How to hire employees in the Netherlands through an Employer of Record (EOR) [2023 Guide]

It’s not surprising that companies are attracted to talent in the Netherlands. The Netherlands ranks highest among European countries for digital skills and top three for growing talent—making them one of the best countries for talent competitiveness. For those companies eager to leverage the country’s workforce in Amsterdam and hire Dutch employees around the country, you’ll have to consider establishing a legal entity or hiring through an employer of record (EOR).

Registering a legal entity can take months, preventing you from getting started with work in-country. Compliance can be tricky to maintain as Dutch employment laws are ever-changing. You can quickly incur fines and harsh penalties for misclassifying workers or paying incorrect taxes by the Dutch Tax and Customs Administration.

Alternatively, you can use an “Employer of Record” (EOR), which handles Dutch payroll, tax, and compliance considerations. Here’s a step-by-step guide for hiring through an EOR in the Netherlands.

Step by step: How to hire through an Employer of Record in the Netherlands

Step #1: Decide between a Dutch EOR and a legal entity

Deciding between a legal entity or obtaining an employer of record service will depend largely on your company’s resources, size, and plans to scale in-country. 

• Legal entity in the Netherlands. Setting up a legal entity from scratch usually requires registration with local authorities, opening a Dutch bank account, and consulting with local experts to ensure compliance with tax and labor laws. It can be a hassle. First, you’ll need to pick the right business structure for your company in the Netherlands, pick a name that’s available, and set up a business address. Then, you'll have to register your company with the Netherlands Chamber of Commerce (KVK) and the Dutch Tax and Customs Administration, just to start the process.

• Dutch EOR. An EOR is a third-party service that operates as an employer on a company’s behalf—meaning you don’t need to set up your own entity. As well as allowing you to hire full-time Dutch employees, EORs handle all the legal requirements for complying with Dutch laws for payroll, employment contracts, and benefits like health insurance and maternity leave. EOR services also include calculating and withholding income taxes, onboarding and managing employees, and running payroll.

Step #2: How to choose the best EOR for your business

Before you choose a platform, you should consider the services you will need, and how much you plan to grow your global hiring presence.

• Is the EOR active in the countries in which you need to hire? The first, and perhaps most obvious consideration when choosing an EOR for global expansion.
• Does the EOR own its own entities in the countries it services? If the EOR does not own the entities, it means they are partnering with a local or third-party provider.
• How does the EOR protect your sensitive and confidential information? It is vital that your EOR has the appropriate data protections in place, as well as secure technology that eliminates potential disclosures of private information.
• Does the EOR offer automated solutions? You may want to look for an EOR that automates the busy work like onboarding and benefits enrollment and other common HR and IT tasks.
• What is the EOR’s support model? It’s essential that your EOR has support staff that is both easy to contact and experts in the regulations of the countries in which you are hiring.

Get the full checklist in our guide: What is an EOR?

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Step #3: How to hire and onboard your Dutch employees

Running a global workforce is not for the faint of heart, and picking an EOR to help you stay compliant when hiring full-time employees in the Netherlands is the right move to get you operating quickly. Once you’ve picked an EOR, you’ll need the following information to begin the onboarding process with your new employees:

• Their name, initials, DOB, and complete address
• Their Citizen Service Number (BSN)
• The employee’s salary in euros

Then, fill out the official form and send it to the Dutch Customs and Tax Administration.

Next, you must classify the worker’s employment status, whether a full-time employee or independent contractor. You need to send an employment agreement, including an offer letter, outlining working conditions.

The Netherlands is very strict surrounding its employment laws to uphold its employees’ work-life balance. Dutch laws, specifically in the Book 7 of the Dutch Civil Code, have established mandatory benefits programs and penalties if employers do not correctly implement them. These required benefits include a three-part pension, a minimum of 20 paid vacation days per year, public holidays, unlimited sick leave, health insurance, and long-term care.

An EOR can automatically localize and distribute employment agreements to include these required benefits and more as you stay competitive in today’s job market. Every Dutch hire will have a legally compliant contract offering statutory requirements for probation periods, working hours, pensions, minimum wage, benefits, and termination policies like severance pay and notice periods. Average working weeks (common practice) are between 36-40 hours and are not required to work on Sundays/weekends and/or public holidays unless stated in the employment agreement/collective bargaining agreement.

