The laws and regulations for an individual employment agreement in the European Union should be based on the rules of the Rome I Regulation (Rome I). According to Article 8 of Rome I, an individual employment agreement is governed by the law chosen by the parties. However, there are certain mandatory provisions to protect employees. The employer and employee cannot agree to remove these protections through the choice of law. Without being exhaustive on the mandatory Dutch employment law provisions, this section will set out some relevant Dutch employment law provisions that an employer must take into account.
Employment law is predominantly governed by the Dutch Civil Code. This code contains detailed, mandatory provisions relating to employment relationships and various employment issues. These provisions include:
Employers must pay employees the Dutch minimum wage as well as the minimum holiday allowance in accordance with the Minimum Wage and Minimum Holiday Allowance Act (Wet minimumloon en minimumvakantiebijslag, “WML“).
You can find the minimum wage here excluding holiday allowance for a full-time employee of 21 years or older. The statutory minimum holiday allowance is 8% of the gross salary. If an employee earns more than three times the minimum wage, the employer does not have to grant holiday allowance.
The Inspectorate of Social Affairs and Employment (Inspectie Sociale Zaken en Werkgelegenheid) checks whether employers, including foreign employers, comply with the WML. They may impose heavy fines if the employer does not comply. This can be up to EUR 10,000 per employee.
The Dutch statutory holidays in any given year can be found online. Liberation Day (Bevrijdingsdag) is only a statutory holiday every five years (2025, 2030 etc.).
The statutory holiday entitlement per year is 20 days (4 weeks) of paid leave for full-time employment (40 hours per week). Employees who work part-time (which is very common in the Netherlands) receive an amount proportionate to the reduced time worked. An employer is allowed to provide the employee more days than the statutory minimum; these are the days in excess of the statutory holiday entitlement (bovenwettelijke vakantiedagen).
If an employee’s minimum holiday entitlement is unused, it expires within six months after the end of the year in which this minimum accrued. However, holiday entitlement in excess of the statutory minimum expires within five years after the end of the year in which this excess accrued.
An employee may not waive this statutory minimum holiday entitlement in exchange for more compensation for his or her employment. An employee entitled to holidays on termination of employment has, in principle, a right to receive remuneration in lieu of holiday.
By law, working hours may not exceed 12 hours per shift, 60 hours per week. Taking a longer period into consideration, an employee may not work longer than 55 hours per week during a period of 4 weeks and not longer than 48 hours per week during a period of 16 weeks. Please note that there are many exceptions to the rule depending on the business activities of the employer and the Collective Bargaining Agreement (CAO).
There is an exception to this for certain categories of employees, including employees whose annual income is three times higher than the annual minimum wage.
In general, employees may be required to work overtime. The obligation to work overtime may be derived from the individual employment agreement, an applicable CAO or the general principles of good faith that apply in any employment relationship (i.e. an employee’s duty to act as a good employee). There may or may not be an entitlement to additional remuneration for overtime work, depending on the individual employment agreement, the CAO (if applicable) and the general principles of good faith. The minimum wage also applies to overtime payment.
Employers have a general statutory duty to comply with strict, detailed health and safety regulations, to ensure the health and safety of employees and, if necessary, to improve conditions at the workplace.
The rights and obligations for employers and employees around health and safety at work are set out in the Working Conditions Act (Arbeidsomstandighedenwet), the Working Conditions Decree (Arbobesluit) and the Working Conditions Regulations (Arboregeling).
The Working Conditions Act contains the basic principles for the working conditions policies of employers. Under this act, employers must have a working conditions policy. Employers must inform employees adequately about their work and the related risks and provide personal protection equipment. The Working Conditions Act also obliges employers to lay down the risks that are a result of the work and are a threat to the safety, health, and well-being of employees in an assessment and evaluation (Risk Inventory & Evaluation). Employers also need to appoint a health & safety officer if the employer employs 25 or more employees. A health and safety officer focuses on day-to-day health and safety issues within a company, such as implementing health and safety measures.
