The Netherlands is one of the most attractive places in Europe to build a team, and one of the most protective of employees. A skilled, English-fluent workforce, strong infrastructure, and a central European location make it a natural base. What surprises most companies entering the Netherlands is how much obligation sits with the employer: two years of sick pay, a mandatory holiday allowance on top of salary, a dismissal system with no at-will termination, and a contractor regime that has tightened sharply since 2025. This guide sets out what an international company needs to know to employ staff in the Netherlands in 2026, what it actually costs, and how to put people on the payroll without first setting up a local entity.
Most companies reach this question one of two ways. Either they have found someone they want to hire, often a developer, commercial, or specialist, and need a compliant way to employ and pay them. Or they have been using a Dutch freelancer and have realised the rules on that have changed. Both are covered below.
Netherlands employment law overview
Employment is governed primarily by the Dutch Civil Code (Book 7), supported by a dense layer of statutes covering working hours, dismissal, and leave. Two features shape almost everything.
The first is the collective labour agreement, or CAO. Around 80% of Dutch employees are covered by a CAO, and many set pay scales, notice periods, sick-pay top-ups, and pension obligations well above the statutory minimums. The applicable CAO, where there is one, is often the binding source of terms rather than the statute. The second is the strength of employee protection, which runs through sick pay, dismissal, and the treatment of contractors, and which makes getting the employer obligations right far more consequential than in lighter-touch markets.
Employment contracts
Contracts can be indefinite or fixed-term, and may be in Dutch or English. Fixed-term contracts are limited by the chain rule (ketenregeling): once an employer uses more than three successive fixed-term contracts, or exceeds three years across successive fixed terms, the relationship converts to a permanent contract.
A probation period is tightly capped. No probation is permitted at all in a contract of six months or less. For shorter fixed-term contracts the maximum is one month, and for permanent or long contracts it is two months. Any probation clause that exceeds the statutory maximum is void in full, not merely reduced, so the limits must be applied exactly.
Working hours, leave and the holiday allowance
Working hours
Working time is regulated by the Working Hours Act. A full-time week is commonly 36 to 40 hours depending on sector and CAO. There is no single statutory overtime premium; overtime treatment is set by contract or the applicable CAO.
Annual leave
The statutory minimum paid annual leave is 20 days for a full-time employee, calculated as four times the weekly working days. The Netherlands has 11 public holidays, which are not part of the statutory paid-leave minimum and are not automatically paid days off unless a contract or CAO provides for it. Many employers and CAOs grant 25 days.
The holiday allowance
A distinctively Dutch obligation, and one that catches foreign employers out, is the holiday allowance (vakantiegeld). Every employer must pay at least 8% of the employee's annual gross salary as a holiday allowance, usually as a lump sum in May. It is a genuine addition to salary, so an advertised salary understates the real cost by 8% before social security is added.
Maternity, partner and parental leave
Family leave is largely funded by the state rather than the employer. Maternity leave is a minimum of 16 weeks of paid leave, paid through the Employee Insurance Agency (UWV). Partners receive one week of paid leave at the birth plus up to five further weeks at 70% via UWV within the first six months. Parental leave is 26 times the weekly working hours per parent up to the child's eighth birthday, of which the first nine weeks are paid at 70% by UWV if taken in the first year, with the remainder unpaid.
Sick pay and the two-year obligation
This is the single most important point for a foreign employer to understand about the Netherlands, and the area where the cost and risk are heaviest.
An employer must continue to pay a sick employee for up to two years, at a statutory minimum of 70% of salary. For the first 52 weeks the payment cannot fall below the statutory minimum wage, and many CAOs or contracts require 100% in the first year and 70% in the second. Alongside the pay sits a legal duty under the Gatekeeper Improvement Act (Wet verbetering poortwachter): the employer and employee must actively work towards recovery and reintegration, the employer must engage an occupational health service or company doctor, and a documented reintegration plan must be maintained. If the process is handled poorly, UWV can extend the pay obligation into a third year.
Two years of pay plus mandatory reintegration is a materially heavier sickness obligation than in most countries, and it is the main reason dismissing a long-term sick employee is closely controlled. For any company employing in the Netherlands, it should be planned for and, in most cases, insured against.
