The Netherlands is a country in northwestern Europe bordered by Germany and Belgium. The word “Netherlands” literally means "lower countries", in reference to the country’s low elevation and flat topography.

The Netherlands ranks among the highest in the world for press freedom, economic freedom, human development, quality of life, and happiness. Thanks to its great location, business-friendly policies, strong economy, and talented workforce, the Netherlands offers several benefits for companies wanting to set up shop in Europe.

Types of Contracts

• Fixed Term with a maximum length of 3 years, which can be renewed twice for a total of 3 contracts in 9 years.
• Indefinite

Working Hours

The maximum working hours per day is 12 hours, which equates to 60 hours per week. However, in the longer term, Dutch law stipulates that:

• Over a 4-week period, the number of working hours per week should not exceed 55 on average, though can be increased to 60 as part of a collective agreement
• Over a 16-week period, the number of working hours per week should not exceed 48 on average.

Overtime can be accumulated and paid back in days off (time off in lieu).

Minimum Wage

The minimum wage is EUR 1,995 per month for employees over the age of 21, and scales down for each year younger down to 15 years of age (see here).

Note that the minimum wage changes frequently (often in January and July); for the most up-to-date values, see the government website here.

Holiday Allowance

Employees have a legal right to holiday allowance on top of their wages. Although it is called holiday allowance (vakantiegeld), it can be spent any way they like. Holiday allowance must be at least 8% of the employee’s gross wage, including overtime, bonuses or supplements. Note that this is considered taxable income.

30% Reimbursement Ruling (Tax Advantage)

Highly skilled migrants to the Netherlands can take advantage of the “30% reimbursement ruling”. This is a tax-free allowance equivalent to 30% of the gross salary, intended to help the employee with the financial burden involved in moving country.

In practical terms, the employee and employer agree to reduce the employee’s salary by 30%, then this amount is given to the employee as a reimbursement for expenses, which is not taxable. Thus, 30% of the employee’s salary is not subject to taxes. This applies for the first 5 years of employment.

Employees must meet the following criteria to be eligible, then apply for the grant with the employer:

• The employee is recruited or transferred from abroad
• The employee has specific skills or experience that is sought after in the Netherlands (determined by several factors such as employment history, seniority, education, salary and age)
• The employee’s salary is above a minimum threshold (which varies according to their level of education). Note that the salary must remain above this amount each year to continue receiving the advantage.
  • There are exceptions to this, notably employees in roles such as scientific research and doctors working in specific companies or institutions

Probation Period

For temporary contracts, the maximum probation period is 1 month. For permanent contracts, it is 2 months.

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Taxes & Local Employment Costs

Employee Taxes

Employees in the Netherlands must pay income tax on the employment income (aka “box 1”), which is a progressive tax at the following rates per income bracket:

• Below EUR 37,149: 9.28%
• EUR 37,150 to EUR 73,301: 36.93%
• Above EUR 73,301: 49.50%

Additionally, employees must pay national insurance contributions of 27.65% on their earnings below EUR 37,149.

Employer Taxes & Contributions

Employers should make the following contributions, in addition to the employee’s gross salary:

• Mandatory health insurance: 6.68% of gross salary, with a monthly cap of EUR 5,579.67
• Long-term disability fund: 5.37% of gross salary, with a monthly cap of EUR 5,579.67
• Sickness (state) fund: 7.61% of gross salary, with a monthly cap of EUR 5,579.67*
• Unemployment fund: 7.64% of gross salary, with a monthly cap of EUR 5,579.67

Note: Sickness state fund costs are referred to as the work resumption fund. The work resumption fund (Whk) is part of the employee insurance schemes. Employers pay a Work resumption fund premium for it. These premium receipts finance the wage costs of employees who are sick or unfit for work. Many employers have to deal with absenteeism of employees at some point. This may involve short-term or long-term absenteeism.

The employee insurance contribution percentages are set twice every year (1 January and 1 July) by the Ministry of Social Affairs and Employment. The Employee Insurance Agency (UWV) shows the current contribution percentages (in Dutch).

The national insurance contributions (in Dutch) are set every year. They depend on the rates and the age of the person paying. The social insurance benefits (in Dutch) are set every six months.

Annual Leave

The statutory minimum holiday entitlement in the Netherlands is 20 days.

Sick Leave

If an employee is sick, there is no statutory limit to the number of days that can be taken as sick leave. The employer must pay a minimum of 70% of the salary of the employee while they are on sick leave, though it is very common for employers to pay 100% of the salary.

This applies for up to 2 years, beyond which the employer is not obliged to pay.

According to article 7:629 of the Dutch Civil Code, an employee with an employment contract for an indefinite period of time is entitled to a maximum of 104 weeks (almost 2 years) of continued wage payment during incapacity for work based on 70% of his/her gross monthly salary.

In the first year of incapacity for work, however, it should be at least the minimum wage, if the 70% falls under this amount.

Maternity Leave

Pregnant employees are entitled to 6 weeks pregnancy leave (before the due date) and at least 10 weeks maternity leave (after childbirth). In total an employee has a right to at least 16 weeks of leave. If, for instance, the baby is born before the pregnancy leave, the total of 16 weeks starts from the day after the birth.

In some cases, the maternity leave can be longer than 10 weeks. For example:

• If an employee takes between 4 and 6 weeks of pregnancy leave before giving birth, she can add the remaining time to her maternity leave afterwards.
• If the baby is born later than the due date, the employee's maternity leave begins after the actual birth. The total may therefore be longer than 16 weeks.

In the case of multiple births, the employee has the right to at least 20 weeks leave, and also has a right to maternity pay for this period. If the baby is hospitalized for more than 7 days directly after birth or during the maternity leave, the employee may have a right to longer maternity leave.

If the mother dies in childbirth, her partner is entitled to take the maternity leave.

Paternity Leave (Partner Leave)

If the partner of an employee gives birth, the employee has a right to 1 week of parental leave for partners after the birth. This paid leave can be taken any time in the first 4 weeks after the birth of the child. During this period of leave, employers must continue to pay 100% of the employee's salary.

Public Holidays

There are 10 public holidays in the Netherlands for 2024. See here for the full list of public holidays on the NL government website.

Notice Period

The standard minimum notice periods are as follows. However, this notice period can be waived as long as this is agreed between employee and employer in the contract.

• 1 month for the employee
• 2 months for the employer (end-client)

An employer may dismiss employees during their probation period without cause. There is no notice period during probation. The employee may resign without giving a reason. However, if either the employer or employee requests written grounds for dismissal or resignation, they must be provided.

Severance Pay

In the Netherlands, if an employee’s contract is terminated, the employee is entitled to severance pay. The amount of severance depends on the employee’s length of service; 1/3 of their gross monthly wage per year worked (starting from the first working day), up to a maximum of one gross annual salary.

Incomplete years are pro-rated for this calculation. Any unused leave must be taken before the end of employment. If there is any remaining leave time, it will be paid out in the final salary.

It's common for companies in the Netherlands to pay their employees a 13th month allowance in November or December of each year. The percentage is the same for all employees in the company and usually equals about 8.33% of the base salary.

The Netherlands introduced a tax scheme that allows migrant workers to receive 30% of their income tax free for up to five years, helping them offset the cost of relocation and potentially higher cost of living. The program is intended to attract skilled workers to the Netherlands and keep Dutch employers competitive in a global marketplace.