Working conditions at workplaces may be inspected periodically by the Health and Safety Inspectorate (Arbeidsinspectie). Furthermore, employers must prepare risk inventories and assessments of working conditions.
If an employer fails to comply with health and safety regulations, this may lead to liability. In general, employers in the Netherlands may be liable for all loss or damage incurred by an employee during and after the termination of employment in relation to accidents or illnesses that occurred during his or her employment. There is an exception to this if the employer can prove that they complied with all relevant health and safety regulations or that the accident or illness would have occurred even if the regulations had been complied with. An employer may also escape liability by proving that the accident or illness was intentionally caused by the employee or by reckless behaviour on the part of the employee. However, in practice, this is very difficult to prove.
In the event of long-term illness, employers must pay the sick employee 70% of the last earned salary for a maximum period of two years. The sick pay is capped to the daily wage of EUR 225.57 (July 2021), which may be lower than the employee’s actual salary. It is not uncommon that employers pay 70% or even 100% of the last earned salary during the first two years of illness.
The employer must make every effort to reinstate the employee during the two-year period. An employee who is significantly uncooperative may lose his or her entitlement to these employer benefits and risks being dismissed. If the employee is still unable to return to work after two years, the employee may become entitled to a government disability benefit.
In the Netherlands, employment relationships are governed by the individual employment agreement. However, as explained in more depth later in this chapter, there are several collective agreements that may apply to an employment relationship. An employee can enter into an employment agreement for a fixed term (a temporary agreement) or for an indefinite period (a permanent agreement) under Dutch law.
A fixed-term employment agreement ends by operation of law. An employer and an employee may enter into three fixed-term employment agreements with an employee. A pause of six months can ‘break’ the chain of successive fixed-term employment agreements. However, under Dutch law, there can be no more than three subsequent employment agreements for a fixed period and the total duration of any of the renewals (including the first agreement) cannot exceed three years. If this number of renewals or period is exceeded, the last agreement will be deemed to be entered into for an indefinite period.
The employer must inform the employee at least one month before a fixed-term agreement of six months or more ends whether the agreement will be continued and what conditions will apply to the continued employment.
An employment agreement may be oral or in writing. Additionally, some employment conditions must be agreed on in writing (such as a non-compete clause).
Some employment agreements are quite detailed. Others are limited in both content and length, especially if the employment relationship is already governed by one of the collective agreements described below.
Collective bargaining agreements (collectieve arbeidsovereenkomst, “CAO”) play an important role in the Netherlands. CAOs are long-term agreements negotiated by national labour unions and national employers’ organisations. Their statutory maximum term is five years, but usually the term is one or two years.
There are two kinds of CAO: industry-wide and company level. By law, a CAO must be registered with the Ministry of Social Affairs and Employment. Employers have some discretion in the choice of the applicable CAO. However, the scope of the CAO must be considered. In practice, most employers select the CAO for the company’s specific industry, sector or trade that was negotiated by the union with which the company and/or its employees are affiliated.
CAOs are normally binding for both employees and employers who are a member of a trade union or employers’ organisation respectively that are parties to the CAO. By law, a CAO-bound employer is expressly prohibited from making a distinction between employees who are union members and those who are not union members. The CAO applies to both groups.
The government can declare a CAO to be wholly or partially binding nationwide for two years or less. In this event, the CAO acquires the status of a law, and all employers in the industry, sector or trade covered by the scope of the CAO are, in principle, obliged to govern their affairs in accordance with the CAO. The employers concerned cannot depart from the CAO to the detriment of the employee. Whether or not they are parties to the specific CAO is not relevant.
In addition, some industries also apply a mandatory collective pension scheme that all employers in the same industry must contribute to.
Consequently, in every individual employment relationship, both statutory legislation and any applicable CAO must be taken into consideration. Under Dutch law, it is not permitted for the parties to agree to agreement out of statutory provisions or the terms of a CAO if a CAO applies. CAOs apply even if the parties agree otherwise.