Local employment laws protect employees and mandate that an indefinite contract can not be terminated without the approval of UWV (Employee Insurance Agency). Fixed-term employment agreements can be terminated during the probationary period, or not renewed. In contrast, contractors/freelancers who have fixed-term contracts can be terminated at any time with notice.

Step #4: Run payroll

Once you’ve collected a new hire’s information and both parties have signed employment agreements, an EOR will pay your Dutch employees their annual salary in EUR while withholding legally required taxes from their salaries with the correct tax rate per local laws. Employers will pay payroll tax and contributions on the employees’ monthly salary, including:

• Income tax
• Social Security contributions
• Mandatory private healthcare

While payroll occurs once a month around the 25th, employers must pay and file payroll taxes by the end of the following month. If you do not comply and pay these payroll taxes past the due date, you’ll be charged a 3% administrative fine on the outstanding balance. If you fail to file your tax return or miss the filing deadline, you’ll be charged €68. For the A-to-Z on global employment payroll, read our comprehensive guide to running international payroll for employees in the Netherlands.

Frequently asked questions about hiring through an EOR in the Netherlands

How much does an EOR cost?

EORs typically use one of two pricing structures:

• Fixed monthly fee per employee
• Percentage of payroll plus applicable taxes

Both methods can also come with various administrative fees, onboarding charges, and other costs for supplemental features. 

Keep in mind that you don’t need to use an EOR for your entire workforce. If you want to segment its use, you’ll only be charged for the employees you employ through the EOR.

What is the difference between an EOR and PEO?

A Professional Employer Organization (PEO) co-employs a company’s workforce and provides administrative services like paying employees, handling compliance, and filing payroll taxes. The company and PEO are jointly responsible for the workforce. A PEO does not, however, allow you to hire in other countries where you haven’t set up a local entity. 

An EOR, on the other hand, is the sole employer of the portion of your workforce you use it for, assuming all the associated liabilities. An EOR allows companies to work with employees in other countries without setting up a legal entity.

Does an EOR protect your sensitive and confidential information?

While outsourcing your payroll management to an EOR can spare you time and compliance risk, sharing your data with companies who use third-party vendors leaves you exposed to data breaches from manual uploads. 

Under the Personal Data Protection Act, citizens of the Netherlands have the right to know what is being done with their personal data and who has access to it. The Data Protection Authority oversees compliance and checks if organizations are obeying the law.

You should seek out EORs that prioritize data protection, including:

• Compliance with industry-standard privacy regulations in different countries.
• Secure infrastructure with around-the-clock maintenance.
• Carefully vetted personnel.

You can also establish a Data Processing Agreement (DPA) with a payroll service that mandates sound privacy practices and provides legal protection. 

Does an EOR help with Dutch tax filings?

An EOR can automatically calculate and file your taxes in the Netherlands. Rippling, for instance, is an authorized payroll provider in the Netherlands. The employer is required to provide a pay stub, or loonstrookje, every month and one at the end of the year summarizing all earnings and deductions.

On your company’s behalf, it can distribute and submit a loonstrookje that outlines:

• Gross salary.
• Net salary.
• Taxes withheld.
• Employer contributions to social insurances.

What are the mandatory benefits for Dutch employees?

The Dutch Civil Code provides the following mandatory employee benefits:

• Pensions.
• Sick leave.
• Parental leave (including paternity and maternity leave).
• Vacation entitlements (minimum of 20 paid vacation days).
• Public holidays (not included in vacation days total).
• Health insurance.
• Long-term care.

Many Dutch employers offer additional supplementary benefits like allowances for home offices, a 13th-month bonus or holiday allowance, statutory annual leave, extended paternity leave, and other types of statutory protected leaves.

Read our complete guide for more information on mandatory benefits in the Netherlands.

What are the employer costs for full-time employees in the Netherlands?

Employers in the Netherlands are responsible for deducting the following from their full-time employees’ paychecks. Total employer payroll costs can be up to 33.29% (excluding benefits’ add-ons). 

Find the details below:

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Rippling and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any related activities or transactions.