Pay, minimum wage and CAOs
Since 2024 the Netherlands has used a statutory hourly minimum wage rather than a monthly one. From 1 January 2026 the gross statutory minimum wage for employees aged 21 and over is €14.71 per hour (Business.gov.nl). The rate is adjusted twice a year, on 1 January and 1 July, and lower age-banded rates apply to workers under 21. For a 40-hour week this works out to roughly €2,550 gross per month.
In practice the statutory minimum is often not the binding figure. Where a sector CAO applies, its pay scales usually sit above the statutory floor, and the CAO rate is what must be paid.
Income tax and social security
Employment income falls in Box 1 and is taxed progressively. The 2026 structure has three brackets, and the lowest bracket bundles in national insurance contributions, so the rate looks high but most of it is social security rather than pure tax.
| 2026 taxable income (Box 1) | Rate |
|---|---|
| Up to €38,883 | 35.70% (includes 27.65% national insurance) |
| €38,883 to €79,137 | 37.56% |
| Above €79,137 | 49.50% |
On top of what the employee bears, the employer pays separate contributions: an income-dependent healthcare contribution (Zvw) of around 6.1%, and employee-insurance premiums for unemployment, disability, and return-to-work. These are capped at a maximum contribution base of €79,409 for 2026, and earnings above the ceiling carry no further employee-insurance premiums. Taken together with the 8% holiday allowance, total employer cost on top of gross salary is commonly in the region of 28 to 38%, depending on sector, employer size, and risk-classified premiums.
Termination and the transition payment
Dutch dismissal law is among the most protective in Europe, and there is no at-will termination. If an employee does not consent to the dismissal, the employer needs prior approval from one of two bodies, and the route is fixed by the grounds: the Employee Insurance Agency (UWV) for economic or redundancy reasons and for long-term illness, or the sub-district court for personal grounds such as underperformance or a disturbed working relationship. Termination by mutual consent through a settlement agreement is common, and the employee then has a 14-day right to reconsider.
On exit, a statutory severance applies. The transition payment (transitievergoeding) is one-third of the gross monthly salary for each year of service, and it accrues from the first day of employment, not after a qualifying period (Business.gov.nl). It is subject to a statutory maximum that is indexed each year. Employer notice must also be observed, scaling from one month for shorter service up to four months for the longest. The practical takeaway for a foreign employer is that ending employment in the Netherlands is a planned legal process with a defined cost, not a same-day decision.
Engaging contractors and the reclassification risk
Companies that have been using Dutch freelancers need to treat this section as current and live, not theoretical.
The enforcement moratorium on bogus self-employment ended on 1 January 2025, and the Dutch Tax Administration resumed normal enforcement. A soft landing applied through 2025, but from 1 January 2026 the Tax Administration can impose culpability fines and can assess payroll taxes retroactively to 1 January 2025, and up to five years where intent is found. The test is substance over paperwork: a contractor who works under direction, without genuine entrepreneurial risk, can be treated as an employee regardless of what the contract says, and the tax liability lands on the engaging company.
The legislation continues to evolve. In 2026 the government narrowed its reform bill, retaining a rebuttable presumption of employment based on hourly rate. The base rate is around €36 per hour, which the government has stated is equivalent to about €38 per hour as at January 2026, indexed to the minimum wage. Below that rate, the burden of proof shifts to the engaging company to show the relationship is genuinely independent. For an international company relying on Dutch contractors, the practical options narrow to raising rates and tightening the arrangement, or converting the worker to compliant employment, which removes the exposure entirely.