Company-level collective agreements
Another kind of collective agreement is the company-level agreement. Such agreements are usually drafted unilaterally by the employer. They may deal with issues such as working conditions. In certain cases, the agreement requires the approval of the works council (if there is one) to be lawful.
Agreements with the works council
An employer and the works council may agree on certain terms and conditions. These agreements usually relate to fringe benefits. An employee is only directly bound by these terms if this is stated in his or her individual employment agreement or if the employer and individual employee subsequently agreed to these terms.
In general, parties are free to agree on remuneration. However, this remuneration is subject to minimum wage laws, equal treatment laws and any applicable CAOs. If parties have not agreed on remuneration, the Dutch Civil Code provides that the employee is entitled to the remuneration that was customary at the time of entry into the agreement for the agreed kind of work or, in the absence of this criterion, remuneration that is regarded as fair in the circumstances of the case.
There are a few statutory rules governing employee recruitment. First and foremost, of these are the various laws prohibiting discrimination and mandating the equal treatment of employees. Discrimination by an employer based on gender, age, race, nationality, disability, sexual preference, religious belief, political views or marital status is generally prohibited. A potential or new employee cannot be required to undergo a medical examination, subject to limited exceptions.
In general, there are no specific restrictions on the citizenship of employees in the Netherlands. A company is free to hire all Dutch citizens or all foreigners. Employment discrimination based on nationality is prohibited by law, subject to a few specific exceptions. A foreigner may be required to obtain a work permit and/or residence permit.
An employer in the Netherlands is not required to hire a minimum number of Dutch citizens. Moreover, an employer is not required to assign specific positions to Dutch citizens, quite the opposite, since doing so could qualify as discrimination based on nationality.
Employers are not generally required to hire a minimum number of employees. If a company has more than a certain number of employees, there may be implications in terms of employment law, including rules governing collective dismissal and the requirement for a works council or other employee representative body. These rules are generally unfavourable to the employer.
An employer may be liable under agreement or tort if they unjustifiably (i.e., at an advanced stage of the hiring process) abruptly withdraw from the employment selection process and do not offer the job.
An employer must ascertain the identity of a new employee and keep a copy of the employee’s identification papers throughout the employment relationship. Since the introduction of the EU General Data Protection Regulation, strict rules apply to handling and keeping personal data. Non-compliance may incur a hefty fine.
Employers have a Dutch wage tax withholding obligation for their employees to calculate and remit the wage tax and/or social security’s contributions due each pay period (monthly of four weeks) to the Dutch tax authorities.
In the Netherlands, wage taxes consist of wage tax and social security contributions. The social security contributions consist of national insurance contributions (i.e. insurance for old age government pensions), employee insurance (i.e. insurance for unemployment and disability) and the income dependent contribution to the Dutch health care insurance. The wage tax and national insurance contributions are due by the employee but withheld and remitted by the employer. The employee insurance contributions and the income dependent contribution to the Dutch health care insurance are due by the employer.
Employees are strongly protected from dismissal under Dutch employment law. An employer’s ability to dismiss an employee is limited. It is not possible for an employer to simply give notice to an employee, except:
In some situations, the employer cannot legally dismiss an employee. For example, during the employee’s first two years of illness, during maternity leave or when the employee has joined the works council.
An employer seeking to terminate an indefinite-term employment agreement or prematurely terminate a definite-term employment agreement containing an interim termination clause has two options: (1) gain the cooperation of the employee in signing a termination agreement or (2) start termination proceedings.
Employers in the Netherlands must provide training for employees that is necessary for the performance of the employee’s position and for continuing the employment agreement if the position of the employee ends or he or she is no longer able to perform it .
An applicable CAO may also include provisions relating to employee training.
The employer will have to obtain a permit from the Dutch Employee Insurance Agency (UWV) to be able to give notice when the dismissal is based on:
The employer must substantiate its request and provide the UWV with sufficient supporting evidence. A UWV form is used to submit the information electronically to the UWV.
