Netherlands

Employer of Record in the Netherlands

The Netherlands is an attractive destination for international hiring, thanks to its highly skilled workforce, business-friendly environment, and strong economic stability.

Did you know the Netherlands retained first place in the EF Global Proficiency Index 2022? 

Needless to say, English proficiency is exceptionally high in this country, and most Dutch citizens are fluent in English. 

This enables global companies to conduct all their business operations with ease. 

It also reduces the likelihood of miscommunication, which not only affects productivity but can also cost companies lost or diminished output.

In addition, the Netherlands strongly emphasizes education. 

The country scores high among the world’s top countries for equity in education opportunities. 

This results in a workforce that is not only multilingual but also highly skilled.

However, despite all these advantages, there are quite a few challenges that you are likely to encounter when hiring in the Netherlands. 

The country boasts various labor laws and regulations that are often difficult to understand, leading to non-compliance and potential legal consequences. 

Furthermore, you will also be required to navigate through the various tax requirements and other similar obligations, which can get very confusing without proper expertise. 

This is where the Employer of Record in the Netherlands comes into play.

Skuad’s Netherlands EOR (Employer of Record) helps you hire remote teams in the Netherlands without setting up any physical entity there. 

Setting up offices in a foreign country and navigating the administrative and legal formalities can be a complicated process. 

With the support of Skuad's unified and automated platform, you can successfully build, pay, and manage your remote team in the Netherlands. 

Additionally, we feature numerous tools to make further this hiring process easier and provide a cost advantage over others. Try out Skuad’s employee cost calculator for detailed information on roles & country-specific salaries.

‍Learn how Skuad solutions can streamline your business's onboarding, payroll, and compliance.

The Netherlands at a Glance

• Population size: 17.7 million
• Currency: Euro
• Capital city: Amsterdam
• Languages spoken: Dutch, English‍
• GDP: USD 1.01 billion

How to Hire Employees

You can hire employees in the Netherlands in three main ways,

• Direct hiring without the help of EOR services in the Netherlands.
• Hiring via Professional Employer Organizations (PEOs)
• Hiring with Skuad’s Employer of Record Netherlands solutions.

Direct Hiring: Setting up a Subsidiary

The first step in hiring employees in the Netherlands is registering your company in this country. 

The duration taken for the entire procedure of registration is between 2-4 weeks. There are six essential steps to opening a subsidiary company in the Netherlands:

Step 1: Ensure that you select a unique business name. It shouldn’t have been used and registered as a trademark in the Netherlands.

Step 2: Notarization of Articles of Association: Whether you wish to set up a privately or publicly held company in the Netherlands, you need to get the Articles of Association notarized. 

At this stage, you will need the services of a civil law notary to draft and execute deeds of incorporation.

Step 3: Register the name and the business at the Dutch Chamber of Commerce: Once you have decided the name of the company, you need to register it with the Dutch Chamber of Commerce and also submit a trading name that should abide by the regulations laid down by the Trade Name Act. 

Your details are then passed on to the Tax and Customs Administration. Post-registration, a unique number, called the KvK number, will be generated for your business. 

This number will be used in all your invoices and outgoing posts.

Step 4: Open a corporate bank account: A bank account in one of the Dutch commercial banks makes payments and transactions smoother, even though accounts in foreign banks are also allowed by the new SEPA rules. 

Documents related to the company's registration with the Chambers of Commerce, articles of association, and proof of the board members' and directors' responsibility might be required.

Step 5: Employee Insurance: Before you start hiring employees, register with the Dutch Tax and Customs Administration. 

You will receive a payroll number that you will use to submit returns. 

You are required to pay contributions on behalf of your employees to the National Insurance Scheme and Employee Insurance Agency.

Step 6: Conduct a risk inventory and evaluation: Before starting the business, this evaluation must be carried out to answer the following questions:

• What are the risks that you and your employees are susceptible to?
• What measures have been taken to prevent or mitigate the risk?
• What action are you planning to take?

Following this, you need to,

1. Perform a thorough screening of prospective employees and ideal candidates. Recommend a rigorous background check and identity verification of original documents.

2.  Register as an employer with the Dutch Tax and Customs Administration to meet the payroll tax obligation for employing in the Netherlands.

3. Get into an employment contract with them and mention whether a Collective Labour Agreement applies, what pension schemes are, details about the working hours, and so on. Below is a detailed list of elements to be included in the employment contract.

4. The minimum wage should be determined according to the type of employee hired, and they should also be provided with a holiday allowance.

5. Provide healthy and safe working conditions for your employees. They are also entitled to certain leave schemes and a number of days off each year. 

