HUMAN RESOURCES IN THE NETHERLANDS FREQUENTLY ASKED QUESTIONS

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1 HUMAN RESOURCES IN THE NETHERLANDS FREQUENTLY ASKED QUESTIONS INTRODUCTION TO THE BASICS 1

2 Table of content 1. Hiring personnel, labour laws and terms of employment 1.1. Are there rules and regulations pertaining to the minimum wage? What are the laws pertaining to holiday allowance? Do I have to provide a pension scheme? Must I adhere to special rules when hiring temporary personnel? It is difficult to find specialised personnel. How can I connect with the right talent? Do I have to follow a collective labour agreement (CAO)? Personnel administration 2.1. What actions are required when registering information in a personnel file? Dismissing personnel, labour laws 3.1. What steps should I follow when dismissing an employee? Sick leave 4.1. What are the rules pertaining to an employee s illness and subsequent absence from work? Reintegration File Penalties Works Council 5.1. What are the rules regarding staff representation or a Works Council?? Setting up an effective HR structure 6.1. Can you advise me on setting up an strong HR structure in our company? Where can I find more information about HR-related issues?

3 1. Hiring personnel, labour laws and terms of employment 1.1. Are there rules and regulations pertaining to the minimum wage? Every employee working in the Netherlands who is younger than 67 years of age is entitled to the Dutch minimum wage, even if they are a foreign national. There are specific minimum wage scales, starting from the age of 15 up to 23 years and older. As an employer, you may, of course, choose to pay more but you cannot pay less. The gross minimum wage rates are stipulated in the provisions of the Minimum Wage and Minimum Holiday Allowance Act (Wet minimumloon en minimumvakantiebijslag). You are obliged to state the gross minimum wage applicable on the employee s payslip. Every year, on the first day of January and the first day of July, the gross minimum wage amounts are revised. The current gross minimum wage can be found on the website of the Ministry of Social Affairs (see link below). For more information (in Dutch only): minimumloon/vraag-en-antwoord/ hoe-hoog-is-het-minimumloon.html 1.2. What are the laws pertaining to holiday allowance? Employees are entitled to a minimum holiday allowance, as outlined in the Minimum Wage and Minimum Holiday Allowance Act (Wet minimumloon en minimumvakantiebijslag). This is calculated to be a minimum of 8 per cent of the employee s gross salary. A holiday allowance will be paid out in addition to the employee s normal salary. You can pay out this amount by way of an annual payment or in instalments. The holiday allowance must be stated separately on the employee s payslip. When someone is leaving your employ, you must pay any remaining holiday allowance still owed to them, as part of their final salary payment. By law, the minimum number of holiday days to which employees are entitled each year is four times the number of working For more information (in Dutch only): 3

4 days per week. The minimum allowance of holiday days is 20 days per year if working fulltime (4 x 5 days a week). Updated rules pertaining to holiday allowance have been in place since Employers must pay out the minimum allowance even if an employee was ill when their contract was terminated. Since 2012 there has also been a reduced period of time for when holiday allocation must be used by the employee: it is now six months following the end of the calendar year in which the holiday allocation was accrued, instead of the previous fiveyear expiration date Do I have to provide a pension scheme? In the Netherlands, some 90% of employers offer a pension scheme to their employees. Pension provisions are part of the compensation and benefits package. On 1 January 2007, the new Pension Act (Pensioenwet) came into force. Unlike the previous regulatory measures, there is now no obligation for new employers to provide pension provisions for their employees. If an employer and an employee have entered into a pension agreement, the Pension Act contains the terms and conditions that the pension provisions and agreement must comply with. One of these conditions is that the pension agreement must be administered by a pension fund or an insurer that operates in the Netherlands or in another EU Member State. The Pension Act also sets out the operating requirements for the pension fund or the insurer. For more information (in Dutch only): Must I adhere to special rules when hiring temporary personnel? There are rules that you must comply with for all personnel that you hire (see link below). Temporary workers are entitled to the same wage and other allowances as comparable workers in the industry in which the worker is temporarily carrying out his work, unless an (applicable) collective agreement provides other rules. It is also important to realise that a temporary contract can be offered no more than three times subsequently. After the third contract a permanent contract must be offered. The three contracts cannot exceed a total maximum of 3 years. For more information 4

