An Employer of Record (EOR) in the Netherlands is a company that takes on the responsibility of being the legal employer for a worker. This includes managing payroll, benefits, and other employment-related tasks on behalf of the worker's actual employer.
Discover the key considerations and essential details you should be aware of before opting for an Employer of Record (EOR) in the Netherlands.
On this page: Employment Contracts | Collective Labor Agreements | Employment Types | Withholding Taxes | Social Security Contributions | Personal Income Tax or Wage Tax | Employee Benefits
Employment Contracts in the Netherlands:
An employment contract, known as "arbeidscontract," establishes the pivotal relationship between an employer and an employee in the Netherlands. This document meticulously outlines the "arbeidsvoorwaarden" or terms and conditions of employment. Here’s a structured breakdown:
- Types of Contracts:
- Fixed-Term and Permanent: Employers can offer either temporary or permanent contracts, which can be formalized in writing or verbally.
- Permanent Contract Eligibility: Generally, permanent contracts follow three consecutive temporary contracts or after three years of temporary agreements, unless a Collective Labour Agreement (CAO) dictates otherwise.
- Key Employment Contract Elements:
- Essential Details: This includes names, work location flexibility, job roles, working hours, salary specifics, contract duration, type, trial periods, training entitlements, holiday provisions, leave, termination procedures, pension, ancillary conditions, and more.
- Education: If stipulated in the CAO, employers must fund employee education and allow for training during working hours.
- Ancillary Activities: Prohibiting simultaneous employment elsewhere is generally not allowed unless justified by health and safety risks, protection of confidential information, integrity of government services, violation of legal regulations, or prevention of conflicts of interest.
- Modifications: Employers must address employee requests for contractual changes within stipulated periods, ensuring transparency and adherence.
- Equal Treatment and Pay: Upholding non-discriminatory practices is fundamental. Payroll employees are accorded the same rights and conditions as regular company employees.
Collective Labour Agreements (CAO) in the Netherlands:
A CAO, or Collective Labour Agreement, plays a crucial role in shaping employment standards across the Netherlands:
- Types of Collective Agreements:
- Sectoral: Pertaining to specific industry sectors.
- Company-Specific: Tailored for individual companies.
- Application of CAO:
- When It's Applicable: It becomes mandatory either by direct agreement with trade unions, employer organization memberships, or declarations by the Ministry of Social Affairs and Employment (AVV).
- Deviations: While some flexibility exists, deviations must favor employees. Otherwise, standard CAO norms prevail.
- Integration with Employment Contracts:
- Specification: Employers must specify in contracts if a CAO applies. When active, the CAO universally governs employee terms, superseding individual contract terms if conflicts arise.
- Non-Compulsory CAO and Employment Arrangements:
- Flexibility: Absent mandatory CAO stipulations, employers can independently craft employment terms. However, overarching employment laws, such as the Minimum Wage Act and Working Hours Act, remain binding, underscoring the importance of compliance.
Employment Types in the Netherlands
Understanding Employment Types in the Netherlands
Employment in the Netherlands is categorized by distinct types, each governed by specific regulations and conditions. Here's a comprehensive overview:
1. Fixed-term and Indefinite-term Employment Contracts:
Employees under these contracts commit to working for a specified period. The key distinctions include:
- Fixed-term Contracts: Have a predetermined end date.
- Indefinite-term Contracts: Continue without a specified end date.
2. On-call Employees (Oproepkracht):
On-call contracts, such as zero-hours and min-max contracts, do not specify regular working hours but come with similar regulations as other employment types.
3. Agency Workers (Uitzendkracht) and Payroll Workers (Payroll Werknemer):
These workers are affiliated with staffing companies and are lent out to other companies. The primary distinctions are in their exclusivity and recruitment processes.
4. Independent Contractors (ZZP-er):
Operating autonomously, independent contractors offer services through service contracts. Unlike traditional employees, they lack certain employment protections and are accountable for aspects like sick pay and contract terminations.
Assessment for Contractor Status:
Determining if a service contract equates to an employment contract depends on multiple factors. These include job nature, independence levels, exclusivity, working terms, payment structures, financial risks, insurance coverage, and non-compete stipulations. Each case undergoes a thorough evaluation based on its unique circumstances.
Note: The employment durations for these categories adhere strictly to the aforementioned terms, without additional limitations.
Withholding Taxes in Netherlands
When navigating employment regulations in the Netherlands, one crucial aspect employers must grasp is the concept of withholding taxes. These taxes, which include Wage Tax and National Insurance Contributions, are fundamental to ensuring compliance and facilitating a smooth employment experience for both employers and employees.
Key Tax Components:
- Wage Tax: A mandatory deduction from the employee's wage.
- National Insurance Contributions: Contributions towards the national insurance scheme.
- General Old Age Pensions Act (AOW)
- Surviving Dependants Act (Anw)
- Long-Term Care Act (Wlz)
- General Child Benefit Act (AKW)
- Employed persons' insurance contributions: An essential contribution to safeguard the employee's personal insurance.
