Employing Staff in the Netherlands: How Does Dutch Labour Law Work?
International businesses employing staff in the Netherlands have to deal with Dutch Labour law, employment law, Labour rules, and working culture. What do you need to know as international employer doing business in the Netherlands?
There are a lot of mandatory rules, which could make Dutch employment law complicated to work with. Compared to other jurisdictions, it is exceptional that employers in the Netherlands need prior approval—of the employee, court, or Labour office (UWV)—before the employer is able to terminate an employment contract. Also, the payment obligation during illness is rather long compared to other countries.
We will give an introduction to the most important aspects of Dutch employment law.
What types of employment are available?
Under Dutch employment law there are various types of employments.
- temporary/fixed-term employment contract
- permanent/indefinite-term employment contract
- flexible working hours employment contract
- agency worker contracts
- independent contractors
The type of employment you choose to offer your employee, depends on the working relationship. Is it a temporary job? Can you take the risk to offer a permanent contract? Is it possible to have the job performed independently? Is flexibility required?
For more information about types of employment, please read the article Overview of employment contracts in the Netherlands.
Which employment terms and conditions are basically required and common practice in the Netherlands?
Term: permanent or fixed-term
- Notice period: there is a minimum by law (1–4 months, depending of the length of service) or longer.
- Salary: minimum wages are stipulated by the law (approx. EUR 1,565 gross per month, full-time), or higher if an industry-wide declared binding collective Labour agreement (CAO) applies for your industry.
- A holiday allowance of 8% is to be paid, usually once per year.
- A total of 20 days of holidays per year is the legal minimum (full-time), apart from bank and national holidays; 24/25 days is however more common. The CAO could stipulate a higher number.
- Trial period / probationary period: one or two months, depending on the type of contract.
- Payment during illness: This is 70% of the wages, paid during 104 weeks of illness. It is common to pay 100% during the first year of illness. Employers can take out insurance to cover this risk.
- Working hours: The average per week may not exceed 48 hours. Common is 36–40 hours full-time. Part-time work (usually 24–32 hours) is also very common, depending on the position and type of industry.
- A commuting allowance: this is usually the tax-exempt maximum (19 cents per km).
- Unilateral amendment clause: this gives limited possibilities to change the terms and conditions without the consent of the employee.
- Choice of law, which cannot overrule the law appointed by the EU Regulation Rome I that applies in cross-border working situations.
- Pension: none, insurance, or (mandatory/voluntary) fund
- Company property (mobile phone/laptop/car)
- Reimbursement of business costs (incl. travel)
- Bonus: discretionary or fixed
- Non-competition clause
- Non-solicitation clause
- Confidentiality clause
- Intellectual property clause
- Ban on side activities
- Ban on financial transactions
- Reference to a CAO (applicable by law or voluntarily)
- Reference to a code of conduct/employee manual
- In case of internationals: relocation/repatriation clauses
Collective Labour agreement
In the Netherlands, collective Labour agreements (CAOs) do not only apply to companies if the company is a contracting party to this collective Labour agreement. A collective labour agreement could also apply if a company falls within the scope (branch of industry) of a CAO and this CAO has been declared generally binding by the Ministry of Social Affairs. There are for instance generally declared binding CAOs in the following industries: metal working, wholesale, retail, and healthcare.
Privacy of employees
Recently the privacy protection of employees has become an increasingly important topic. A company is limited in the kind of employee data it may process. The starting point is that the employer may only process personal data of the employees if the employer has a legal ground (e.g. tax and immigration requirements) for processing. Medical information may not be processed by employers.
In line with EU rules both direct and indirect discrimination (based on race, gender, age etc.) is forbidden in the Netherlands. Exceptions in this context can be permissible when they are objectively and reasonably justified, e.g., by a legitimate Labour market aim.
Working hours and conditions
The maximum average working hours in the Netherlands is 48 hours per week, however common practice in the Netherlands is 36–40 hours (full-time). Rules regarding working hours and conditions exist to protect the employee’s health, safety, and well-being, but also to facilitate the combination of work, private time, and (child)care. These rules apply to employees of 18 years of age and older. Special provisions apply to minors and to pregnant or nursing women. Furthermore, special rules exist for work in healthcare, mining, and other special sectors.
Which types of leave can be claimed by an employee?
Dutch employment law provides for the following types of leave:
- parental leave
- maternity leave
- paternity leave
- adoption leave
- emergency leave
- short-term care leave
- long-term care leave
Termination of employment
Fixed-term employment contracts terminate on their expiration date, unless too many successive fixed-term contracts have been concluded. Premature termination of fixed-term employment contracts could be difficult and does not often take place, unless by mutual consent. Permanent employment contracts also usually terminate by mutual consent (settlement agreement) or through the resignation of the employee (when the employees finds another job).
If the employee does not agree with termination, the employer needs a valid termination ground (business reason or personal reason), which will be assessed by the court (personal reason) or the Labour office UWV (business reason) before the employment can be terminated. This means employees are very well protected against dismissal under Dutch law. However, if a valid termination ground can be substantiated, the termination pay is rather low.
The relationship between the appointed statutory director and the company could be governed by both corporate law and employment law. Statutory directors appointed under the articles of association of the company have however less dismissal protection and can in principle be dismissed by means of a resolution of the shareholders or the supervisory board.
Do I need to have a works council?
Companies with more than 50 employees should establish a works council. The works council is a representative body, which provides a certain level of participation and representation of the employees. The works council has the right to give advice about important decisions of the company (e.g., a merger with another company) and the right of consent regarding more secondary decisions (e.g., pensions).
This article provides a short guideline of the most important aspects of Dutch employment law and Dutch Labour law. Over the next months we will write more in-depth articles about Dutch employment law and Dutch Labour Law including the aspects mentioned above. Should you have any questions or concerns, reach out to us.
Sanne van Ruitenbeek & Pieter de Ruiter, Pallas Advocaten.