Employment laws in the Netherlands

The Netherlands has a highly educated and skilled workforce, which makes it an attractive place for global firms, like U.S. companies, to source talent. It also has strict labor laws, which employers must comply with.

Employment laws in the Netherlands are complex, including legally binding Collective Labor Agreements (CAOs) in some sectors, and employee consent may be required before termination. This creates challenges for U.S. companies looking to stay compliant, which may be streamlined by using a workforce management platform.

Payoneer Workforce Management offers support to international companies to hire, pay, and manage talent with compliance support. 

Key labor laws in the Netherlands

The main labor laws in the Netherlands come from Book 7 of the Civil Code. This includes rules on wages, annual leave, discrimination, the process of termination, and the respective obligations of employers and employees.

Collective Labor Agreements (CAOs) are also common and legally binding. These can be specific to a company or apply to an entire sector, and a major section of employees in the Netherlands may be included under a COA.

Just like national labor laws, a CAO takes precedence over employment contracts, and employees cannot waive their rights under these agreements. 

Contract employment laws in the Netherlands

A strong, written contract is essential to protect both employers and employees. Classifying workers appropriately is especially important in the Netherlands. Labor laws are strict, and recent updates may have emphasized penalties for incorrectly classifying employees and contractors, even by mistake.

Contract types

The main types of employment contracts in the Netherlands are fixed-term and permanent. 

Fixed-term contracts are commonly referred to as temporary contracts. These have an agreed end date, which avoids the difficult challenge of terminating an employee under Dutch law. Their use is restricted, however.

Permanent contracts continue indefinitely, until the employee leaves, retires, or their employment is terminated.

Employee types

Employment laws in the Netherlands draw a sharp distinction between employees and contractors. Contractors do not receive the same protections from labor laws in the Netherlands. 

Essential contract elements

For an employment contract to be compliant in the Netherlands, it must include key information about the parties and the role, including:

• Whether the contract is temporary or permanent
• Details of any applicable CAO
• The start date of the contract
• The duration of the contract, if temporary
• The name and address of both parties
• The job title and responsibilities, including the location where work will take place
• Details of remuneration, including base pay, benefits, and overtime payments
• Working hours, including overtime, shifts, and availability for irregular work
• Vacation and other leave policies
• Explanation of any probationary period
• Rules around termination, including notice periods and severance

Statutory employment rights in the Netherlands

The core employment rights in the Netherlands come from Book 7 of the Civil Code. Here are some key rights to be aware of.

Working hours and rest periods

As per the Working Hours Act (Arbeidstijdenwet), the typical working week in the Netherlands is broadly similar to that in the U.S., with most employees working 40 hours per week before overtime. 

Employees are allowed to work for a maximum of 12 hours per day, 60 hours per week; however, the average working hours over 16 weeks must be 48 hours.

Employees are entitled to at least 4 weeks of paid vacation time per year, although this is often increased by a CAO by an additional 5 days, giving employees a total of 25 leaves annually. There are also 11 public holidays in the Netherlands, but these are not necessarily included as additional time off.

Overtime

Overtime must be compensated, but this does not need to be at an increased rate unless specified in a CAO.

Overtime cannot be unlimited. The upper limit for a single week is 60 hours of work. In any 16 weeks, employees should not be asked to work an average of more than 48 hours per week.

Employment contracts or collective bargaining agreements establish the overtime rates, it is usually either 50% or 100% of pay or time off. 

Minimum wage 

The Netherlands has a national minimum wage, set at €13.27 per hour, and that applies to all workers over the age of 21. 

The minimum wage may be adjusted every few months to allow for cost-of-living rises. 

It’s a good idea to regularly monitor current rates on the Netherlands’ government website. 

Mandatory benefits

Employment laws in the Netherlands also include other mandatory benefits. These include:

• Social security: Social security includes employee insurance schemes and national insurance. Employee insurance schemes provide unemployment, illness, and incapacity benefits and are paid by the employer. National insurance schemes cover provisions such as old age pensions and child benefits.
• Pensions: Some industries or occupational groups have compulsory occupational pension schemes. Other sectors may include pension provision in a CAO.
• Health insurance: All employees must be covered by health insurance. If employees do not have health insurance, it is arranged by the central administration.
• Sick leave: Employees are entitled to at least 70% of their usual salary for the first two years of illness.
• Parental leave: Minimum pregnancy and maternity leave in the Netherlands is 16 weeks with full pay. Their partner is entitled to 6 weeks of paid parental leave.
• Vacation leave and public holidays: Workers in the Netherlands are entitled to at least 4 weeks of paid vacation time plus 5 additional days via CBAs. They have 11 public holidays per year, but these are not always offered as additional paid time off.
• Holiday allowance: In addition to paid vacation leave, employment laws in the Netherlands mandate that employees receive 8% of their salary as a holiday allowance. This is usually paid in a lump sum in May.
• 13th-month salary: Many companies voluntarily pay an additional month’s salary as a bonus, usually in December.
• Additional leave: Workers in the Netherlands may receive emergency leave or special leave. 

Find out more about the leave policy in the Netherlands.

Netherlands employment laws on termination 

As per the Netherlands’ employment laws, companies may not have an automatic right to terminate employees. They must instead provide a valid reason. Grounds for dismissal may include economic needs or poor employee performance.

Employers are required to pay severance (called a transition payment) and allow them to work the notice period specified in their employment contract. Transition payments are also required if you do not renew an employee’s temporary contract.

During probation, the notice period is 30 days; after probation, the notice period is as follows:

• Less than 5 years of service – 1 month
• 5 – 10 years of service – 2 months
• 10 – 15 years of service – 3 months
• Greater than 15 years of service – 4 months

The notice period is usually capped at 6 months.

Navigate employment laws in the Netherlands with trusted support

Staying compliant with local laws is a priority for global businesses, like U.S. companies, when hiring employees abroad, and this is especially true in the Netherlands. Labor laws are strictly enforced, and breaches may attract hefty fines. 

Payoneer Workforce Management offers expert guidance with local employment laws, helping you stay compliant without building an in-depth knowledge base yourself. This is particularly valuable when you are building a global presence.

Book a demo today!

FAQs

1) What is the employment law in the Netherlands?

Most employment law in the Netherlands comes from Book 7 of the Civil Code, which sets out minimum standards and expectations for employers. Collective Labor Agreements may apply to the majority of Dutch employees and are legally binding for companies.

2) What are the obligations of employers in the Netherlands?

Employers in the Netherlands are required to provide a safe, healthy workplace, pay a fair wage, and offer social security and retirement plans for their staff. Employment laws in the Netherlands also set out maximum working hours, minimum rest periods, and annual leave policies, which employers are obliged to comply with.

3) How many vacation days do you get in a Dutch employment contract?

The minimum amount of paid vacation time in a Dutch employment contract is 4 weeks, but this can be increased by an additional 5 days through a collective labor agreement. There are also 11 public holidays, but these are not always offered as additional vacation time.