimum:

• An employer and employee can, where appropriate, agree that periods in which the employee cannot perform work due to illness are deemed holiday, to the extent it is holiday exceeding the statutory minimum (four times the agreed work period). It is not common to treat holiday as used during garden leave and to do so would require the agreement of the employee.
• Parties can also agree (in advance) that days during which the employee cannot work due to illness are deemed holiday. There are no set forms for such an agreement, except that it must be in writing or by CBA. This is only possible for days’ holiday exceeding the statutory minimum.

The employee’s consent is required to consider days during which the employee cannot perform work due to an illness as holiday. However, case law shows that the position is different if the employee is actually able to enjoy their holiday, for instance, where the illness is the result of a conflict at work. In that case, the reason the employee reported ill would not stop them from actually enjoying holiday. Where it is reasonable and fair to do so, these days can be counted as holiday. However, the fact the time is taken as holiday must not interfere with the employee’s recovery process.

Additional Benefits in the Netherlands

General tax credit (algemene heffingskorting)

The general tax credit (algemene heffingskorting) is a tax break on your income tax. The amount you are entitled to depends on your income level.

Labour tax credit (arbeidskorting)

Every working person in the Netherlands is entitled to receive the labour tax credit (arbeidskorting or loonheffingskorting).

The Netherlands Holidays

Public holidays are not included in the minimum holiday entitlement. In The Netherlands, there are eight public holidays:

• 1 January, New Year’s Day.
• Good Friday and Easter Monday.
• 30 April, Queen’s Day.
• Ascension Day.
• Whit Monday.
• 25 December, Christmas Day.
• 26 December, Boxing Day.

Why Choose WeHireGlobally

WeHG takes care of all the onboarding hurdles, payroll, compensation and benefits, tax filing, and termination of employment. Our Employer of Record solution allows you to manage your overseas teams efficiently while minimizing cost and risk.