01. Hiring Practices

Requirement for Foreign Employees to Work

Employment permit

If an employer wants to hire a foreign employee in a legal manner, several requirements have to be met. First, the foreign employee has to be in the possession of a residence permit. Secondly, the employer is obliged to obtain an employment permit. This permit is valid for a maximum period of one year. Employees with Dutch nationality and employees from one of the countries of the European Economic Area and Switzerland are exempt from these rules, as well as some specific groups of people. For example, skilled and highly educated foreign nationals, but also other categories such as students and artists.

The employment relationship

When an employee works in the Netherlands, Dutch law does not necessarily govern the employment relationship. A foreign employee could remain in the employment of his foreign employer based on his foreign employment contract with a choice of law in favour of the laws of the foreign country and then (for example) be seconded to the Netherlands. In other words, the employer is not obliged to offer employees from another country a Dutch employment contract when they are transferred to the Netherlands. Employees can continue to work based on their current (foreign) employment contract.

The Netherlands is a party to the (EU) Convention on the Law applicable to Contractual Obligations/Rome I Regulation. This Convention/Regulation is applicable to international employment law issues. It states that regardless of the governing law of the employment contract, the parties are entitled to the protection afforded by the compulsory regulations that would apply if no applicable law had been chosen. The more an employee is legally or socio-economically integrated in the Netherlands, the sooner a Court will decide that the employment contract is linked to the Netherlands, as a result of which Dutch law would be applicable. The Posting of Workers Directive (in Dutch: Detacheringsrichtlijn) and the Terms of Employment (Cross-border Work) Act must also be taken into account.

In case of an international employment relationship, the Dutch tax authorities grant special tax benefits to foreign employees who are temporarily assigned to a Dutch subsidiary or branch from abroad, e.g., employees who reside in the Netherlands or employees who are recruited by a Dutch employer. Under the so-called 30% Ruling, 30% of the employee’s salary may be paid out as tax-free compensation for costs. In general, an addendum should be added to the employment contract declaring the applicability of the 30% Ruling in respect of the agreed wages. The main conditions related to the 30% Ruling pertain to:

• if the employee has a specific expertise, which is (almost) not available in the Netherlands;
• the employee has obtained a valid individual decision of the Tax and Customs Administration;
• in a period of 24 months before the employment in the Netherlands commenced, the employee must have lived more than 150 km in a straight line from the Dutch border;

Since 2019, the maximum duration of the tax advantage has been reduced from 8 years to 5 years. Even employees who started benefitting from the tax advantage before 2019 are now entitled to a maximum of 5 years of the tax benefit.

Does a Foreign Employer need to Establish or Work through a Local Entity to Hire an Employee?

Foreign employers can hire employees in the Netherlands either through a local entity or a foreign entity. Before deciding on how to structure their business in the Netherlands, foreign employers are advised to consider the tax consequences.

Limitations on Background Checks

During the pre-employment phase, only personal data specifically required for the position that the applicant applied for, can be screened. Standard screening procedures are normally not allowed in the Netherlands. In the pre-employment phase no extraordinary personal data of the candidates may be screened. This is only allowed if there are exceptional requirements for the vacancy that make this type of screening necessary.

Restrictions on Application/Interview Questions

The employer can only ask about an applicant’s health situation if a medical examination is required for the job by law. Of course, it is prohibited to discriminate against applicants on the grounds of – among others – gender, race, age, civil status, religion, and so on. Every company is required to comply with the regulations outlined in the General Data Protection Regulation (in Dutch: AVG). If the employer fails to do so, fines up to EUR 820.000 or 10% of the yearly turnover can be given.

The Recruitment Code of the Dutch Association for Personnel Management and Organisational Development (in Dutch: Nederlandse Vereniging voor Personeelsmanagement & Organisatieontwikkeling, abbreviated to: NVP) contains basic rules that employers should observe during the recruitment and selection process. The purpose of this code is to provide a standard for a transparent and fair recruitment and selection procedure. This Code is not binding, but employees can derive protection from these rules. The Code for example prohibits the requirement of a photo of the applicant prior to the applicant being invited to an interview.