The UWV checks whether you have complied with all the rules such as reasonable grounds and alternative employment. On receipt of the application, the UWV provides the employee with an opportunity to object to the request for dismissal. Normally, the UWV then provides each party another opportunity to state their case. An oral hearing may also be held. However, this is not compulsory. The Employment Office then decides whether to issue the permit to the employer.
The complete procedure usually takes four to six weeks, although it can be longer in particularly complex cases. The decision of the Employment Office is irrevocable and not subject to appeal. However, the employer and employee may still apply to a Dutch civil court to have the employment agreement dissolved.
Even if the Employment Office issues a permit, or even if no permit is required, an employer must still give the employee the contractually agreed notice or the statutory minimum notice. Failure to comply with the applicable notice period does not affect the dismissal per se, but liability on the part of the employer arises.
The second option for dismissal is to apply directly to the court for a court order for the dissolution of the employee agreement on other reasonable grounds.
The other reasonable grounds are:
Occasionally it may be necessary for an employer to summarily dismiss an employee without going through the processes described above. If the reason is sufficiently compelling, the employer may forgo giving notice, obtaining a government permit, and obtaining a court order. This applies if the employee commits an act, has a characteristic or engages in conduct such that the employer cannot reasonably be required to allow the employment to continue. Examples include the discovery of theft or fraud, or an act of intimidation.
It is essential that the employer acts quickly if these compelling reasons arise. Otherwise, the summary dismissal may not be supported by the court in the legal proceedings that will most likely follow and instead may order the employer to reinstate the employee or pay damages. Dismissal in this situation is warranted as soon as the sufficiently compelling reason arises or becomes known. It is still preferable to put it in writing rather than to simply dismiss the employee verbally.
Where the summary dismissal was not based on a seriously blameworthy act or omission on the employee’s part, the employee is entitled to the transition payment.
An employer must observe a statutory notice period of one month for every five years of service, up to a maximum of four months. Parties can agree in writing to a different notice period, but for this notice period to be valid, the notice period for the employer must be twice if the notice period the employee must observe (unless otherwise prescribed in a CAO).
By law, an employer in the Netherlands must give the following notice of dismissal:
An employee only ever needs to give one months’ notice. An employment agreement or CAO may provide for a different notice period. The notice period of the employer must be at least twice as long as that applicable to the employee, unless otherwise agreed upon in a CAO or in another collective agreement.
An employee is entitled to a mandatory severance payment (transition payment), when the agreement ends and isn’t extended or the employee is dismissed, either through a permit from the UWV or a court decision.
The transition payment is intended to be spent by the employee on finding new employment, although this is not mandatory. If the employer has invested in opportunities for the employee’s benefit to enable him or her to be more easily employed elsewhere should the employee be dismissed, the employer is allowed to reduce the transition payment in line with the amount spent on the employee to improve his or her employability.
The employee is not entitled to the transition payment if the court decides that the termination can be attributed to serious culpability on the employee’s part.
On the other hand, an employee can claim additional fair severance pay if the termination is due to the employer’s serious culpability. The amount of the additional severance is not fixed but based on reasonableness and fairness.
The transition payment is equal to one-third of the monthly salary per calendar year, including structural emoluments. The payment is calculated over the actual period of the employment agreement and is capped at EUR 86,000 gross (2022), or 12 monthly salaries if the employee’s annual salary is higher than this cap. Where the dismissal is because the employee has reached the pensionable age, no transition payment is payable.
An employee who is dismissed after two years of illness is also entitled to transition payment. Since 1 April 2020, the employer may request compensation from the UWV for a transition payment made on dismissal of a long-term ill employee.
Special statutory rules apply if an employer proposes, for economic and/or organisational reasons, to make 20 or more employees redundant within the jurisdiction of a local employment office (UWV WERKbedrijf) within a three-month period (regardless of the form of dismissal).
