A professional employer organization (PEO) is a simple and streamlined way to hire employees outside of your own country without running afoul of international employment laws or struggling to navigate the complexities of hiring, paying, and managing overseas employees. A PEO takes over the essential human resources functions, like payroll and benefits, per local laws, so you don’t have to.
Using a Netherlands PEO to manage Dutch team members as a co-employer saves your company the hassles and expense of establishing an entity in the country and learning all the ins and outs of local employment laws. You gain access to talent and resources that can help you grow your business without worrying about legal liabilities or contractor risk.
What are the benefits of using a PEO in the Netherlands?
Employment law in the Netherlands is notoriously complex and extensive, and without in-depth knowledge and experience, it’s very easy for your company to violate it inadvertently. This can result in significant fines and other consequences, so it’s best to have a PEO on your side to make sense of the rules and ensure that you follow them.
Working with a Netherlands PEO can also be advantageous tax-wise for foreign companies. By using a PEO rather than establishing an entity in the Netherlands, you can take advantage of the deep talent pool and explore the thriving market without paying substantial corporate tax rates.
That said, hiring in the Netherlands can be expensive, as employers are expected to contribute about 20% of their employees’ salaries to the extensive social programs in the country, cover some of their health insurance costs, and depending on how the PEO is registered in the Netherlands, pay an additional 15% of each employee’s salary toward a legally required employer pension plan.
These additional costs, on top of the income tax rates based on the individual employee’s earnings, can make managing Dutch employees a challenge. A PEO can administer all the mandatory benefit contributions and tax payments, draft compliant employment contracts, and handle all the payroll so you can focus on other priorities.
Unique things about Dutch labor laws
A Dutch PEO can offer expert guidance in the local laws, which differ considerably from other countries.
Working hours and time off
The Dutch people are hardworking and work longer days than some of their European peers. The typical full-time workweek is 36 to 40 hours, or about eight hours daily. However, employment law prohibits anyone from working more than 12 hours a day or 60 hours a week (taking into account that over a period of 16 weeks, you may work an average maximum of 48 hours).
The people of the Netherlands value work-life balance, which is reflected in their generous time-off and leave policies for employees. Every Dutch worker is entitled to a minimum of 20 days of vacation time each year, and most employers offer more than the minimum. This is in addition to the 11 paid public holidays.
Dutch employees are entitled to receive at least 8% holiday pay, based on the average annual wage, which is generally paid out in May or June. In case an employee is earning more than 3 times the minimum wage, it’s possible to explicitly agree not to pay such an allowance, but this is not common in the Netherlands.
Sick days and parental leave
Dutch law also obliges employers to continue paying the salaries of employees up to at least 70% of their salary during the first two years of sick leave. Most employers in general pay 100% of the salary in the first year of sick leave, or take out an insurance to cover for such payment. Employees are generally protected against dismissal during such a period of sick leave.
The Employee Insurance Agency guarantees new mothers at least 16 weeks of paid maternity leave, and their partners are eligible for one week of paid leave at any time within four weeks of the child’s birth. Parents can also take some unpaid leave after having a child, which may be partly covered by the Dutch Employee Insurance Agency up to 70% of the daily wage.
Terminating employment in the Netherlands can be costly and time-consuming. Fired employees are entitled to a generous severance package equal to a third of the monthly salary for every year worked. In addition, any termination outside probation or fixed term needs to be for a valid cause and approved by the Dutch labor court or the Employee Insurance Agency, depending on the reason for termination. For this reason, many companies opt to settle employment disputes with employees directly rather than navigate the lengthy formal court process.
Want to know more about the unique elements of Dutch labor laws and working with overseas employees? Check out our Netherlands hiring guide.
Drawbacks of using a PEO
Working with Dutch PEO services offers many advantages, but the drawback is that they typically only work within the Netherlands and focus on local employees and companies. When hiring team members from other countries, you must identify and hire a different PEO in each country. Not only can this get expensive, but the fact that every organization has its own software, systems, and processes can make managing foreign workers unnecessarily cumbersome.
Working with a PEO in the Netherlands also means outsourcing the HR functions, not the overall burden of managing employees. This is a subtle distinction, but it means that if the PEO does not follow the law, even if you’re unaware, your company is still responsible for the consequences because the PEO is a co-employer. Other options, like an Employer of Record (EOR), place the burden of compliance on the EOR.
Alternatives to Dutch PEOs
Working with a Netherlands PEO isn’t your only option when you want to hire Dutch workers. Here are a couple of other potential solutions.
Opening your own business entity
Establishing a Netherlands-based entity, whether a foreign branch or a subsidiary, allows you to employ local workers and operate internationally. This option is viable if you plan to develop an ongoing presence in the Netherlands and are ready to expand into the market permanently. However, given the cost and complexity of establishing a foreign entity, this approach doesn’t make sense for your company if you only plan to hire a few Dutch staff members.
Using a global employment platform
A global employment platform is easy to set up and use, allowing you to hire people from multiple countries using a single system. A robust platform, like Oyster, is an affordable option that makes it simple to hire and onboard employees and remain compliant with local laws worldwide with expert guidance and insight.
When you want to hire remote workers from the Netherlands, Oyster makes adding them to your team easy. Our global employment platform makes it possible for you to engage, pay, and take care of employees without hassles or compliance worries.
With Oyster, you can manage HR and payroll and automate compliance across 180+ countries—all in one, easy-to-use platform. Check out Oyster today and get started on establishing a talented global workforce.