What you should know about employing people in...Netherlands
It is not possible to terminate an employment contract without following the prescribed procedure.
1. No termination at willTo give notice a labour board permit must be obtained in advance, which generally takes two months; the permit will be refused if the employer cannot substantiate sufficiently that termination is necessary.
An alternative is termination by the cantonal court. This procedure is generally quicker, as it takes 6-8 weeks and the court terminates the employment (without notice) instead of granting permission to give notice (in which case a notice period must be observed). In general, a severance payment is due unless the employee is to blame.
The above does not apply to automatic termination of fixed term contracts, termination during a probationary period or immediate termination for cause. There is a cap on the number of fixed term contracts between the same parties.
2. Discrimination lawsAs everywhere within the EU, there is a wide range of “protected” classes such as race, gender, age, disability, sexual preference and nature of the employment agreement (fixed term/indefinite part-time/fulltime). Courts will generally refuse termination if this is deemed to be in violation of discrimination laws, or alternatively will attach higher severance pay to the termination.
3. Employee benefitsStatutory benefits include a minimum amount of paid holidays, an annual holiday bonus of 8%, and payment during sick leave. Severance pay is not statutory, but dependent on a court judgment. The employer is obliged to pay a contribution towards (national) health insurance, and a (limited) state pension, along with other social premiums.
4. Wage/hour lawsThere is a minimum wage, and a maximum amount of working hours based on European law. There is no statutory regulation for payment of overtime, although this is frequently regulated in collective bargaining agreements.
5. Classification (employee vs. independent contractor)An agreement establishing an independent contractor relationship can still be characterised as an employment contract. Tax wise that will create liability for the employer for income tax and social premiums. The contractor can also claim that the relationship was in fact an employment relationship.
A tax claim can be prevented by obtaining a prior tax ruling. Employment courts will generally rule against the existence of an employment contract if such a tax ruling has been obtained. The employment court bases its judgment on matters such as the extent of the authority of the company over the individual and the obligation of the individual to perform the services personally.
6.Sick leaveThe employee is entitled to 70% of his salary during the first 104 weeks of illness, capped at the maximum insured salary (resulting in a maximum payment of approximately € 2800 per month). However, it is not uncommon for an employee to receive 100% of his wages during the first year of illness, and 70% of his wages during the second year of illness. During this period it is not possible to give notice.
7. Restrictive covenantsClauses prohibiting an employee from working for a competitor or (in whatever way) for relations of the employer after termination of the employment contract are possible, if in writing. Upholding or limitation of these covenants is decided on the basis of a comparison of the reasonable interests of both parties. If indeed the employers’ interest to uphold a restrictive covenant is recognised by the court, matters of the scope of the covenant (both geographic and in time) are always considered.
8. Privacy regulationsThe employer is permitted to monitor the employee’s actions through monitoring phone calls, e-mails, or by use of cameras. However, regulations apply to the use of such measures, the obligation to inform employees beforehand, and the (limited) possibility of using these measures without prior disclosure.
9. Wage payment lawsPayment is generally periodically, either monthly of four-weekly. It is also possible to agree on a (partial) income that varies according to results either of the individual or of the company. In that case the employee is entitled to all information necessary to calculate his income. Dutch employment law prescribes a penalty (which quickly rises to 50%)for overdue salary payment.
10. Law fluctuationLaws and practices in the field of employment law are subject to change. At this time, matters like severance pay, compensation for unfair dismissal, termination protection during illness, and employee protection after merger/take over/insolvency are subject of change.