6. Conduct a risk assessment and evaluation for your employees so that you can be transparent about the risks they face and how you, as an employer, are addressing them.

7. For the permanent employees of the Netherlands, ensure that you deduct the social insurance premiums from their pay. Another option is to become a self-insurer and pay the Dutch Tax and Customs Administration premiums. 

8. Make sure that your employee has a Dutch Health Insurance policy.

9. Try to find potential candidates from the European Economic Area first. You can recruit from other countries if you don’t find suitable candidates in this region.

10. Make sure to apply for a work permit from the Employee Insurance Agency for the employee.

11. You are required to find suitable accommodation for the people that you are employing on a work permit.

Some of the popular job platforms that can be used for hiring in the Netherlands are:

1. Indeed.nl
2. LinkedIn
3. Nationale Vacaturebank
4. Monsterboard.nl
5. Randstad
6. Werk.nl

Hiring with Professional Employer Organizations (PEOs)

A Professional Employer Organization (PEO) acts as your co-employer and handles multiple employee-related liabilities, including payroll, compensation, benefits, taxes, and administration. It has some liabilities for the workers. 

In contrast, an EOR works as a full legal employer for the payroll employees and has complete liabilities of workers. If partnering with a PEO, you need to have your insurance; with an EOR, employees are part of their insurance.

The PEO handles State Unemployment Tax and Federal Unemployment Tax Act rates, while EOR offers insurance coverage for all. With a PEO, you need to make decisions all the time; with an EOR, all HR-related decisions and paperwork are made by the EOR, giving you more time to look after your business.

Employer of Record Services in the Netherlands: Skuad

Business expansion in the Netherlands can occur more easily and quickly with the Netherlands Employer of Record (Netherlands EOR) solution by Skuad. 

The EOR solution guarantees smooth and compliant payroll and other employment obligations processing without creating a new unit in the Netherlands. 

Skuad can assist you with managing your employees' monthly payroll, contracts, work permits, and taxes in the Netherlands.

Onboarding and Agreements

Employee onboarding refers to familiarizing new employees with the organization’s policy, their role in the company, and the workplace culture. 

It involves creating an environment wherein the new joiner can freely interact and communicate with their colleagues and establish social relationships in the workplace. 

The first step of this employee onboarding process is to draft a formal employment contract. 

Under the labor laws, there are two types of employment contracts in the Netherlands: temporary and permanent.

• contract with a fixed amount of time (a temporary contract)
• contract for an extended amount of time (a permanent contract)
• Contracts can be agreed upon verbally or in writing. You must specify if a Collective Labour Agreement (CAO) applies in the employment contract.

After three consecutive temporary contracts or three years of temporary contracts, an employee must be offered a permanent contract. This is the case unless additional agreements have been established in the CAO.

Within one month of starting work, the employer must sign an employment contract that includes details of at least the following conditions that apply to the employee:

1. the place of work
2. the parties' identities and places of residence; 
3. the employee's function or nature of work; 
4. the length of the employee's typical working day or week; 
5. the initial base salary and any other pay components, holidays, and applicable notice periods; 
6. the pension arrangement in place; 
7. the starting date of the employment; 
8. the duration of the employment contract (if applicable); 
9. the daily/weekly working hours
10. probationary period duration
11. details of paid annual leave

Following this, the employer will be required to complete other crucial tasks of the onboarding process, which can be categorized into two main types.

Contact Skuad for expert guidance on the hiring process in the Netherlands.

Taxes in the Netherlands

Worldwide income in the Netherlands is divided into three types of taxable income, each of which is taxed separately under its own schedule, known as a 'box.' 

Each box has a different tax rate. The total income in these three categories determines an individual's taxable income.

The following items are included in Box 1 of taxable income from work and property ownership:

1. Earnings from work
2. Home ownership (deemed income).
3. Receipts and payments are made regularly.
4. Benefits related to the provision of income.

Box 2 relates to taxable interest income, while box 3 relates taxable income from savings and investments.

Employer Taxation

Employee Taxation

Other types of tax requirements in the Netherlands include,

Compliance

In the Netherlands, a single law does not cover the employment law. It is governed by regulations laid out in the Dutch Civil Code, Collective Labour Agreement, internal company regulations, and individual company employment contracts.

Protecting the employees’ rights and providing strong labor conditions is paramount to the Ministry of Social Affairs and Employment in the Netherlands. 

Companies can leverage collective labor agreements and temp agencies for more flexible workforce requirements. 

This is a major reason why, before expanding their business in the Netherlands, you should go for reliable and trustworthy professional services that are aware of the legal framework governing employment laws.