5 As of 1 July 2015, a new law comes into effect (Flexwet), which stipulates that no more than two years of consecutive temporary contracts are permitted. After two years of temporary contracts, or when a 4th contract is offered, the presented new contract must be of a permanent nature. It is only possible to prevent a change from a temporary to a permanent contract if there is a mandatory period of at least six months between the two contracts. Otherwise it is legally viewed as one contract with consecutive days. Prior to 1 July 2015, this mandatory period is three months. As of 1 January 2015, it is no longer permissible to include a trial or probation period of one month as part of a temporary contract that is a maximum duration of six months. This also applies to consecutive contracts. A temporary contract of six months or longer may have a notice period of one month It is difficult to find specialised personnel. How can I connect with the right talent? Professional service providers such as recruitment agencies can typically help to connect you with specialised, hard-to-find personnel. Many agencies focus on specific professional sectors and have a broad network in their chosen field. Your branch organisation can advise you on this topic Do I have to follow a collective labour agreement (CAO)? As an employer you must only apply a collective labour agreement if the Ministry of Social Affairs and Employment has extended a sector-based agreement in your industry. These agreements will then automatically apply to every employer in that sector. For more information (in Dutch) and or 5

6 2. Personnel Administration 2.1. What actions are required when registering information in a personnel file? Identification If you have a business in the Netherlands and employ staff, you must verify the identity of all employees on the basis of an official, original identity document (a driving license alone is not legally sufficient). This applies to both Dutch and foreign employees. Once you have established the identity of your employee, you must make a copy of their identity document. The copy must be clearly legible and the photograph must be recognisable. You must retain this copy for five calendar years following the termination of the working relationship, period of employment or activities. With regard to temporary employees, you must retain the copy for seven years following the end of the activities or period of temporary work. Other information required in a personnel file Other information that is often found in a personnel file includes the following: 1. Correspondence; 2. Personal details; 3. Contracts; 4. Compensation and benefits; 5. Performance/Appraisal; 6. Training & Development; 7. Insurance; 8. Health; 9. Other information. Ad 1. Ad 2. Ad 3. Correspondence On salary, terms of employment and job changes, job offer, a recruitment checklist. Personal details Personal information form (personal Master Data), tax form, copy of ID/ passport, curriculum vitae/application letter, recruitment agency agreement, work permit (if applicable). Contracts Original signed employment contract, changes to the employment contract, user agreement for mobile telephone and/or laptop, user agreement for lease car. 6

7 Ad 4. Ad 5. Ad 6. Ad 7. Ad 8. Compensation and Benefits Changes in employment conditions i.e. salary adjustments, letters on bonus objectives and bonus awards, pension statements, savings. Performance/Appraisal Job description, completed performance forms and appraisal forms, correspondence about performance. Training and development Application forms for training & development, copies of invoices and declaration forms, diplomas. Company Health Insurance Health Correspondence regarding occupational disability legislation (Poortwachter), pregnancy statement. Privacy Access to information about employees should be strictly limited to those in your company with a need to use such information as part of their standard employment role. Privacy of your employees is protected under the Personal Data Protection Act (Wet bescherming persoonsgegevens). 7

8 3. Dismissing personnel, labour laws 3.1. What steps should I follow when dismissing an employee? If an employer wishes to terminate an employee s employment contract against the wishes of that employee, they must adhere to a strict procedure. Nobody can be dismissed without proper cause. The employer must apply for a dismissal permit from UWV (Employee Insurance Agency) or ask the sub-district court to dissolve the employment contract. As of 1 January 2015, employers can only opt for one dismissal route and which route is taken depends on the specific reason for the dismissal. You cannot, for example, dismiss someone (even during their trial period) on the grounds of gender, disability, religion, illness or pregnancy. Acceptable reasons for dismissal are: For (business) economic reasons, for example if a reorganisation is taking place or a company is closing down or relocating. It can also occur when (part of) the company s activities are being closed down. Since 1 March 2012, if more than 20 employees are being dismissed, this must be reported to the UWV (Wet melding collectief ontslag). If an employee does not perform well or is no longer suitable for the job. But not if this is the result of illness. Please note: as an employer, you must have highlighted on multiple occasions that the employee is performing insufficiently, preferably recorded during an official appraisal or performance interview. Before dismissal, the employee must be first provided time to improve their performance. If there is a conflict with your employee and the relation between you and your employee is beyond repair. 8

