Doing business in The Netherlands: Employment Law and Human Capital Toolkit

The Netherlands has a rich and long trading history. We look at the world as our playing field and roll out the red carpet for inbound investments, cultures, and all those who have high aspirations. The Netherlands’ geographical location offers a gateway to Europe’s 500 million consumers and high quality business customers.

The Netherlands’ world-class airport, top-ranked seaports and high-speed road, rail and broadband networks are unparalleled. A staggering 90% of the Dutch population is fluent in English, the language of worldwide business. Our judicial system is one of the best in the world, upholding the rule of law, transparency and fairness. And as to human capital, according to the World Population Review the Netherlands is one of the top six spots for the happiest countries in the world. Last but not least, competitive tax facilities are the cherry that brings the Netherlands’ full circle as one the most attractive countries to have a business presence.

All these features have already attracted vast numbers of multinationals establishing business operations in the Netherlands, and since Brexit we are seeing a consistently increasing influx of companies that are securing their market share in Europe through presence in the Netherlands. When contemplating to set up business in the Netherlands the decision is typically commercially driven, combined with some important corporate and tax considerations. To maintain your momentum and timelines it is important to consider the key employment and human capital topics in a very early stage. This saves you time, prevents delays in getting your business operational, and cultivates confidence in a professional business that is ready to excel and expand.

1. You can employ staff under an employment agreement, through a temporary staff agency or secondment supplier. There are several types of employment contracts, for instance a fixed term or a permanent one. It is also possible to engage consultants or freelancers on the basis of a services contract. Which contractual form is the best fit depends on the needs of your anticipated business. These decisions should therefore be made taking into consideration in the company’s short, mid and longer term goals.

2. Employment law is codified in the Civil Code. Most regulations apply to both permanent and fixed term staff. Additionally, there can be collective labor agreements (CLA) in place that apply to your industry. If your company falls within the scope of a CLA, compliance is mandatory.

3. Generally a CLA is combined with an industry-wide pension fund. When setting up your payroll it is important to align with the statutory laws, the CLA and the applicable pension scheme. Note that choosing a certain corporate structure for your business activities can in certain circumstances carve out part of your staff from the scope of the CLA. This underscores the importance of involving your HR and legal teams at the design stage of your expansion ambitions.

4. There are options to opt for pre-employment screening. This is typically important for integrity sensitive positions. For each worker that you hire/engage you will need to obtain a copy of their original identity document and you must keep that in your records. The Dutch implementation of the GDPR (the “AVG”) prescribes the legal framework for processing workers’ personal data. If you will be employing staff for the first time in the Netherlands you will need to register as an employer with the Dutch Tax and Customs Administration.

5. Employing staff and engaging workers comes with a duty of care and an obligation to provide a safe and healthy work place. Private occupational health agencies (Arbodienst) offer services to help you draw up a risk inventory and evaluation (RI&E) that reflects the risks that your personnel faces while on duty and the measures that your company has in place to address and mitigate these risks. Every employer must have a contract with such an Arbodienst. They will also guide you in the reintegration process when employees fall ill. Illness processes are subject to strict legal formalities and it is important that you familiarize yourself with your employer’s rights and obligations. Part of your duty of care is to verify that your employees are insured for the standard Dutch health care insurance. The costs are borne by the employee, however if they are not properly insured the employer may face the obligation to pay the health insurance premiums to the Dutch National Health Care institute.

6. The Netherlands is a proud member of the EU. As such when hiring employees from the European Economic Area (EEA) or Switzerland you will not need to arrange for work permits or visa. Your company is obliged to recruit personnel from the EEA and/or Switzerland first and only if you can prove that suitable personnel cannot be found, are you permitted to recruit from other countries. Employing a non- EEA or Switzerland national will usually only be allowed if you apply for and obtain a permit for residence and work. There are various residence permits. Which residence permit applies depends on the employee’s job. In order to attract highly skilled persons from abroad, the Immigration Authorities (the “IND”) has a relatively quick and easy process to obtain a permit for highly skilled persons.

SAGIURE assists multinationals, SME and ambitious entrepreneurs who invest in the Netherlands. We offer legal assistance at the interface of corporate and employment law and our lawyers are praised by our clients for their commercial approach and ability to act as true business partners, overseeing the commercial importance of business decisions, helping them to overcome the legal hurdles in the most efficient way possible.

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Contributing Advisors