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 followed by everyone who employs people in the Netherlands, even if the company is registered elsewhere. Many Dutch companies are also subject to a collective labour agreement (CAO) concluded with a trade union, either independently, through an employer’s organisation or because there is a CAO that is binding for their sector.
Employment contracts in the Netherlands
In the Netherlands, a work contract must specify a number of particular details. This includes mentioning the employee’s role and salary, outlining working hours, specifying the notice period, indicating arrangement of an employee pension scheme, and 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 – they automatically enter into permanent employment starting with the fourth consecutive contract or after two 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
It’s important to note that 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 such as under-18s and pregnant employees.
Employees are also entitled to a specific number of days of paid leave. Annual statutory leave is proportionate to the amount of time worked. It’s set at four times the weekly working hours of an employee, i.e. someone who works 40 hours per week is entitled to 160 hours of annual leave. It’s worth noting that the majority of employers offer paid leave that is at least five 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 15-to-20-year-olds.
The minimum holiday allowance paid to employees must be at least 8% of the employee’s gross wage. Even employees on zero-hours contracts are entitled to holiday allowance. Please note, in some CAOs or contracts, holiday allowance can be excluded but only under specific salary conditions.
At the other end of the scale, there are also strict rules regarding variable pay, including bonuses. The Dutch bonus cap is more stringent than the EU-wide regulations and means that the variable part of the salary must not exceed 20% of the non-variable salary.
There are two types of social insurance. The first is employee insurance schemes. These are mandatory for every employee and include 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. They may not be deducted from the employee’s wages. In addition, there are 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 at least one month in advance of the contract’s end date whether the employer intends to renew the contract or not. For permanent contracts, the statutory notice period for the employee is at one month; for the employer, the period depends on the duration of the employment contract, starting at one month for employees that have been with the company for under five years. It’s capped at four months for employees that have been with the company for 15 years or longer. Alternative notice periods may be agreed in the contract, though the notice period for the employer must always be at least twice as long as that of the employee. When a contract is terminated by an employer, it may be liable to pay a severance fee.
For more information about many of the factors of hiring employees, see this checklist from the Dutch government.