As mentioned in our previous blog, the Netherlands has an attractive business climate for foreign investors. Setting up a business in the Netherlands may lead to hiring employees for the execution of business activities. In that case, there are some aspects with respect to Dutch employment law that need to be taken into account. The most important aspects are set out below.
Immigration: required documents
Employees with the nationality of one of the countries of the European Economic Area (EEA) or Switzerland are allowed to work in the Netherlands without a prior permission being required. These countries are subject to the European freedom of movement for workers. The freedom of movement for workers does not apply to employees from Croatia. These employees are subject to the rules for non-European employees.
Employees with Non-European nationality are only allowed to work in the Netherlands with permission of the Dutch government. This permission can (shortly) be obtained in the following forms:
– Employee has a valid residence document with a note: ‘Labor is allowed freely. Work permit not required.’
– Employee has a valid passport with an official IND sticker with the note: ‘Labor is allowed freely. Work permit not required.’
– Employer has a valid work permit, which is related to every employee personally.
– Employee has a single permit for residence and work.
There are some exceptions, for example for self-employed persons and when hiring from a foreign temporary employment agency. An employer must be aware and must observe the fact that foreign employees have exactly the same rights and claims as Dutch employees (i.e. in salary, holiday, fees). In addition, it is the responsibility of the employer to inform the employees about these rights and claims in a language that is understandable for them.
Based on the Dutch employment law, all employees are entitled to a minimum amount of vacation days per year. In hours, this amounts to four times the average working hours a week. For a 40 hour working week, this comes down to 20 vacation days a year. Most of the employees are entitled to additional vacation days, based on the individual employment agreement or the collective agreement.
On top of their monthly salary, employees are entitled to a holiday allowance of 8% of their regular salary. Generally the holiday allowance is paid once a year, but is can also be included in the salary payments.
Incapacity for work
Salary payment during illness
In case of incapacity of work due to illness, the employer is entitled to pay 70% of the employee’s salary during the first 104 weeks of illness. Often, this percentage will be supplemented to 100% for the first 52 weeks based on the individual employment agreement or collective agreement. During a period of 104 weeks, the employer is not allowed to dismiss the employee. The obligation to pay the employee’s salary could be extended with a maximum of 52 weeks in case the employer does not meet the obligations concerning the reintegration of the employee. The ‘Uitvoeringsinstituut Werknemersverzekeringen’ (hereinafter: the UWV), a Dutch governmental body, assesses whether the employer has met its obligations.
Obligations of the employer
The obligations of the employer include, among other things, the involvement of a company doctor to assess the medical possibilities and limitations of the employee. Also, the employer needs to act in accordance with the advice of the company doctor by making workplace adjustments or giving the employee the opportunity to perform parts of the stipulated work. In case the employee is not able to perform the stipulated work (partly), the employer is obliged to look for suitable work within or outside the company. The obligations are based on the idea that the role of the employer has an important influence on the reintegration of the employee.
Dismissal of an employee
In the Netherlands, the employer is only allowed to dismiss an employee for reasons as exhaustively mentioned in the Dutch civil code. These reasons include for example the culpable acting and omission of the employee, long-term (two years) incapacity of work due to illness or business economic reasons.
In order to dismiss an employee, the employer needs to ask the court to terminate the employment agreement or needs prior approval of the UWV. The employer needs to be able to substantiate its reason for dismissal. Therefore it is recommendable to build a decent file in paper before turning to the court or UWV.
In case of dismissal, the employer could be obliged to pay the employee a so-called transition payment. The employee is entitled to this payment in case the employment lasted for at least 24 months and the dismissal is not caused by culpable acting or omission of the employee. The transition payment amounts to 1/3 of a monthly salary per year of employment. After 10 years of employment this payment will be raised to half a monthly salary per year of employment. In case of culpable acting or omission by the employer, the employee could also be entitled to a fair payment. This will only be the case in exceptional circumstances.
When terminating the employment agreement, the employer must observe a notice period. The statutory notice period varies between one and four months and depends on the duration of the employment. It is possible to differ from the statutory notice period by individual employment agreement or collective agreement.
Questions for our labour lawyers?
When you want to hire employees in the Netherlands, it is important to comply with all the aspects of the Dutch employment law. In case you consider to hire an employee, Clairfort is happy to provide further information and to assist you during this process. For questions or assistance, please feel free to contact labour lawyers Mathijs van Logten or Geke Bosch for further information.
Other blogs about Doing business in the Netherlands
Clairfort publishes a series of blogs about Doing business in the Netherlands. You can read the first one here: Part 1: Setting up a business.