Contractors vs Full-Time Employees

In the case of full-time employees, the important elements of the employment relationship are as follows:

1. The work is done individually.
2. The employee is paid for it. 
3. There is a relationship of authority between the employer and the employee.

Dutch law protects employees and mandates that an indefinite contract can not be terminated without the approval of UWV (Employee Insurance Agency) or a sub-district court.

Payroll taxes must always be withheld for full-time employees.

In the case of contractors, the following holds:

1. every contractor works independently,
2. there is no relationship of authority between the employer and the employee, and 
3. The contractor does not have to perform the work personally/ individually.

Agreements can be terminated on notice, and termination is always possible. There are no restrictions on contract termination. As far as payroll matters are concerned, the employer has the choice not to withhold payroll taxes.

Most foreign employers, therefore, go for contractors as the policies and contracts are much more flexible.

Please maintain the proper distinction between employees and independent contractors when hiring workers from this country. 

If employees are misclassified, your organization will most likely face severe legal penalties, fines, and reputational damage.

Book a demo to learn more about how Skuad’s customized solutions work for your business needs!

IP Protection

The Netherlands has various types of protection for intellectual property rights, such as the following,

Other similar IP rights provided by the Netherlands laws include design rights, database rights, plant breeders’ rights, tradename law, and semiconductor topography rights.

Types of Visa

Payroll

Many regulations need to be followed regarding payroll and taxes in the Netherlands. All businesses must register with the Dutch Tax Authorities and receive a payroll tax number. 

Some of the primary concerns for payroll outsourcing in the Netherlands are income tax withholding, national insurance withholding (included in payroll tax), business tax, and permanent establishment concerns, i.e., these are the three components of payroll tax.

Types of Payroll

Benefits and Compensation

The social insurance scheme in the Netherlands can be divided into two categories,

• Employee insurance schemes that are mandatory for every employee
• National insurance schemes cover everyone working or living permanently in the Netherlands.

Employee Insurance Schemes

The primary goal of employee insurance schemes in the Netherlands is to provide aid to individuals during unemployment, illness, or incapacity for work. 

It allows individuals to access temporary income if they cannot work.

Employee insurance schemes are regulated by four main acts: the Sickness Benefits Act, the Work and Income ( Capacity for Work) Act, the Unemployment Insurance Act, and the Invalidity Insurance Act.

National Insurance Schemes

The National insurance schemes in the Netherlands comprise the following benefits,

• The National Survivor Benefits Act
• General Child Benefit Act: No contribution is required under this Act
• General Old Age Pensions Act and
• Long-Term Care Act.

Worker Rights

We have highlighted below a few of the many statutory entitlements of employees in the Netherlands.

Statutory Working Hours

The statutory working hours in the Netherlands are 60 hours per week and 12 hours per day.

Overtime

Overtime is allowed in the Netherlands and regulated by employment or collective agreements. The compensation amount for overtime usually varies from 50% to 100% of pay or time off.

Minimum Wage

The minimum wage for individuals over 21 years is €13.27 per hour.

Probation Period

The probationary period must be specified in writing. In the Netherlands, the standard probationary period for an open-ended employment contract or a contract fixed for two or more years is two months. 

Otherwise, the longest possible probation period is one month. A probation period will only be valid in an employment contract that extends longer than six months.

Anti-Discrimination Laws/Acts

The Dutch Equal Treatment Act is the primary legislation that prohibits any form of discrimination against employees based on religion, race, sex, personal beliefs, and nationality, among other grounds. 

Additionally, the Working Conditions Act lays down a series of obligations for employers to prevent harassment in the workplace.

Health and Safety

The Working Conditions Act, Working Conditions Decree, and Working Conditions Regulations lay out the rights and obligations of employers and employees regarding health and safe working conditions.

Under these laws, employers are primarily responsible for providing an environment where employees can work under health and safety conditions. 

On the other hand, employees are responsible for following all the relevant safety conditions applicable to the workplace. 

Bonuses

A bonus equal to a minimum of 8% of their annual gross wages is given to employees as a vacation allowance. A work council may help employers institute, change, or end a bonus scheme if there is one. 

The employer must mention the criteria or guidelines for earning a bonus in the criteria list. They should also be able to justify the bonuses since Dutch employees have the right to challenge the amount.

Remote & Hybrid Work in the Netherlands

When hiring employees in the Netherlands, one key aspect that you, as an employer, need to consider is your organization's hybrid and remote readiness. 

By remote readiness, we mean how well and effectively you and your employees can engage in remote and hybrid work setups. 

This includes the ability to maintain productivity and communication outside a traditional office environment.

There are three main elements of remote readiness. They include:

• Technology and Infrastructure

Ensure you have all the necessary technology and infrastructure to facilitate remote work for your employees. 

These include the proper communication and collaboration tools so that even the most minute information can be conveyed effectively, suitable hardware such as laptops and mobile devices, and a reliable internet connection. 

• Flexible Work Policy

Carefully review your organization's existing work policies and guidelines and check how well they are in sync with remote work readiness. 

These guidelines should enhance clarity and relevance and include key aspects such as performance evaluation, work hours, and communication expectations.

• Feedback and Continuous Improvement

Lastly, remember to gather feedback from your employees and team members on their remote and hybrid work experience. 

Use the information gathered to identify any possible areas for improvement within your organization and take the necessary steps to rectify them.

Salary

The salary of employees in the Netherlands can vary a lot depending on several factors, such as,

• The industry: The average salary of an IT engineer in the Netherlands is currently set at €60,505 per annum. Meanwhile, an individual with expertise in the healthcare sector earns up to  €35.256.
• The experience level: Individuals who have previously worked in other organizations or have enough experience in a particular sector will earn more than someone who has just graduated or is considered a fresher.
• The location of work: The location of work can also directly influence the salary earned by individuals working in the Netherlands. 

When hiring individuals from the Netherlands, please ensure you adhere to all the government's minimum wage requirements and comply with the various payroll rules and regulations. 

For example, employees can only be paid in the Netherlands' official currency, the Euro (EUR, €). Additionally, the pay date is usually the last day of the month.

Take a look at Skuad’s salary insight tool. It grants you access to the latest salary trends and robust compensation data so that you can offer the fairest and most competitive packages to your potential hires.

Leave Policy

Let’s look at the country's leave policies, which include national holidays in the Netherlands, annual paid leave, and sick leave, among others. 

National Public Holidays

In addition to the types of leaves discussed above, employees also get to enjoy these below-mentioned national holidays in the Netherlands.

• New Year’s Day
• Good Friday
• Easter Sunday and Easter Monday
• King’s Day
• Liberation Day
• Ascension Day
• Whit Sunday and Whit Monday
• Christmas Day
• Boxing Day

Background Checks

Background checks in the Netherlands are a crucial part of the hiring process. They not only help to ensure a safe workplace but also prevent the occurrence of fraud and theft. 

In addition, conducting a thorough background check in the Netherlands has several other benefits. They include:

• They help you to hire the most qualified candidates and improve overall productivity.
• They help to preserve the company's reputation and brand image.
• They help lower insurance costs and avoid unnecessary lawsuits by hiring candidates who clear a pre-employment screening.
• They help build trust between employees and employers, especially when handling sensitive business matters.
• They guarantee compliance with all legal requirements and regulations.

Types of Background Checks in the Netherlands

Various types of background checks are permissible under the Netherlands labor laws. They include,

• Criminal Record Check

A criminal record check helps uncover details related to an individual's state and federal criminal records. 

This type of check is especially important when hiring candidates to fill roles that involve access to sensitive business information or security responsibilities. 

Employees in the Netherlands can directly apply for a criminal record document, also known as a certificate of conduct (VOG), in the Netherlands, either online or through the Integrity and Screening Agency.

• Education Verification Check

Employers hiring for job roles requiring specific academic qualifications must conduct an education verification check. Job candidates may often exaggerate their education, experience, or even a job title in their resumes. 

Therefore, it is important to conduct a check beforehand to identify any red flags.

For this contact, you can directly get in touch with educational institutions to check the accuracy of their high school diplomas, undergraduate or graduate degrees, and any other certifications.

• Employment History Check

An employment history check helps to confirm a job candidate’s work experience with previous employers/organizations, including their start and end dates, reasons for leaving, or sometimes even salary. 

The main purpose of an employment history check is to determine whether the individual has the necessary skills and expertise to perform the job role for which they are hired.

• Credit History Check

A credit history check is done when an employer gathers the financial records of a job applicant to get an overview of their financial history. 

It reveals various information related to the individual’s credit card and debit card debts, payment and default history, details of any other delayed payments, loans, and so on.

Such types of checks are especially useful for job roles of a leadership level or those that are directly related to finance positions.

In addition to these, you can conduct social media verification and medical screening in the Netherlands.

Termination and Offboarding

In the Netherlands, there are generally five ways of termination of an employment contract:

• Termination by mutual consent;
• Termination proceedings before the Employee Insurance Agency (UWV WERKbedrijf);
• Termination is due to the dissolution of the contract by the cantonal court.
• Termination with the consent of the employee
• Dismissal due to an urgent cause

Statutory Notice Period

The notice period during the probationary period is seven days. 