Employing foreign nationals: work permits and the 30% ruling
Nationals of the EU, EEA, and Switzerland need no work permit. For other nationals, the main route is the Highly Skilled Migrant scheme, and it carries a structural requirement: the employer must be a recognised sponsor with the Immigration and Naturalisation Service (IND), which brings ongoing duties of information, care, and administration. Recognised sponsors benefit from fast processing, usually two to four weeks. The 2026 salary thresholds for highly skilled migrants, gross per month and excluding the holiday allowance, are set out below, and salaries must also be market-conform.
| Highly skilled migrant category (2026) | Minimum gross monthly salary |
|---|---|
| Aged 30 and over | €5,942 |
| Under 30 | €4,357 |
| Reduced rate (recent graduates) | €3,122 |
For qualifying incoming employees, the 30% ruling (the expat scheme) allows part of salary to be paid tax-free as a proxy for relocation costs. The maximum is 30% in 2026, reducing to 27% for new rulings from 1 January 2027 (Business.gov.nl). To qualify in 2026 the employee must be recruited from abroad, have scarce expertise, have lived more than 150km from the Dutch border for at least 16 of the 24 months before employment, and meet a salary threshold of €48,013 (or €36,497 for a master's-degree holder under 30). The benefit is capped at the statutory top-income norm, and that cap now applies to all users from 1 January 2026.
2026 Netherlands employment cost and compliance reference
The figures below are the load-bearing numbers for planning a hire in the Netherlands in 2026, collected as a single dated reference.
| Item | 2026 position | Note |
|---|---|---|
| Minimum wage | €14.71 per hour (age 21+) | 1 Jan 2026; revised again 1 July |
| Holiday allowance | 8% of annual gross salary | Mandatory, usually paid in May |
| Annual leave | 20 days minimum (full-time) | Plus 11 public holidays; CAOs often give more |
| Sick pay | Employer pays at least 70% for up to 2 years | Year 1 not below minimum wage; reintegration duties apply |
| Income tax (Box 1) | 35.70% / 37.56% / 49.50% | First bracket includes 27.65% national insurance |
| Employer contributions | Approx. 28% to 38% on top of gross, incl. holiday allowance | Contribution ceiling €79,409 (2026) |
| Maternity leave | 16 weeks, paid by UWV | Parental leave 9 weeks paid via UWV |
| Probation | Max 1 to 2 months; none for contracts of 6 months or less | Excess clauses void in full |
| Termination | No at-will; UWV or court approval required | Transition payment from day one |
| Transition payment | One-third month's salary per year of service | Annually indexed statutory cap |
| Contractor presumption | Employment presumed below ~€36/hr (≈€38/hr at Jan 2026) | Enforcement live since 2025; fines from 2026 |
| 30% ruling | 30% tax-free in 2026, reducing to 27% from 2027 | Salary threshold €48,013 (€36,497 under-30 master's) |
| Highly skilled migrant | €5,942 / €4,357 / €3,122 per month by category | Employer must be an IND recognised sponsor |
Citation: Aspirock (2026), "2026 Netherlands Employment Cost and Compliance Reference," aspirock.com. Compiled from the Dutch government (Rijksoverheid, Business.gov.nl), the Belastingdienst, UWV, and published legal and payroll sources; figures current at publication and subject to revision. Free to cite with attribution and a link to this page.
Compliance changes to watch in 2026 and 2027
Three things are moving. The minimum wage is revised again on 1 July 2026, and because some terms are indexed to it, that revision flows through to related thresholds. The contractor reclassification regime continues to tighten, with culpability fines available from 2026 and the hourly-rate employment presumption proceeding as separate legislation expected to be published in 2026. And from 1 January 2027 the 30% ruling drops from 30% to 27% for new rulings, with the qualifying salary threshold also rising, which changes the economics of expat packages.
Hiring in the Netherlands without a local entity
Companies that want to employ in the Netherlands without incorporating typically use an Employer of Record. The EOR holds the local employment relationship, employs the staff on its books, and runs the parts that carry the compliance risk: compliant employment contracts and CAO classification, payroll and wage-tax withholding, the 8% holiday allowance, social security contributions, leave administration, the two-year sick-pay obligation and reintegration process, and a lawful termination route with the transition payment.
Incorporating a Dutch company is achievable, but the obligations behind it are where the weight sits. A registered entity still has to administer the holiday allowance, carry two years of sick-pay liability with reintegration duties, classify workers against the right CAO, and manage a dismissal system with no at-will route. For companies hiring a small number of staff, converting a contractor exposed to the new rules, or testing the market, an EOR carries those obligations as the legal employer while the client keeps day-to-day direction of the work.
