Introduction
Are you considering implementing your business in the Netherlands? Entering a new market is challenging (see our blog about how to enter a new market), especially when understanding the Dutch employment landscape. Employment contracts in the Netherlands require precise compliance with legal requirements. Negotiations and agreement processes can be time-consuming as they require meticulous attention to detail. A solid overview of the local employment landscape fosters positive employee relationships and enhances the overall success of business operations in the country. Additionally, navigating collective agreements, which establish industry- or company-specific standards for wages, working hours, and other employment conditions, further contributes to the complexity of the process.
This blog post aims to provide a comprehensive guide to empower businesses and help them navigate the complexities of employee contracts and collective agreements in the Netherlands. We’ll explore key aspects of Dutch labor law to facilitate a smooth market entry for businesses.
Building up Your Dutch Employee Contract
An employment contract is more than a formality; it is the cornerstone of the employer-employee relationship, protecting both parties’ rights. Dutch law mandates specific elements in employment contracts, such as:
- Identities of both parties: Names, residences, and workplace locations.
- Rights and obligations: Employers must ensure a safe working environment.
- Working conditions: Type of contract, job responsibilities, working hours, leave regulations, and payroll methods.
Types of Employment Contracts
- Temporary labor contract (tijdelijk contract): Automatically changes to a permanent contract if an employee has had several temporary contracts with their employer for more than three years, except if there are other rules in the collective labor agreement.
- Permanent labor contract (vast contract): A long-term contract with no fixed end date.
- Contract with a recruitment agency (uitzendcontract): An agreement with a recruitment agency whereby they are your legal employer and salary provider, even though you will be working for a third party.
- Zero-hour contract (nul uren contract): Can exist as either a temporary or permanent work agreement. An employee has no fixed working hours, allowing for flexible scheduling.
- Freelancer’s contract: Not an official contract with an employer but requires a specific type of contract with a client defining the working relationship.
Working Hours, Leave Regulations, and Payment
Dutch employers must track employee working hours. Employees aged 18 and over can work up to 12 hours a day and 60 hours a week, though not consistently every week. The regulations are as follows:
- 48 hours a week over a 16-week period, or
- 55 hours per week over a 4-week period.
Sick Leave
- Employees must provide a medical certificate to justify their absence.
- Employers cover at least 70% of the salary from the first day of illness, with possible supplementation up to 100% according to any applicable collective labor agreement (CAO).
- For instance, an employee sick for two days and earning €15.00 per hour will receive at least €10.50 per hour during sick days.
- For long sick leaves, employers must pay at least 70% of the salary for the first two years of sick leave. If the sick leave extends beyond two years, the Employee Insurance Agency (UWV) may provide a sickness benefit. Employers cannot dismiss a sick employee.
- For example, an employee earning €2,500 per month on long-sickness leave will receive at least €1,750 per month.
Pregnancy and Maternity Leave
- Pregnant employees are entitled to six weeks of pregnancy leave (before the due date) and at least ten weeks of maternity leave (after childbirth).
- Fathers are entitled to five weeks of paternity leave.
- There are also specific holidays when employees in the Netherlands are not working. Check the government website to stay updated.
Payment Conditions
- Employers must pay at least the minimum wage, which for employees aged 21 and up is €13.27 gross per hour for the first half of 2024. Check every six months to stay compliant with Dutch law. For employees under 21, consult the government website for specifics.
- Payment conditions are negotiated between employer and employee during the contract formation. The contract must specify how wages will be calculated and paid on an agreed-upon schedule, often determined by collective agreements (CAO).
Termination of the Contract
Dutch employment law provides extensive protection for employees regarding dismissal and termination. There are three primary methods for terminating an employment contract:
- Mutual Consent Termination: Employers and employees can agree to terminate the contract amicably without requiring permission from authorities. A written settlement agreement must include terms of termination and severance pay. The employee has a 14-day reflection period to rescind the agreement.
- Termination with UWV Permission: For economic reasons or prolonged illness, the employer needs permission from UWV WERKbedrijf, a Dutch governmental agency. The UWV reviews the validity of termination grounds, which could take 8 to 12 weeks. Severance pay is due if the employee has served for more than two years, determined by government regulations based on service duration and age. Special provisions apply for employees over 50. The maximum severance award is limited, but additional damages may be awarded for unfair dismissal or gross misconduct by the employer.
- Dissolution by Cantonal (regional) Court: When termination reasons are not covered by mutual consent or UWV permission, the employer must apply for dissolution through the courts. Severance pay is due unless the employee is found at fault.
Collective Labor Agreements (CAO)
Collective agreements (CAOs) are legally binding contracts between employers and employee unions, covering wages, working hours, and other conditions. They can apply to a single company or an entire business sector. Employers are obligated to adhere to a CAO under certain circumstances
- If the employer has directly negotiated the agreement with trade unions.
- If the employer is a member of an employer’s organization that has established a CAO relevant to the business sector.
- If the Ministry of Social Affairs and Employment has deemed a CAO binding to the sector (AVV). Verification of a relevant CAO can be done through the Uitvoeringstaken Arbeidsvoorwaardenwetgeving (UAW).
- If the employer operates without membership in an employer’s organization and there is no binding CAO for the sector, but the employer has formulated its own CAO.
There are two types of CAOs: sectoral collective agreements and company collective agreements. In the hierarchy of legal precedence, collective agreements are more important than individual contracts, unless individual agreements offer more advantageous terms.
All employees within an organization are subject to the regulations outlined in a CAO, irrespective of their position or role. While CAOs are not mandatory, they establish the general rules of employment within a given sector.
In the absence of a CAO, seeking guidance from a contract lawyer is advisable, as they possess a deeper understanding of legislation, particularly for employees navigating complex employment scenarios.
Alternatively, companies can draft their own CAO with the assistance of legal professionals familiar with labor law. This process ensures that company-specific regulations and agreements align with legal requirements and industry standards.
Conclusion
Understanding the nuances of employee contracts and collective agreements is essential for businesses operating in the Netherlands. By adhering to legal requirements, businesses can foster positive employer-employee relationships, mitigate risks, and ensure compliance with Dutch labor laws. Whether navigating employee contracts or negotiating collective agreements, businesses can benefit from legal expertise to navigate the complexities of the Dutch employment landscape effectively. By adhering to legal requirements, businesses can establish a strong foundation for success in the Dutch market.
Are you ready to enter the Dutch employment market? Internago is with you every step of the way. Our team is dedicated to helping your company implement in the Netherlands. Together, we stay updated on the latest changes in Dutch employment law. If you need assistance, contact us at info@internago.com. For more insights into the Dutch market, check out our blog on work-related cost schemes.