Before the redundancies, the employer must first consult with the works council, if there is one. The employer must also notify the relevant trade unions and the local employment office in writing. On giving notice, the employer must give reasons for the redundancies and other relevant information, including the number of employees involved, the criteria used to select those employees, the method of calculation of any redundancy payments, and whether there is a works council.
Regardless of whether an employee is made redundant as part of a collective redundancy the employer is not free to decide which employees are made redundant. When determining the order of redundancies, account must be taken of the reflection principle. This principle states that employees with interchangeable positions must be divided into five age categories (15-25, 25-35, 35-45 and 55 and older). The redundancies must be carried out in such a way that the age distribution within this position remains the same in so far as possible before and after the redundancies. For each age category, the employer must propose the employee who has been employed at the company for the shortest period for redundancy. Employees who have reached state pension age and work in a group where redundancies are being made will be the first to go. The employer does not need to apply the reflection principle if a unique position (a position that is only held by one employee) ceases to exist. The same is true if an entire category of interchangeable positions ceases to exist.
The reflection principle can be departed from in several exceptional circumstances, for example if the employer can prove that a particular employee has specific knowledge and skills that are so important for the functioning of the company that this employee is indispensable. Another employee should be proposed for redundancy in that case.
The employment agreement cannot be terminated until one month has passed from the date of the notification to the UWV. This ‘waiting period’ does not have to be observed, if the employer has a statement from the trade unions that they have been notified and agree with the redundancies.
If the employer and the relevant trade unions agree on the number of jobs being cut, the UWV will not carry out an assessment of the collective redundancy. However, it will check that the reflection principle has been applied.
The right of association and assembly is protected by the Dutch constitution. Trade unions are legal and recognised by the government. Dismissing an employee on the grounds of participating in a union, exercising union rights or performing union activities is prohibited. Unions play a significant role, although not to the extent seen in some other countries. Another aspect of the Dutch private sector is that many employers have grouped together into employers’ associations. Collective bargaining is standard practice in most industries. There are about a thousand CAOs in force.
Under Dutch law, a company is obliged to establish a works council (ondernemingsraad) if the company has more than 50 employees.
A works council is a representative body of employees elected by the other company employees. The Works Councils Act (Wet op de ondernemingsraden) obliges management to meet the works council at least twice a year to discuss general subjects concerning the company.
One of the key powers of the works council is the right to advise management if management intends to make certain economic decisions or decisions relating to the organisation of the enterprise such as:
The works council’s advice must be requested at a time when it can still have a material effect on the decision to be taken. The request must be accompanied by a statement summarising the reasons for the intended decision, its consequences for the employees concerned, and the measures proposed to be taken to remedy ill effects.
If management’s decision deviates from the advice given by the works council, the management is obliged to suspend the implementation of its decision for one month. During this period, the works council may lodge an appeal with a special section of the Amsterdam Court of Appeal (Ondernemingskamer).
Another key power is the right to approve. The most common regulations for which approval needs to be obtained are:
The Works Council Act also contains employee participation/consultation obligations for companies that do not have a works council. For example, companies with at least 10 but less than 50 employees are, in the absence of a works council, obliged to set up an “employee representative body” if most of the employees request this. Management must consult with the staff representation committee (personeelsvertegenwoordiging) on several subjects, including intended decisions that may result in job losses or major changes to the working conditions of at least 25% of the employees working in the company. An employee representative body has limited powers compared with the powers of a works council. In contrast to a works council, an employee representative body and/or personnel meeting will not be able to engage in legal proceedings if the company does not abide by their written advice.
The Dutch pension system has three pillars: (1) the basic state pension, (2) collective pension schemes via an employer and (3) private individual schemes.
Since 2013, the state pension age has been gradually increasing and will continue to do so until it reaches 67 years in 2024. View the age at which Dutch residents are currently eligible for state pension here. From 2024, the state pension age can further increase depending on the average life expectancy in the Netherlands.
Collective pension schemes (pillar 2) are mostly administered by a pension fund or by an insurance company.
