How to pay international contractors in the Netherlands
Apr 13, 2023
If you're looking for one of the world's most exciting, emerging tech hubs, look no further than the Netherlands. The country ranks second in the world for internet connectivity, and its capital, Amsterdam, has been named one of the world's most AI-ready cities.
Hiring employees in the Netherlands can be complex and time-consuming because you need to have a legal entity established in the country. That's why so many global businesses are interested in hiring Dutch contractors—known as zelfstandige zonder personeel, or zzp’ers. Zzp'ers give companies the ability to hire from the Netherlands' diverse and highly skilled talent pool, but with more flexibility.
Before you hire your first contractor in the Netherlands, there are some important things to consider—like how you'll pay them. If you need to know how to run international payroll for contractors in the Netherlands, you're in the right place—read on for the details.
Step by step: How to run payroll for contractors in the Netherlands
Step #1: Verify your Dutch contractor's identity
In the Netherlands, all employers are legally required to verify their workers' identities—this goes for both employees and zzp'ers. Rules are strict about the types of ID you can use for this—you'll need to see their passport, Dutch ID card, or Dutch or European driver's license. Check their name, age, height, nationality, signature, and photo, and be sure to make a copy of their ID document for your company's records.
Step #2: Classify your workers in the Netherlands
Classifying Dutch workers correctly is crucial. Misclassifying employees as contractors in the Netherlands can result in fines, back taxes, and other harsh penalties, including:
- Back taxes and social security
- Statutory rights, including paid leave
- Severance pay if you are found to have terminated a contractor who actually has an employee relationship
- Government fines and penalties
- Loss of intellectual property protection
- Reputational damage
The Dutch government offers a tool (in Dutch) to help employers and workers evaluate their relationships to ensure they aren't misclassified.
In the chart below, you'll find some of the characteristics that help differentiate Dutch contractors from employees.
High level of worker control. Dutch contractors are free to determine when and how they perform their work.
More direction from the employer. Dutch employees may be given direct supervision and instructions on when and how to work.
Work may not be part of the "core" business of the company.
Work may be part of the "core" business of the company.
Tools and equipment are provided by the contractor.
Tools and equipment are provided by the employer.
Compensated after work is performed and an invoice is submitted.
Compensated with regular salary payments.
Not entitled to most statutory benefits, with exceptions for minimum wage, workplace safety requirements, and rest periods in certain industries.
Entitled to all statutory benefits in the Netherlands, including paid vacation, sick leave, parental leave, public holidays, and more.
Non-exclusive. Companies cannot prohibit contractors from providing services to other businesses.
Exclusive services. Employees can be contractually obligated to work for just one company.
Fixed-term work agreements. Contractors cannot work for the same employer for "long and continuous" periods.
Indefinite work agreements. Employees work indefinitely until one party chooses to end the employment agreement.
Step #3: Draft and sign a model agreement
To help guard against misclassification, employers and contractors in the Netherlands can use a "model agreement," a standard contract drawn up by the Dutch Tax and Customs Administration for zzp'ers and their clients. The tax authority offers three kinds of model agreements:
- General model agreements, which cover most standard contractor-client relationships.
- Sector- or profession-specific model agreements, which are specific to certain industries and types of work.
- Individual model agreements, which are created by contractors and then offered for free use by anyone else working in the same profession.
It's also an option to draft your own model agreement and then have it assessed by the Dutch Tax and Customs Administration, but with so many accepted model agreements already available for use, it's generally faster to use an existing agreement.
Step #4: Provide safe working conditions
While contractors in many countries are excluded from the statutory benefits employees are entitled to, the Netherlands offers some of the best protections in the world for self-employed people. Employers of all workers, including zzp'ers, are required to provide a safe and healthy workplace that meets Dutch labor law requirements.
Step #5: Determine your contractor's working hours and rest times
Rules about working hours and rest periods are laid out in Dutch labor laws, but they don't always apply to contractors. The notable exception is for zzp'ers who work in roles where the safety of a third party could be at stake. For example, contractors who work in transport, such as drivers, are required to take mandatory rest days.