9 If your employee has serious conscientious objections to their duties and you are not able to offer a different role or suitable work. If an employee is long-term occupationally disabled (minimum of 2 years). For improper conduct, for example if the employee forges certificates; threatens colleagues; endangers themself or others; if an employee does not observe the duty of confidentiality; steals; refuses work without good reason; comes to work under the influence of alcohol or drugs. If you and your employee mutually agree to the dismissal. DISMISSAL ROUTE As of 1 January 2015, rules regarding the dismissal route and severance pay have changed. Prior to 2015, the dismissal of any employee was audited by the UWV (Employee Insurance Agency) or the district court in regards to whether the dismissal was legally valid. As of 1 January 2015, employers can only opt for one dismissal route and which route is taken depends on the specific reason for the dismissal: A dismissal for (business) economic reasons and a dismissal for an employee that has been long-term occupationally disabled (minimum of two years) must be processed by the UWV. A dismissal for other reasons must be processed by the district court. Mutual termination agreement It remains possible for an employer and employee to mutually agree to the dismissal. The employee then has a cooling-off period of 14 days in which they can change their mind. It is mandatory for the employer to notify the employee of this cooling-off period. 9

10 SEVERANCE TRANSITION BUDGET As of 1 January 2015, another change to dismissal law relates to severance pay. Irrespective of the termination route, the government stipulates that permanent and temporary employees who are dismissed must be awarded a transition budget. This replaces the previous severance payments. The employee can use the transition budget, for example, for training or assistance to transfer to another job. The agreements on the transition fee are as follows: The employer will pay this fee to an employee who has worked for two years or more with the employer. In the case of a dismissal by severe culpability of the employee, the employee is not entitled to the transition fee. The owed transition fee is accrued per year of service. The rule is: 1/3 of a month s salary per year of service up to 10 years; 1/2 of a month s salary per year of service that an employee has been employed beyond 10 years. The transition fee may not exceed 75,000 or a full year s salary (whichever is highest). The employer can consider the costs of, for example, outplacement or training, deducting such costs from the final transition fee. These costs must have been incurred to help the employee following dismissal and in full consultation with the employee. Costs incurred during the employment period to make the employee more employable may also be deducted by the employer on condition that the employee also agrees to this. The sub-district court may yet grant an additional fee if the employer is judged culpable. 10

11 4. Sick Leave 4.1.What are the rules pertaining to an employee s illness and subsequent absence from work? Occupational disability legislation (Wet Verbetering Poortwachter) has been in place since 1 April This law is intended to help workers reintegrate and to prevent them from an unnecessarily long stay at home due to illness. The employee and employer must work together to ensure that the employee returns to work as soon as is possible. Under this law, both parties are obliged to cooperate. Both employer and employee and a Health, Safety & Welfare service (Arbodienst) or another certified company physician must play an active role in the reintegration process. More information Setting up a Health, Safety & Welfare service (Arbo): More information on the Working Conditions Act: If the employee is no longer able to carry out their contracted job role due to an illness or disability, the employer must explore whether there is another suitable employment opportunity within the company. The employer can hire a reintegration bureau for this task. Together with the bureau, the employer can look at the various possibilities available to them. Occupational disability legislation has, in short, the following requirements: Cases of illness should be reported on time to the Health, Safety & Welfare service/certified company physician. The Health, Safety & Welfare service/certified company physician supports managers in absenteeism (verzuimbegeleiding). It must be determined whether there is a risk of prolonged absence. In that case, a problem analysis and an advice report should be drafted (in the sixth week of illness). Employer and employee establish a plan of action for rehabilitation and reintegration. This is based on a problem analysis and the advice of the Health, Safety & Welfare service/ 11

12 company physician. This plan of action is regularly reviewed and adjusted wherever necessary. Employer and employee designate a case manager. Reporting illness to the UWV in the 42nd week of illness. Creation of reintegration file containing all listed activities and agreements. Drafting a reintegration report after 20 months of illness (at the latest), together with the application for Work and Income according to Labour Capacity Act (WIA). These should be sent to the UWV after 21 months of illness (at the latest) Reintegration File As part of any anticipated long-term absence, all parties are obliged to maintain a reintegration file. In this file, the employer must include all important reintegration activities. Compilation of the reintegration file should begin eight weeks after the employee first reported sick. The file consists of all documentation relating to the employee s reintegration, such as a plan of action, the reintegration report and correspondence with the occupational Health, Safety & Welfare service (Arbodienst). The employee can hold the employer and the Health and Safety service/company physician answerable to their obligations and is entitled to a summary of the reintegration report to include with their application for WIA support. Afterwards, the process is reviewed by the UWV. If the efforts of reintegration are considered inadequate, penalties will be applied. The UWV can provide assistance with standard forms Penalties If an employer s reintegration efforts are shown to be insufficient, the maximum penalty is one year s salary in the third year of illness. In the case of an employee who has not demonstrated a willingness to return to work, the UWV can postpone the assessment for the WIA support. This may result in the employee being temporarily without income. 12

