The Netherlands is known for its progressive policies. The country is the first to make working from home a legal right. A leader in IT and telecommunications, the Netherlands stands out as one of the most dynamic economies in the European Union. With the 17th largest economy in the world, the country is home to over 17 million people.
In the Netherlands, foreign companies will not be recognized as a legitimate business without establishing either a subsidiary or entity, or partnering with a global PEO or EOR service.
This article gives foreign businesses an overview of the options they have for establishing an employer-of-record in the Netherlands.
Often, people say PEO when they actually mean an EOR service or an Umbrella company.
If your global expansion includes the Netherlands, you can either 1) set up an entity or subsidiary in-country to hire talented employees who live here and partner with a PEO service provider or 2) use a global employer-of-record service like Via that already has established entities in the country and understands the country’s complex tax and labor laws.
PEO services in the Netherlands provide HR and global payroll services to companies that already have established entities in the country.
Partnering with a PEO means:
Setting up an entity, which can take months
Hiring new employees in a short amount of time
PEO services do not take full responsibility for maintaining compliance with Dutch laws. Employers enter into a co-employment with the PEO, which comes with additional liability risks.
If you already have an entity or subsidiary and in the Netherlands, using a PEO service can be a good solution. However, if you don’t, seeking the services of an employer-of-record, like Via, is likely going to be a better option.
If your business is still growing or you’re just looking to test and see the costs associated with the Dutch labor market, an employer-of-record can help you streamline the HR, hiring, and compliance process.
EOR services like Via:
Manages all HR related tasks
Acts as its own entity to free parent companies from legal issues, including compliance with tax and labor laws
Hires, onboards, pays, and cares for new employees without you having to wait to open an entity. This means hiring Dutch employees in a matter of days, as opposed to months
EOR services also help your expansion in a number of ways:
Testing out areas for global expansion: Setting up an entity can be costly, especially if you end up shutting it down if the location doesn’t suit business. Using an EOR service helps you test out these new areas for expansion without you investing a significant amount of startup capital and valuable time.
Helping you onboard candidates in a new place: Hiring good global talent from a country like the United States can be tricky and means you need to be prepared to hire internationally. This can be hard to do compliantly, and if you only need to hire one candidate, expensive.
Scaling up quickly: Start-ups and tech units in major enterprises move quickly. If you have to wait months to set up an entity, you may lose business opportunities by being weighed down with the subsidiary process.
Capital city: Amsterdam
Largest city by population: Amsterdam
Currency: Euro (EUR)
Population: 17.44 million
NL GDP: 9.12.21 billion
Payroll frequency: Monthly
Federal Minimum wage: 1,756 (EUR) per month
The Netherlands has 10 public holidays, which are usually counted as paid time off.
These holidays include:
New Year’s Day
Second day of Christmas
Full-time employees in the Netherlands are entitled to 20 days of paid annual leave per year. However, it is common practice for employers to offer 24-32 of vacation days annually. Some startups and tech companies offer unlimited PTO.
Any leave accrued from the previous year must be used by the following July. The employer must inform the employee that the accrued leave is about to expire.
Sick employees are entitled to at least 70% of their last earned salary for up to 1 year of illness, some employers choose to offer their employees more sick pay depending on the stipulations set forth in the employment agreement. If an illness lasts longer than 1 year, WULBZ becomes effective and makes payments to the employee.
The country’s generous sick leave legislation allows salary payments to continue for up to 2 years, at 70% of the employees last earned salary. Some employers choose to supplement the payment to make it 100% of the employees salary.
New mothers are entitled to 16 weeks of paid maternity leave. Maternity leave in the Netherlands is split into 2 periods: pre- and postnatal leave. Prenatal leave must be taken for 4-6 weeks before the expected due date. Postnatal leave covers the 10-12 weeks immediately following childbirth.
Maternity leave is often paid by the Employee Insurance Agency. However, it is common for employers to pay the employees salary to them directly and be reimbursed for the mother’s leave by the Employee Insurance Agency.
New fathers are entitled to 1 week of paid paternity leave following the child’s birth.
Employees are also entitled to 5 weeks of unpaid leave in the 6 months following birth. They can put in a claim for up to 70% of their salary during this period to the Employee Insurance Agency.
New parents are paid 50% of their salary for the first 9 weeks of leave. The government makes these payments. This leave must be taken within a year of the child’s birth.
Depending on the collective agreement between employer and employee in the employment contract, employees may be allowed additional leave for:
Short-term care: employees are entitled to 2 days of paid leave at 70% of their regular salary
Adoption leave: Employers can apply to the Employee Insurance Agency on behalf of their employees, for up to 6 weeks
Payroll taxes for the Employee Insurance Agency (social security fund) are split between contributions from both the employees and employer.