Step #6: Determine the best way to pay your contractors in the Netherlands
Before you can pay contractors in the Netherlands, you need to determine how you'll pay them. With the rise of global workforces and remote work, employers now have more choices than ever for making international payments to contractors. Here are some options:
- Bank wires. You can open a Dutch bank account and use it to deposit funds into Dutch contractors' accounts or use your bank to send a global wire transfer to pay a Dutch contractor.
- International money orders. This long-standing payment method can be slow—especially because the employer needs to physically purchase the money order, and the contractor needs to physically deposit it upon receipt. Money orders can also come with fees and bad exchange rates.
- Digital wallets or payment platforms. Some employers use platforms like Wise to transfer money across borders. Remember that exchange rates can change from day to day, making it difficult to predict your outgoings.
- Global payroll services. Typically, contractors aren't included in payroll, since they aren't subject to the same withholdings as employees—instead, they invoice for their services, which goes through accounts payable for many companies.
Step #7: Use global payroll software to process payments for Dutch contractors
As you saw in Step #6, there are multiple ways to pay contractors in the Netherlands. But the fastest and simplest way is paying contractors through global payroll software.
Step #8: Stay compliant with Dutch tax laws
While tax laws aren't known for their simplicity anywhere in the world, they're particularly complex in the Netherlands.
One of the major compliance issues you'll want to avoid is known as "permanent establishment." Even if your business is based outside of the Netherlands, if you hire Dutch workers and they conduct certain kinds of business, you could be found to have a permanent establishment in the Netherlands and be required to pay local corporate taxes. The main trigger for this is if your Dutch workers generate revenue for your company; i.e., if they work in IT or customer support, they're likely on the right side of this rule, but if they work in sales, they may not be.
While employers are exempt from payroll taxes for contractors in many countries, this isn't true in the Netherlands, where zzp'ers are entitled to certain worker protections. For example, employers have to pay more employee insurance for contractors than for employees, since their work arrangements are short-term.
Keep in mind, also, that foreign employers are required to pay VAT on all invoices for contractors and subcontractors. VAT can typically be deducted as input tax.
Frequently asked questions about running payroll for contractors in the Netherlands
Does Dutch minimum wage apply to independent contractors in the Netherlands?
Yes. Unlike in many countries, employers are required to meet minimum wage thresholds for both employees and contractors in the Netherlands. As of June 2020, the Dutch minimum wage is 1,635.60 EUR per month.
Do Dutch contractors get benefits?
Independent contractors in the Netherlands aren't entitled to all the same benefits as employees, but they have some entitlements, including:
- Minimum wage
- Social security
- Employment insurance
- Safe and healthy workplace requirements
- Working hours and rest days (in certain industries)
Can you pay contractors in the Netherlands in your home currency?
Contractors in the Netherlands can be paid in any currency, but it's usually best to pay them in their home currency so they can avoid fees and exchange rates.
Can you manually pay contractors in the Netherlands?
Yes, and many small business owners choose to manually process contractor payments as a cost-cutting measure. But manual payroll can be very time-consuming, especially as your business grows and if you work with multiple contractors in the Netherlands or across borders.
It's also important to note that manually processing payments comes with some risks:
- Compliance. Running payroll manually means assuming the risk of human error and omission. Protect yourself and your business with Rippling, which automatically enforces compliance with any applicable local laws—no matter where your contractors live.
- Security. Manual payroll processing also poses security risks, especially if you use spreadsheets or paper records. Sensitive employee information can be lost, stolen, or misused.
How do you turn a contractor into an employee in the Netherlands?
While hiring independent contractors over full-time employees can come with financial benefits, sometimes you do need a full-time employee. The challenge is making sure all the legal requirements are in order: the Netherlands' labor laws require payroll deductions, benefits, and more for employees that you don't have to worry about for contractors. Plus, you'll need a legal entity in the Netherlands—whether that's through establishing your own entity or using an Employer of Record (EOR) service.
Effortlessly manage your global contractors
You can pay international contractors directly through Rippling, meaning you need just one system to pay all types of employees—wherever they are.
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.