13 5. Works Council 5.1. What are the rules regarding staff representation or a Works Council?? According to the Works Councils Act (Wet op de ondernemingsraden) every business with at least 50 employees must have a works council. The employer must ensure that this works council is established. Businesses with between 10 and 50 employees may also establish a voluntary works council or a staff representation system. A staff representation system is obligatory if the majority of employees want one. Businesses with between 10 and 50 employees that do not have a works council or a staff representation system are obliged to hold staff meetings. 13

14 6. Setting up an effective HR structure 6.1. Can you advise me on setting up an strong HR structure in our company? As an example, you could take the following steps to establish an effective HR structure, which can be customised to fit the company s size and your start-up situation. A step-by-step plan to strengthen HR within your company could include the following: A. Setting up a structure for Personnel in terms of employment and engagement (e.g. benchmark salaries, compensation and benefits in the market), and designing a salary structure (flexible while abiding to personal wishes). B. Designing an Appraisal form & process and related instruments. C. Setting up a Sick Leave policy (Wet poortwachter), which is mandatory by law. Health, Safety & Welfare services can assist you in this. D. Empower the Managers for tasks with an HR responsibility. For example, create a clear division of responsibilities and set up a safety net for specialised HR questions, providing managers with extra HR knowledge. Specialist companies can offer advice when needed. Knowledge about redundancy law (Wet poortwachter), the Working Conditions Act and tax laws (e.g. declaration of travel allowances and other allowances) are very important and should be available, whenever needed, to your company and managers. E. Setting up a Personnel Handbook with, for example, the following rules and regulations: a. Pension scheme (if applicable). b. Employee savings scheme (Vitaliteitssparen, in force since 2012 as a replacement for the Levensloop and spaarloon saving schemes). c. Time off for emergencies regulation (mandatory by law). d. Time off for parenting scheme (mandatory by law, Work and Care Act). e. Carer s leave (paid/unpaid) (mandatory by law). f. Overtime policy (applying the Working Hours Act). 14

15 g. Travel allowance or regulation scheme (home-work/work-work) (compliant with the tax rules/tax free stipulation). h. Holiday entitlement, allowance and regulations (mandatory by law). i. Illness rules and regulations (mandatory by law, Working Conditions Act). j. Health, hygiene and safety at work (mandatory by law, Working Conditions Act). k. Study and development policies. l. Appraisal policy and instruments. m. Insurances and policies already implemented. n. And other new policies specific to your company. F. Setting up a structure for supporting People Management (including division of responsibilities, retention and education). G. Setting up a structure for Internal Communication. H. Setting up a structure for Labour Market Communication and recruitment and having a specific plan for specialised personnel needs Where can I find more information about HR-related issues? For most of your HR-specific questions or services, specialised service providers can be hired or contracted. These third-party service organisations can be found for all specific areas of the HR field. Accountancy bureaus for tax laws; Health, Safety & Welfare service providers for implementing the Work and Care Act, the Working Conditions Act, occupational disability legislation and providing a company physician; Temp agencies (Uitzendbureau) and Recruitment agencies (Werving & Selectie bureau) for recruiting specific or temporary personnel; Outsourcing of personnel administration and/or salary administration (both can be handled by specialised companies, including payroll); Employment lawyers (Arbeidsrecht juristen) can advise you on labour laws and dismissal rights. Other important links on Dutch Labour and Tax laws Provided by the Dutch government: Provided by the Ministry of Social Affairs and Employment: 15

16 This document outlines the principles of Dutch labour law that may be applicable to (international) employers. Despite making every effort to ensure the accuracy of the information contained in this document, the City of Amsterdam cannot accept any liability related to possible inaccuracies or erroneous information. No rights, of any kind, can be derived from information contained within this document. It is advisable to always seek expert advice prior to taking any form of action based upon the information contained in this document. Should you encounter information in this document that you believe to be incorrect or antiquated, please contact us by telephone or . 16

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