- Sickness Benefits Act (ZW)
- Invalidity Insurance Act (WAO) / Work and Income according to Work Capacity Act (WIA)
- Unemployment Insurance Act (WW)
- Income-dependent contribution pursuant to the Health Care Insurance Act (Zvw)
Wage Tax in the Netherlands
Introduction to Wage Tax
In the Netherlands, the Wage Tax, categorized into distinct boxes, plays a pivotal role in the country's tax framework. Understanding these categories and their implications is essential for both residents and employers.
Box 1 Income - Progressive Income Tax
Box 1 encompasses income from employment (like wages and salaries) and homeownership (inclusive of rental income and imputed rental value). Dutch residents are subject to progressive tax rates based on their age and income level:
| For Individuals Under the Age of 66: |
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| For Those Reaching Pension Age in 2023: |
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| For Individuals Born Before January 1, 1946: |
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| For Those Born on or After January 1, 1946: |
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Box 2 Income
Box 2 income, associated with substantial shareholdings (owning at least 5% of a company's share capital), is taxed at a flat rate of 26.9%. This rate ensures equitable taxation for those benefiting from significant shareholding returns.
Box 3 Income
Income from savings and investments falls under Box 3. Regardless of one's income level, a flat tax rate of 32% is applied, emphasizing a consistent taxation approach for savings and investments.
National Insurance Contributions
National Insurance Contributions in the Netherlands play a pivotal role in ensuring the financial well-being of its residents across various life stages. These contributions fund essential social security programs, offering financial support during retirement, in the event of a partner's demise, during long-term care needs, and for families raising children.
General Old Age Pensions Act (AOW)
The AOW provides a state pension for elderly residents of the Netherlands, ensuring financial support during retirement.
- Eligibility: Those insured under the Dutch AOW system qualify.
- Administration: Managed by the Social Insurance Bank (SVB).
- Contribution for 2023: 17.9% of income.
- Minimum Contribution: €558
- Maximum Contribution: €5,588
- Income-Based: Varies between the minimum and maximum based on income.
Surviving Dependants Act (Anw)
Anw offers financial assistance to surviving dependents, such as widows and widowers, after the loss of a partner or spouse.
- Contribution for 2023: 0.1% of income.
- Minimum Contribution: €3
- Maximum Contribution: €31
- Income Threshold: Contributions differ for incomes above and below €37,149.
Long-Term Care Act (Wlz)
Wlz provides comprehensive support for individuals with prolonged care needs, ensuring they receive necessary assistance for daily living activities.
- Contribution for 2023: 9.65% of income up to €37,149.
- Protection: Capped at a maximum of €10,271 regardless of income.
General Child Benefit Act (AKW)
AKW offers financial aid to families with children, assisting parents or guardians with the costs associated with raising their children.
- Contribution: No direct contribution required.
- Benefit: Monthly support based on child's age and family size.
By understanding and adhering to these contributions, residents can ensure that they leverage the full benefits of the Dutch social security system, enhancing their quality of life and securing their future.
Employed Persons' Insurance Contributions
Understanding employee personal insurance contributions is essential for both employers and employees in the Netherlands. These contributions ensure financial protection and support for workers during various life events, including illness, incapacity, or unemployment.
Sickness Benefits Act (ZW)
The Dutch Sickness Benefits Act, or Ziektewet (ZW), provides compensation for employees unable to work due to illness or incapacity.
- Administered by: Employee Insurance Agency (UWV).
Invalidity Insurance Act (WAO) / Work and Income according to Work Capacity Act (WIA)
The WIA encompasses two schemes for individuals facing work-related challenges:
- IVA (Income Support): For those fully incapacitated for work.
- WGA (Work Resumption): For those partially capable of work.
- Administered by: Employee Insurance Agency (UWV).
Unemployment Insurance Act (WW)
The Unemployment Insurance Act (WW) offers financial support to individuals who become unemployed, ensuring a safety net during job transitions.
- Administered by: Employee Insurance Agency (UWV).
Return to Work Fund (Whk)
The Whk facilitates the reintegration of individuals into the labor market after incapacity due to illness or disability.
- Administered by: Employee Insurance Agency (UWV).
Premium Details for 2023
| Description | Premium |
|---|---|
| Basic WAO/WIA premium for large and medium-sized employers | 7.11% |
| Basic WAO/WIA premium for small employers | 5.82% |
| General Unemployment Fund premium (AWf lower) | 2.64% |
| General Unemployment Fund premium (AWf-high) | 7.64% |
| Premium component WGA for permanent employment | 0.87% |
| Premium component Sickness Benefits Act for flexible employment | 0.66% |
Income-dependent contribution pursuant to the Health Care Insurance Act - zorgverzekeringswet (Zvw)
Health insurance contributions vary as per the employee’s income. As of 2023, employer contribution is 6.68% and Employee contribution is 5.43% of the gross salary. Maximum income is ceiled at €66,956.