If an employee is terminated after the probationary period, the duration of the notice period will differ depending on their tenure of employment.

The maximum notice period in the Netherlands is currently set at six months. 

However, please note that if the termination has occurred due to the employee's decision, then the notice period will only consist of one month.

Severance

The severance payable in the event of termination amounts to 1/3rd of the employee's gross monthly salary for every year of their service at the company. 

The total amount of severance payable is currently capped at 89000 Euros, or the employee’s full-year salary, whichever is greater.

Cultural Considerations

Every country has its own working culture, and the same holds for the Netherlands. 

When hiring individuals from this region, you should be aware of the key characteristics of this working culture to ensure that they are the right fit for your organization. 

A detailed overview of the same is mentioned below:

• Leaving work on time

The Dutch are infamous for maintaining the perfect work-life balance. They like to keep their personal and professional lives separate, and spending time at home with loved ones is considered sacred. 

This means that when hiring employees from the Netherlands, do not be too surprised if they do not answer any work-related calls or emails outside of office hours.

• Honesty and Transparency

The Dutch are generally considered to be very direct people, and the same applies to a working environment. 

They tend not to beat around the bush when telling a colleague or even their boss that they are not doing their work properly. 

This level of directness is seen as honest and efficient and, therefore, highly valued in the workplace. 

• Informal Workplace

Compared to most other countries, the Dutch organizational structure is usually flat. 

Higher officials work closely with lower-level staff daily, and everyone refers to one another by their first names.

Conclusion

Hiring in the Netherlands is a good solution for most companies that are expanding globally. It is a great place for business with a great infrastructure and a diverse talent pool. 

The government has also created legal frameworks to encourage more companies to hire in the Netherlands and set up their services in the country. 

More highly skilled and experienced people are welcomed, and some laws allow them to set up their businesses there.

Skuad’s expertise and robust global employment platform will help you achieve all your goals for your global expansion. To learn more about Skuad's EOR services, click here.

FAQs

1) What is an employer of record in the Netherlands?

An Employer of Record (EOR) in the Netherlands is a third-party service provider that legally manages another company’s workforce. The EOR manages payroll processing, tax compliance, and benefits administration and ensures adherence to Dutch labor laws.

2) What is the WHK tax in the Netherlands?

It's a tax levied on the WHK (Werkhervattingskas), the return-to-work fund in the Netherlands. Businesses are taxed between 0.21% and 3.48%, depending on their unemployment risk level. The rate is determined by the business's risk profile, with higher-risk businesses paying more.

3) What is an employer statement in the Netherlands?

An employer statement (werkgeversverklaring) in the Netherlands is a document that includes details such as the employee's job title, start date, type of employment contract, and gross monthly salary. Banks and financial institutions ask for this when an employee applies for a mortgage or other forms of credit.

4) What is the WHT tax in the Netherlands?

The WHT (Withholding Tax) is imposed at a rate matching the highest Dutch corporate income tax (CIT) rate for the current tax year, which is 25.8% for 2023. However, this WHT rate can be lowered if a tax treaty applies.

5) What are the employer obligations in the Netherlands?

Dutch labor laws and regulations govern employer obligations in the Netherlands. These obligations include a written employment contract, statutory minimum wage, adherence to working hours and overtime regulations, safe and healthy working conditions, paid annual leave, sick leave, and maternity leave, and compliance with social security contributions, including WHK and other taxes.

6) How much does an EOR cost?

The cost of an EOR in the Netherlands varies based on local labor laws and the number of employees. EOR providers generally charge a monthly fee per employee, ranging from $100 to $1000 or more. Pricing structures depend on local regulations and workforce requirements, providing transparency for businesses.

7) What is the difference between EOR and PEO?

A PEO co-employs another company’s staff and shares certain HR responsibilities. An EOR, however, is a third-party service provider that legally employs the distributed workforce of client companies without local entities and manages them on the company's behalf.

8)  How does an EOR work?

Ans: An EOR primarily assumes the legal responsibility of employing staff on behalf of another company. It includes several key tasks, such as managing employee payroll and benefits, handling tax requirements, and, most importantly, ensuring compliance with all country-specific labor regulations.

9) What is the difference between payroll and employer of record?

Ans: One of the many differences between payroll companies and employers of record services in the Netherlands is liability and responsibility. While the former gives you all the tools/equipment that facilitate international payment, the latter takes the majority of all the legal responsibilities.