About Aspirock
Aspirock is an Employer of Record and global payroll provider operating in the Netherlands and 70+ countries worldwide, with 22 years of operational experience and offices across the GCC, Europe, and the Americas. In the Netherlands, Aspirock provides Employer of Record services that cover compliant employment contracts, payroll and wage-tax withholding, the holiday allowance, social security, leave and sick-pay administration, and lawful termination handling, so international companies can employ staff without setting up a local entity. To discuss employing people in the Netherlands, get in touch.
Frequently asked questions
Can a foreign company employ staff in the Netherlands without a local entity?
Yes. A company can employ staff in the Netherlands without incorporating by using an Employer of Record, which holds the local employment relationship, runs compliant payroll and wage-tax withholding, pays the mandatory holiday allowance and social security, and manages leave, sick pay, and termination. The client keeps day-to-day direction of the employee while the EOR carries the legal employer obligations. This is the standard route for hiring a small number of staff, converting a contractor affected by the new rules, or testing the Dutch market before setting up an entity.
How long does a Dutch employer have to keep paying a sick employee?
In the Netherlands, the employer must continue to pay a sick employee for up to two years, at a statutory minimum of 70% of salary, with the first year not falling below the minimum wage. Many collective agreements require 100% in the first year. The employer also has reintegration duties under the Gatekeeper Improvement Act, including appointing a company doctor and maintaining a reintegration plan, and a poorly managed process can extend the pay obligation into a third year. This two-year obligation is one of the most significant employer costs in the Netherlands and is usually insured against.
What does it cost to employ someone in the Netherlands?
Beyond gross salary, a Dutch employer pays a mandatory holiday allowance of 8% of annual gross salary, plus social security and healthcare contributions for unemployment, disability, return-to-work, and the income-dependent healthcare levy. Together these typically add in the region of 28% to 38% on top of gross salary, subject to a 2026 contribution ceiling of €79,409. Employers should also account for accruing transition payment and the potential cost of up to two years of sick pay. Budgeting on salary alone significantly understates the real cost.
Is my Dutch contractor at risk of being reclassified as an employee?
Possibly. The Dutch Tax Administration resumed enforcement against bogus self-employment on 1 January 2025, and from 2026 it can impose culpability fines and assess payroll taxes retroactively to 1 January 2025. A rebuttable presumption of employment applies for workers paid below around €36 per hour, stated as roughly €38 per hour as at January 2026, shifting the burden to the engaging company to prove genuine independence. A contractor who works under direction without real entrepreneurial risk can be treated as an employee regardless of the contract. The clean fix is to convert the worker to compliant employment, which removes the exposure.
Can you fire an employee in the Netherlands?
There is no at-will dismissal in the Netherlands. If the employee does not consent, the employer needs prior approval from either UWV, for economic reasons or long-term illness, or the sub-district court, for personal grounds such as underperformance. Termination by mutual consent through a settlement agreement is common, with a 14-day reconsideration right for the employee. On dismissal the employer owes a transition payment of one-third of a month's salary per year of service, accruing from the first day of employment, and must observe notice. Ending employment is a planned legal process with a defined cost.
What is the 30% ruling and does my expat hire still qualify in 2026?
The 30% ruling, or expat scheme, lets an employer pay part of a qualifying employee's salary tax-free to cover relocation costs. The maximum is 30% in 2026, reducing to 27% for new rulings from 1 January 2027. To qualify in 2026 the employee must be recruited from abroad, have scarce expertise, have lived more than 150km from the Dutch border for at least 16 of the 24 months before employment, and meet a salary threshold of €48,013, or €36,497 for a master's-degree holder under 30. The employer must be an IND recognised sponsor, and the benefit is capped at the statutory top-income norm.
How long does it take to hire someone in the Netherlands through an EOR?
For an EU, EEA, or Swiss national, onboarding through an Employer of Record is fast, usually a matter of days once terms are agreed, because no work permit is required. For other nationals the timeline depends on the Highly Skilled Migrant route, which a recognised sponsor can typically process in two to four weeks where the salary thresholds are met. Setting a realistic start date means accounting for the permit timeline rather than the local-hire timeline.
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