Social Security Schemes:
It's a norm in the Netherlands to ensure all employees benefit from social insurance. The contribution specifics can differ based on the employee’s nationality. To elucidate:
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For Employees from EU, EEA, and Switzerland:
Employees already insured within these regions can obtain an A1/E101 certificate from their respective countries before commencing work in the Netherlands.
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For Employees Outside the EU, EEA, and Switzerland:
Employees from nations outside these regions must secure a Statement of Applicable Legislation (Verklaring toepasselijke wetgeving) to comply with Dutch social security regulations.
Employers don't have to withhold the taxes or contribute to insurance contributions upon receiving the above mentioned certificates from the country they reside.
How an Employer of Record (EOR) in the Netherlands Facilitates Tax Withholdings:
Engaging with an Employer of Record (EOR) in the Netherlands can significantly simplify the process of managing and withholding these taxes. An EOR possesses the expertise and infrastructure to ensure:
- Accurate calculation and deduction of the required taxes.
- Timely submission of withheld amounts to the relevant authorities.
- Guidance on obtaining essential certificates or statements, such as the A1/E101 or Verklaring toepasselijke wetgeving, for internationally sourced talent.
- Adherence to Dutch regulations, ensuring both compliance and efficiency in tax-related matters.
Summary:
Withholding taxes in the Netherlands is a multifaceted process integral to the country's employment framework. Ensuring compliance is paramount, and partnering with an Employer of Record (EOR) can streamline this intricate task, offering both accuracy and peace of mind to employers.
Employee Benefits in the Netherlands
In the Netherlands, mandatory employee benefits are comprehensive, encompassing general old-age pensions, surviving dependents' pensions, long-term care, child support, unemployment benefits, work and income protection, sick leave, and health insurance. The social security system consists of national insurance and employee insurance schemes.
Mandatory Employee Benefits:
1. National Insurance Schemes:
- General Old Age Pensions Act (AOW): All residents accrue rights to a state pension based on AOW, with the amount depending on years lived in the Netherlands.
- Surviving Dependents Act (ANW): Insured for a surviving dependents' pension based on ANW, subject to specific criteria.
- Long-Term Care Act (Wlz): Provides care or support for daily activities due to limitations.
- Child Support (Kinderbijslag): Offers financial support for child care costs.
2. Employee Insurance Schemes:
- Unemployment Insurance Act (WW): Provides unemployment benefits under specific conditions.
- Work and Income Act (WIA): Addresses partially disabled workers' capabilities through IVA and WGA schemes.
- Sickness Benefits Act (ZW): Covers sick pay for employees, with a maximum of 104 consecutive weeks.
- Health Insurance: Mandatory basic health insurance for all residents and workers.
Supplementary Employee Benefits:
1. Retirement Pension:
- Defined Contribution (DC) Pension Schemes: Employers contribute to individual employee pensions based on age and salary.
2. Dependent’s Pension:
- Pension Schemes: Include supplemental cover for partner and orphan pensions based on salary and potential years of service.
3. Disability Insurance:
- Work and Income Act (WIA): State disability benefit after two years of sick leave, covering at least 70% of final income.
4. Accident Insurance:
- Accident Insurance Policy: Pays benefits in case of death or disability resulting from an accident.
5. Group Health Insurance:
- Health Insurance Policy: Covers costs incurred due to illness, typically paid by employees, although some employers contribute.
Perks extend to transportation allowances, mobile phones, and flexible leave models, providing additional incentives to employees. The Dutch social security system ensures a robust framework of benefits, offering financial security and support throughout various life stages.
Netherlands Overview
| Overview | |
| Continent | Europe |
| Country | Netherlands |
| Capital | Amsterdam |
| Time zone | UTC -4, UTC +1 |
| Total Time zones | 2 |
| Working hours per week | 40 |
| Working week | Monday–Friday |
| Financial Year | January 1st to December 31st |
| Personal Tax filing deadline | 1st May |
| Date format | dd/mm/yyyy |
| Currency | Euro (EUR) |
| VAT | the standard rate is 21% |
In the Netherlands, an Employer of Record (EOR) serves as an invaluable ally for businesses navigating the complexities of the Dutch employment landscape. By assuming the responsibilities of local compliance, payroll management, and administrative tasks, the EOR allows companies to focus on their core objectives without the burden of intricate regulatory requirements. This partnership not only streamlines the expansion process but also ensures that employees are engaged under contracts that align with Dutch labor laws and standards. As the Dutch market continues to evolve, the role of an EOR becomes increasingly pivotal, offering companies a seamless pathway to establish and grow their presence in the Netherlands while maintaining compliance and fostering a productive work environment.
Western Europe: EOR Belgium | EOR France | EOR Ireland | EOR Luxembourg | EOR Netherlands
Social Security Contributions in the Netherlands
In the Netherlands, both employees and employers contribute to several social security schemes that provide various benefits.
Here's a breakdown of the contributions for each party:
Employee Contributions:
Employer Contributions:
Summary Table: