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Netherlands – Employer of Record

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Country Introduction – Netherlands

Capital – Amsterdam
Currency – Euro
GDP – 1.013 trillion USD (2021)
People/Nationality- Dutch
Language – Dutch
Major Religion – Christianity
Population – 17,624,224 (as of August 11, 2023)

Netherlands has a highly developed and diverse economy that is characterized by its strategic location, advanced infrastructure, and international trade. It is often referred to as a “gateway to Europe” due to its well-connected ports, airports, and transportation networks. The country’s economy is known for its strong emphasis on international trade, innovation, and a skilled workforce.

It has a well-established financial sector, with Amsterdam serving as a financial and business center. The Amsterdam Stock Exchange (Euronext Amsterdam) is one of the oldest stock exchanges in the world. The Netherlands is committed to sustainable practices and has been investing in renewable energy sources, such as wind and solar power, as well as promoting energy efficiency and environmental initiatives. The Dutch creative sector, including design, architecture, fashion, and media, is internationally renowned and contributes significantly to the economy.

The country’s historic cities, cultural attractions, and picturesque landscapes attract many tourists each year, contributing to the economy. The Netherlands places a strong emphasis on research and innovation, with a focus on sectors like technology, life sciences, and engineering. It is home to several prestigious universities and research institutions. The Dutch economy benefits from a well-educated and skilled workforce, a stable business environment, and a strong commitment to open trade and investment.

Living in the Netherlands offers a high quality of life with strong social services, diverse culture, and a welcoming environment for expatriates. The country’s efficient infrastructure, work-life balance, and focus on well-being contribute to a comfortable lifestyle. English proficiency, progressive policies, and a vibrant cultural scene make integration accessible. Cycling, excellent education, healthcare, and natural beauty further enriches the experience.

Contract of Employment

In the Netherlands, it is generally recommended and legally advisable to have an employment agreement in written form. While verbal agreements can be legally binding, a written employment contract provides clarity, transparency, and legal protection for both the employer and the employee. Under Dutch law, there are two distinct types of employment contracts: fixed-term agreements and permanent agreements.

Probation Period

The maximum duration of a probationary period depends on the length of the employment contract. For contracts with a duration of less than two years, the probationary period cannot exceed one month. For contracts of two years or longer, the probationary period can be a maximum of two months.

Termination

The legal minimum notice periods for employees are as follows:

– Less than 5 years of service: 1 month
– 5 years of service or more: 2 months

Working Hours

The standard full-time working week is typically around 36 to 40 hours. This can vary depending on the industry, company policies, and individual employment contracts. Part-time work is common and widely accepted in the Netherlands. Many employees work fewer than 40 hours per week, and part-time positions offer flexibility to balance work with other responsibilities.

Overtime

There are limits to the number of overtime hours an employee can work. Dutch law sets a maximum of 60 hours of work per week, including overtime.

13^th Month Pay

The 13th-month pay is often referred to as the “holiday allowance” because it is traditionally paid to employees in May, right before the summer holiday season. It is intended to provide employees with extra income to cover holiday expenses. The holiday allowance is legally mandated for employees who are subject to Dutch labor law, which includes most employees working in the Netherlands. It is considered a standard part of employee compensation.

Annual Leave

Full-time employees are entitled to a minimum of four times the number of days they work per week in annual leave days. For example, if an employee works five days a week, they would be entitled to a minimum of 20 days of annual leave per year. Part-time employees are entitled to a proportional amount of annual leave based on the number of hours they work. Their entitlement is calculated based on the standard of four times the number of days they work per week.

Sick leave

During the first two years (104 weeks) of illness, employees generally receive sick pay from their employer. The percentage of the regular salary covered by sick pay and any waiting days (unpaid days at the start of illness) are determined by employment contracts, collective labor agreements (CAOs), or company policies.

Maternity and Paternity Leave

Pregnant employees in the Netherlands are entitled to a period of maternity leave that starts six to four weeks before the expected date of childbirth (typically around the 34th week of pregnancy). The duration of maternity leave is a minimum of 16 weeks.

Partners in the Netherlands are entitled to up to five days of paid paternity leave (partnerverlof) around the time of childbirth. These days can be taken within four weeks of the birth of the child.

VAT / GST

The Netherlands has different VAT rates for various types of goods and services:

Standard Rate: The standard VAT rate is 21%. This rate applies to most goods and services, including non-essential items.

Reduced Rate: A reduced VAT rate of 9% is applied to specific goods and services considered essential, such as food, books, medicines, and some cultural and entertainment services.

Zero Rate: Certain goods and services are subject to a 0% VAT rate, meaning no VAT is charged, but businesses can still deduct input VAT. This rate applies to, for example, international transport, exports, and intra-community supplies.

Income Tax

The income tax brackets for 2023 are as follows: The Netherlands has a progressive income tax system, which means that higher income earners pay a higher percentage of their income in taxes. The following are the income tax brackets and rates for individuals in the Netherlands:

Additionally, there is a lower rate for individuals aged 65 and older, applicable to a portion of their income.

Employer / Employee Contributions

In the Netherlands, both employers and employees contribute to various social security programs to ensure employee well-being and access to essential services.

Key contributions include:

Social Security Contributions: Both employers and employees contribute to programs like state pension (AOW), health insurance, unemployment insurance, and disability insurance. Employers provide benefits for employees facing unemployment or disability.

Payroll Taxes: Employers withhold income tax (wage tax) and national insurance contributions from employees’ salaries. These funds support social security benefits.

30% Ruling: Highly skilled migrant employees may receive a tax-free reimbursement (30% ruling), reducing both employer and employee tax liability.

Specific Industry Contributions: Certain sectors may require contributions to social funds providing additional benefits. Contributions vary based on factors such as employment type, collective agreements, and employee status.

Public Holidays

Here is a list of some of the major public holidays in the Netherlands:

January 1 – New Year’s Day
Easter Monday, the day after Easter Sunday
April 27 – King’s Day
May 5 – Liberation Day (celebrated every five years as a national holiday)
Ascension Day – The 40th day of Easter, always a Thursday.
Pentecost Sunday and Pentecost Monday – The dates vary each year, falling on a Sunday and the day after.
December 25 – Christmas Day
December 26 – Boxing Day

Please note that while these are some of the major public holidays, there are additional regional holidays and observances that can vary by province or municipality.

Severance Pay

Employees who have been employed for at least 24 months (two years) by the same employer are generally eligible for a transitional allowance when their employment is terminated, either by the employer or by the employee due to certain reasons. Transitional allowance may be applicable in various scenarios, including termination by the employer (except in cases of serious misconduct) or voluntary resignation by the employee due to certain reasons, such as a significant change in work conditions imposed by the employer.

Work and Residence Permits (Expatriates)

Expatriates aiming to work and live in the Netherlands need both a work permit and a residence permit.

Key points include:

Work Permit: Required for non-EU/EEA citizens; exceptions for skilled migrants, knowledge migrants, intra-corporate transferees, and specific situations.

Residence Permit: Needed for legal stay; types include work-related, EU Blue Card, and family reunification.

Application Process: Involves document submission, proof of employment, financial requirements, and health checks.

Authorities: Applications are made through the Dutch immigration authorities (IND).

Legal Advice: Immigration laws can change; consult professionals familiar with Dutch immigration regulations.