Although in principle an employer is not obligated to offer a pension scheme, over 90% of employees in the Netherlands are covered by a collective pension scheme. These collective pension schemes are usually administered by a pension fund or an insurance company. We have several types of pension funds in the Netherlands, including industry-wide pension funds and pension funds for specific professions. It is noted that a CAO may prescribe certain conditions for pensions. In addition, the Ministry of Social Affairs and Employment can make participation in a certain pension fund mandatory for all employers in a business industry or profession at the request of the social partners (the employers’ organisations and trade unions). If an employer falls under the scope of a mandatory pension fund, the employer must register the relevant employees in this pension fund. Otherwise, the employer runs a financial risk. The pension fund can also make a claim for unpaid pension premiums with retroactive effect. As a side note: it is not uncommon that the scope of a CAO that is generally declared binding is also linked to the scope of a mandatory pension fund. Whether the company’s activities fall within the scope of a particular pension fund depends on the company’s actual business activities. This is mainly factual and requires a thorough understanding of the employer’s business activities.
In some cases, an employer can be exempted by the pension fund from the mandatory participation in the pension fund. This is not an ‘easy escape’ from participation. Several strict requirements must be met. Moreover, the employer still has to offer its employees a similar pension scheme.
There are two main types of occupational pension schemes: defined benefit (“DB”) and defined contribution (“DC”).
The benefits paid out in a DB pension scheme are determined by a formula based on a member’s salary and length of pensionable service. These schemes are nowadays most of time linked to a ‘career average scheme’ (middelloonregeling) (where the final pension is calculated by reference to the average amount of an employee’s salary over the course of their working career with the employer).
In a DC pension scheme, each member has his or her own individual ‘pension account/pension pot’. In short, the employer’s only obligation is to pay regular pension contributions, which are then invested in the stock market. The final amount of the pension is then determined by the investment performance of the pension account and the value of the annuity that the employee can afford to buy with the accumulated value of the investment. Essentially, the value of the account will rise and fall according to the fluctuations in the stock market. From an employer’s point of view, the advantage of providing DC benefits lies in the fact that the member bears the ultimate risk as to the final amount of the pension. Unsurprisingly, therefore, the popularity of DC pension schemes among employers has risen in recent years.
In both types of schemes, it is market practice to also provide survivors’ pensions and disability schemes.
An employer is responsible for paying contributions to the pension provider. It can only deduct contributions from the employee’s salary with the employee’s consent (i.e., usually by entering into an employment agreement stipulating that the employee must pay part of the total contribution).
The Dutch Pensions Act (Pensioenwet) contains detailed provisions concerning, for example, scheme disclosure requirements, bulk transfer payments between different schemes as well as the treatment of deferred pensions (preservation). The Pensions Act also sets out requirements regarding scheme governance and scheme funding.
The Dutch Pensions Act will undergo a major reformation in the upcoming years. New legislation is expected as per 1 January 2023. In the new pension system, the pension schemes will all be contribution-based, and pension funds will no longer make promises about the amount of benefits they will pay out. Between 2023 and 2027 the pension providers and social partners/employers will need to make arrangements about the new pension schemes and regarding the transition into the new system. Especially the latter will be a complicated process. It is currently foreseen that this transition process needs to fully be completed by 1 January 2027.
The effects on pension schemes/benefits in mergers and acquisitions depends on the transaction structure. Generally, a share transfer will have no effect on the actual benefits offered, including pensions. However, it is still strongly advisable to review the existing pension schemes, including whether any exception may apply. In an asset transfer, it is necessary to review whether this will qualify as a ‘transfer of undertaking’ under Article 7:662 of the Dutch Civil Code. If so, as a rule, the employees and the employment agreements, including the pension entitlements, will transfer automatically. However, there are certain exceptions to this rule for pension schemes. For example, if the acquirer offers the transferring employees the same pension plan already given to its current employees or if the acquirer is obliged to participate in a mandatory pension fund.
Last updated May 2022