Employer payroll contributions break down as:
5.49%-7.05% for Invalidity insurance fund
0.34%-5.34% for Unemployment fund
6.75% for Healthcare Insurance Act
0.21%-3.36% for Work resumption fund
0.17%-2.72% for Sickness Benefits Act
0.5% for Child care premium
The total employer contribution for social security breaks down to 13.46%-25.72% of an employee’s salary.
Employee payroll contributions break down as:
17.9% for Old age pension
.1% for Orphans and widow/widower pension
9.65% for Long term care
Up to 2.70% for General unemployment fund
For employee contributions, the total ranges between 27.65%-30.35%.
2015 Work and Security Act
Balanced Labour Market Act
Deregulation of Assessment of Independent Contractor Status Act
Artificial Construction Act
Employment contracts in the Netherlands are required by law. Dutch labor laws heavily favor protecting employees, so having a strong employment contract will help the employer ensure they are not out of step with labor regulations. Make sure that the collective agreement/employment contract is gone over and agreed upon by both employer and employee.
The Netherlands already provides employees with a large amount of benefits through their social security system. However, adding supplemental benefits like private health insurance and reimbursements for tuition and travel can help companies attract top employees.
If you partner with Via, we provide your company bullet-proof employment contracts that comply with Dutch laws and protect your business’s IP, or intellectual property.
There is no probation period for new employees set forth by the Dutch government. However, the standard probation period in the Netherlands is two months, and should be agreed upon in the Employment contract.
The normal working week in the Netherlands is no longer than 45 hours, with the average work week being 40 hours per week with 9 hour days and a 1-hour break for meals. The work weeks in the Netherlands are Monday-Friday.
If employees go over their 45 weekly working hours, they are entitled to compulsory overtime pay. There is no set overtime pay regulated by the Dutch government. However, employers must stipulate in the employment contract 1) how much overtime employees can work and 2) how much extra compensation they should receive.
Termination policies in the Netherlands vary based on the employment agreement and the type of contract that the employee and employer agreed upon. Employers are not allowed to terminate employees due to economic reasons or for long-term disability.
In the Netherlands, the statutory minimum notice period is 1 month. In practice, the notice period depends on the employee’s length of service to the company.
Notice periods break down as:
Less than 5 years - 1 month notice
5-10 years - 2 months' notice
10-15 years - 3 months' notice
Over 15 years - 4 months' notice
In the Netherlands, severance pay is referred to as transition payment. Former employees are entitled to payment within their first day of termination.
Hiring talented employees in the Netherlands can be challenging without using a global PEO or EOR service like Via.
Becoming your own employer-of-record in the Netherlands requires you to have a strong legal team and in-depth knowledge about employment laws as well as understanding employment contracts. To maintain compliance with benefits and payroll, you will need to hire a payroll outsourcing company or build your own HR team after establishing a subsidiary or entity.
For companies who hope to hire a large number of Dutch employees, opening a legal entity with an HR team makes sense. Most of the time, however, using a global third-party EOR service like Via is the smartest decision, as we offer support during your expansion every step of the way.
Opening a subsidiary in the Netherlands requires you to pay employees internally and have your own Human Resources team. Both of these steps will be time consuming and require a large amount of upfront resources to get started.
The process of opening an entity takes months, since you will need on-the-ground experts who can assist with opening a new bank account, finding an office, and registering with local government institutions. For this reason, companies looking to hire local Dutch talent quickly can streamline the process by partnering with an EOR service like Via who already has an established entity in the Netherlands.
For companies that want to build a large team in the Netherlands and have the time to open their own entities, using a PEO service is one option.
PEO companies act as co-employers and manage the HR process. The co-employment model means the parent company is still held liable for compliance issues. The PEO service usually passes complex problems related to termination or immigration over to the parent company.
When using an EOR service like Via, you do not need to open a bank account or take legal responsibility for complying with Dutch labor laws. Via takes care of that paperwork for you, and can guide you on the best practices for navigating local laws and paying employees in Euros, the country’s official currency.
EOR services help major corporations looking to scale up operations in the Netherlands as well as scaling startups, SMBs, and other entrepreneur-led businesses.
Many companies want to hire within the Netherlands but do not have the in-depth knowledge of beginning the process compliantly. Via makes hiring Dutch talent and building your global team seamless. Via helps you manage local HR processes for direct employment such as work visas & permits, benefits, payroll, background checks, and more. Our team of local labor lawyers and on-the-ground experts ensure that your company remains compliant while expanding abroad. As your employer-or-record/entity in the Netherlands, Via assumes full responsibility for employment liability, so that you can focus on what matters: recruiting and managing your team.
With Via’s transparent pricing, you can pay full-time employees or contractors in the Netherlands with no hidden set-up fees, no foreign exchange or transaction fees, and no minimums–start with 1 employee and scale up at your own pace.