Starting a business in the Netherlands is exciting and can be very successful. The Dutch speak good English, we have a very friendly tax and financial climate but hiring staff in the Netherlands takes a bit of knowledge since we have a unique employment law system. In this leaflet we will inform you about the 5 most important things of the Dutch employment law.
1. Did you know you need permission of the Dutch authorities or court before terminating an employment contract?
In the Netherlands it is not allowed to terminate an employment contract suddenly without permission of the UWV (Dismissal Authority) for terminating an employment agreement based on financial reasons or if your employee is sick for longer than two years. In case of other reasons (such as underperforming) you need the court to dissolve the employment agreement.
2. Did you know you have to pay your employees at least 70% of the last earned wages in case they fall ill?
Even if your employee is home with a flu or cold. So called sick leave does not exist in the Netherlands and it is the obligation of an employer to pay at least 70% of the last earned wages. It might even be 100% of the last earned wages depending if a Collective Agreement is applicable on the employment agreement.
3. Did you know you have to pay a legal severance payment if your employee works longer then 24 months for your company?
Over the first ten years of employment, the employee will receive a remuneration of 1/6 monthly gross salary for every six months of the duration of the employment (this corresponds to a remuneration of 1/3 of the gross monthly salary for every year of service), and subsequently 1/4 of the gross monthly salary per six months that the employment agreement lasted for the period over ten years (this corresponds to a remuneration of 1/2 of the gross monthly salary for every year of service). The remuneration will be capped at € 81.000,-- gross (2019) or one annual gross salary if the employee earns more than € 81.000,-- gross per year.
4. If you start a business in the Netherlands make sure you know if a Collective Agreement is applicable on the employment contract.
In case there is a Collective Agreement applicable you are legally obligated to follow the Collective Agreement. The legal and financial risks for not applying the Collective Agreement might be substantial. The benefit of applying a Collective Agreement is the fact you don’t have to look into the employment conditions since they are already negotiated with the Unions. In this way it is clear for both parties which employment conditions apply.
5. The maximum probation period is two months.
If you exceed the maximum period of a probation period you can have a problem since overriding the two months can be legally void. In that case no probation period applies. If you offer an employment contract shorter then 6 months and one day no probation period is allowed.
Hiring employees in the Netherlands can feel overwhelming. Fortunately we can help you follow the rules and think about the best possible HR policy within the Dutch law. We are specialized employment lawyers with great experience and HR knowledge. If you have the right knowledge which helps you making the right decisions you will avoid legal and financial risks and have happy, motivated employees which will make your company a success in the Netherlands. We are more than willing to help you. Don’t hesitate to give us a call and we will be more then pleased to pay you a visit.
Carmen Schuchhard en Kim van Berkel