An introduction to Dutch labour law

Getting started with Dutch labour law

Dutch employment law is extensive. It covers issues such as trial periods, temporary and permanent contracts, paid vacation, notice and dismissal, and minimum wage. These regulations must be adhered to by all who employ people in the Netherlands, even if the company is registered elsewhere. Many Dutch companies are also subject to a collective labour agreement (CAO) in cooperation with a trade union. This can agreement can be made independently, at the request of an employer’s organisation, or because a CAO is required to operate in that sector.

Employment contracts in the Netherlands

In the Netherlands, a valid work contract must specify particular details. These include:

• Specifying the employee’s role and salary
• Outlining working hours and specifying the notice period
• Indicating arrangement of an employee pension scheme
• Stating whether a CAO applies

Contracts can be fixed-term or permanent, but there is a limit on how long an employee can be working on fixed-term contracts. Employees automatically enter into permanent employment starting with the 4th consecutive contract or after 2 years, whichever comes first. Specific contracts, such as zero-hours or min-max contracts, apply to on-call workers.

Working hours, rest time and holiday entitlements

Factors such as working hours and breaks are strictly regulated in the Netherlands. The number of hours that employees may work per day and week are limited, and all employees are entitled to regular breaks. The hours that employees are permitted to work and times of breaks or rest periods are determined by the Working Hours Act (Arbeidstijdenwet, pdf) and the Working Hours Decree (Arbeidstijdenbesluit). There are additional rules for certain sectors and for groups like workers under 18 and pregnant employees.

Employees are also entitled to a specific number of days of paid leave. The annual statutory leave an employee is entitled to is proportionate to the amount of hours worked. Minimum paid leave is set at 4 times the weekly working hours of an employee. For example, someone who works 40 hours per week is entitled to 160 hours of annual leave. It’s good to know that the majority of employers offer paid leave that is at least 5 times the weekly working hours.

Salaries and bonus structures

A statutory minimum wage applies to all employees between 21 and retirement age. A youth minimum wage applies to employees aged 15 to 20. The minimum holiday allowance paid to employees must be at least 8% of the employee’s gross wage. Even employees on zero-hour contracts are entitled to holiday allowance. In some CAOs or contracts holiday allowance can be excluded, but only under specific salary conditions.

On the other hand, strict rules also govern variable pay, including bonuses. The Dutch bonus cap is more stringent than EU regulations, stating that the variable part of the salary must not exceed 20% of the non-variable salary.

Social security

There are two types of social insurance schemes. The first is employee insurance. This is mandatory for every employee and includes insurance for unemployment, illness or incapacity for work. The contributions for these are paid to the Dutch Tax and Customs Administrations (Belastingdienst) by the employer on behalf of their employee. This may not be deducted from the employee’s wages. There are also national insurance schemes, which are compulsory for everyone who works or lives permanently in the Netherlands. The employer withholds these contributions from the employees’ wages and pays them to the Tax and Customs Administrations on their behalf.

Notice and dismissal

Even though technically no notice period applies for fixed-term contracts, employees must be notified whether the employer intends to renew the contract at least one month in advance of the end date. For permanent contracts, the statutory notice period for the employee is 1 month. For the employer, the period depends on the duration of the employment contract, but starts at 1 month for people employed for under 5 years. It's capped at 4 months for employees that have been with the company for 15 years or longer.

Alternative notice periods may be specified in the contract, however the notice period for the employer must always be at least 2 times as long as that of the employee. When a contract is terminated by an employer, they may be liable to pay a severance fee. To learn more about which obligations you must consider when hiring employees, view this checklist from the Dutch government.