Dutch labour law principles often – in comparison to many other foreign countries – grant employees better social-, income- and labour protection, thus imposing a bigger financial and operational risk on the company and employer than may be common in the client’s home country.
Are you considering expanding your business to The Netherlands and want to learn more about the Dutch labour law? The most important laws and regulations affecting labour conditions and social security are briefly listed below.
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If an employee’s age is between 21 and state pension age, the employee is entitled to a statutory minimum wage. Employees between 15 and 21 are entitled to the statutory
minimum youth wage. An employer is obliged to pay the new minimum wage starting with the birthday of the employee. The government adjusts the minimum wage twice a year -on January 1st and July 1st- in line with developments in average collectively agreed wages.
Most commonly fulltime employment contracts are based on 40 working hours per week and 8 hours per day. The maximum working hours per week is set to 60. Please note that an employee may not work the maximum number of hours every week. An employee may work a maximum of 12 hours per shift. If an employee works for more than 5,5 hours, he/she is entitled to a break of at least 30 minutes.
A fulltime employee is eligible to receive a minimum of 20 days of statutory (paid) annual leave. If an employee has been working for less than a year or working part-time, the entitlement will be pro-rated. Employees that have not consumed their 20 days of statutory leave, can carry these forward during the first 6 months of the following year, before they lapse. Any leave in excess of the statutory days, if not consumed, can be carried forward for 5 years.
A Holiday allowance of 8% of the gross salary is mandatorily granted to every employee on the Dutch payroll. Holiday allowance will be calculated and paid out based on the employment period from June 1st to May 31st. The entitlement is accrued on a monthly basis and paid to the employee in the month of May, or at end of employment (whichever comes first).
In case of illness an employee must notify the employer immediately on the first day of sickness. During the first 3 months, the employer continues to pay the salary as required by law and from the 4th month onwards until 2 years the insurance covers 70% of the gross salary. The employer will have to continue to pay the salary at a minimum of 70% of the daily social wage, during the first 2 years of continued sickness. However, usually reducing the salary is only done when the employee is ill for a year, but in some cases the employer decides to lower the salary before that. After more than 2 years social security will cover the employee’s loss of income.
The employer withholds the national insurance contributions and pays these as a part of wage tax to the tax office.
** Costs borne by the employer
Health care insurance is compulsory for all living or working in the Netherlands. New residents to the country need to sign up for a health insurance within four months of
registering at the city hall or receiving the residence permit.
The health system is financed via 2 channels:
The basic package in the Netherlands is compulsory and provides the same basic health coverage across all insurers, as it is set by the government. It provides access to GP- and specialist care, most common treatments and medication, hospitalisation and emergency care. Competitive insurance companies can offer this package at different price- and quality-of-service levels.
A person may also need or want extra coverage for additional medical treatment, and here too, insurers can compete in pricing and quality of service.
The Dutch pension system has three pillars which together determine the amount of pension a person will receive when they retire. These pillars are:
The entitlement to maternity leave (“zwangerschapsverlof”) is a minimum of 16 weeks during which the (expected) mother’s salary is continues to be paid by the employer. The employer will however be partially compensated from the social security system. Maternity leave must commence at least four weeks and up to six weeks (ten weeks in case of twins or multiple births) before the expected date of delivery and the remaining time can be taken as additional maternity leave (“bevallingsverlof”).
Partners of mothers who have just given birth are legally entitled to one work week of paid “birth leave” (“partnerverlof” or “geboorteverlof”). The employee can take these leave days at his own discretion but must do so within four weeks after the child is born. Additionally, the partner can take up to 5 weeks of paternity leave within 6 months after the child’s birth. The employee will be fully paid via the social security system with a maximum of 70% of the daily wage.
Parental leave makes it possible for an employee to temporarily work less to take care for his or her child or children. The employee is entitled to parental leave for of a maximum of 26x the length of his/her working week, and can be taken within the first 8 years after the child’s birth.
Nine of these weeks are paid by the employer and will be compensated through the social security system. The employee is entitled to 70% of the maximum daily wage, but the employer is always allowed to pay more. The remaining 17 weeks of parental leave can in principle be unpaid, but again, employers can opt to continue payment of (part) of the salary.
Reach out to our experts in The Netherlands, who are always happy to answer your questions about the Dutch labour principles.