Hiring Your First Employee in the Netherlands

Hiring your first employee in the Netherlands involves more than finding the right person. For international companies, you also need to determine how the employee will be employed, arrange Dutch payroll where required, understand local employer costs and make sure the employment contract and employment conditions comply with Dutch rules.

You do not necessarily need to establish a Dutch company before making your first hire. Depending on your situation, a foreign company may be able to employ someone in the Netherlands directly and register as an employer for Dutch payroll taxes. Other employment structures may also be possible.

In this guide, we explain what international companies should consider when hiring their first employee in the Netherlands.

What do you need to arrange for your first employee in the Netherlands?

Before your first employee starts, you need to determine the employment structure and understand the Dutch obligations that apply to your company and employee.

For most international companies, this means looking at:

• who will legally employ the employee;
• whether Dutch employer and payroll registration is required;
• payroll and payroll tax administration;
• the employment contract and employment conditions;
• whether a collective labour agreement (CAO) applies;
• whether a mandatory pension scheme applies;
• the employee's right to work in the Netherlands;
• salary, holiday allowance and other employer costs.

The exact requirements depend on your company, the employee and how the employment relationship is structured.

Do you need a Dutch company to hire an employee in the Netherlands?

No, you do not necessarily need to establish a Dutch company to employ someone in the Netherlands.
A foreign company can, depending on the circumstances, employ someone locally without first incorporating a Dutch legal entity. The foreign company may need to register with the Dutch authorities and meet Dutch payroll, tax, social security and employment obligations. Setting up a Dutch company is therefore one possible route, but it is not automatically a requirement simply because you want to hire your first employee. The appropriate structure depends on factors such as where the employee works, the activities of the foreign company in the Netherlands and the intended duration and scale of the Dutch operation.

It is also important to distinguish payroll registration from broader corporate and tax questions. Registering as an employer does not by itself determine whether the company's activities create other Dutch registration or tax obligations.

How does Dutch payroll work for your first employee?

If Dutch payroll applies, the employer needs to calculate the employee's salary correctly, withhold the required payroll taxes and contributions, provide payslips and meet the relevant payroll reporting obligations.

For an international company, this is an important part of setting up the first employment relationship in the Netherlands. Dutch payroll typically involves the employee's gross salary, wage tax, social security and employee insurance contributions, holiday allowance and other elements of the employment package. The exact payroll treatment depends on the employment situation. This is why it is important to determine the employment structure before the employee starts rather than simply paying a Dutch employee through an existing foreign payroll.

What does it cost to employ someone in the Netherlands?

The total cost of employing someone in the Netherlands is higher than the employee's gross salary.
In addition to gross salary, employers may need to budget for:

• holiday allowance;
• employer payroll taxes and social security contributions;
• pension contributions, where applicable;
• employee benefits and allowances;
• equipment and other personnel costs;
• payroll and employment administration.

Employees are generally entitled to at least 8% holiday allowance (vakantiegeld). The Dutch government's Business.gov.nl also identifies gross wages, holiday allowance, employer payroll taxes and additional personnel costs as elements employers should consider when calculating personnel costs.

For example, if an employee has a gross annual salary of €60,000 and the salary excludes holiday allowance, 8% holiday allowance represents an additional €4,800 before other employer costs are taken into account. There is no single percentage that represents the total employer cost for every employee. The final amount depends on factors including salary, contract type, employer circumstances, pension arrangements and benefits.

Is holiday allowance mandatory in the Netherlands?

Employees in the Netherlands are generally entitled to at least 8% holiday allowance.

Holiday allowance is usually calculated over the employee's gross salary. There are circumstances in which different rules or arrangements can apply, so the employment contract and any applicable CAO should also be considered. For international employers, it is important to establish whether an offered annual salary includes or excludes holiday allowance. Otherwise, the actual employment budget can be higher than initially expected.

Do you need to arrange a pension for your first Dutch employee?

A pension is not automatically mandatory for every employer in the Netherlands.

A pension scheme can, however, become mandatory if the employer falls within the scope of a compulsory industry pension fund or if an applicable collective labour agreement requires participation. If no mandatory scheme applies, an employer may still choose to offer a pension as an employee benefit. For a company making its first Dutch hire, it is therefore important to check the pension position before finalising the employment package.

Does a Dutch collective labour agreement apply?

A collective labour agreement, known as a CAO, may apply depending on the employer's activities and sector. A CAO can contain employment conditions covering matters such as salary, working hours, holiday, pension and other employee rights. International companies entering the Dutch market for the first time should therefore check whether a CAO applies rather than assuming that all employment conditions can be agreed freely in the individual employment contract.

What should be included in a Dutch employment contract?

The employment contract should clearly record the terms under which the employee will work. Depending on the situation, this includes matters such as the employee's role, salary, working hours, start date, holiday entitlement, contract duration and notice arrangements. Any applicable CAO and pension arrangements also need to be considered. An international company should therefore not simply reuse its standard employment contract from another country without checking it against Dutch employment requirements.

Does your employee need a work permit?

Whether an employee needs permission to work in the Netherlands depends primarily on their nationality and immigration status.
EU, EEA and Swiss nationals can generally work in the Netherlands without a work permit. Different requirements can apply to employees from outside these countries.
Employment and immigration should therefore be treated as related but separate issues. Having the correct employment and payroll setup does not automatically give an employee the right to work in the Netherlands.
If a work or residence permit is required, this should be established before agreeing on a realistic start date.

Can you hire someone first and arrange Dutch payroll afterwards?

The employment and payroll setup should ideally be established before the employee starts working.
Waiting until after the start date can create unnecessary problems with employer registration, payroll periods, employment documentation and the calculation of taxes and contributions. Before your first employee starts, make sure the employment structure, payroll and required registrations are in place. This avoids unnecessary corrections or delays after the employee has already started.

What is the process for hiring your first employee?

A practical sequence for an international company is:

• Confirm where the employee will work.
  Establish whether the role will be performed in the Netherlands and whether Dutch employment and payroll rules are likely to apply.
• Determine the employment setup.
  Decide which company will employ the person and whether a Dutch entity is necessary or another employment structure can be used.
• Establish the registration and payroll requirements.
  Determine which employer registrations are needed and how payroll will be administered.
• Check the applicable employment conditions.
  Establish whether a CAO or mandatory pension scheme applies and which Dutch employment requirements need to be reflected in the contract.
• Calculate the full employment cost.
  Look beyond gross salary and include holiday allowance, employer contributions, pension where applicable and other employment costs.
• Prepare the contract and payroll before the start date.
  Make sure the employment documentation and payroll setup are ready before the employee begins working.

Can a foreign company employ someone in the Netherlands without setting up an entity?

In some situations, yes.
A foreign company does not automatically have to incorporate a Dutch company simply to employ one person in the Netherlands. Depending on the circumstances, the foreign company may be able to employ the person directly while meeting the applicable Dutch employer and payroll requirements.
Whether this is the appropriate solution depends on the company's activities, the employee's situation and the company's longer-term plans.
For a company testing the Dutch market or making its first local hire, it is therefore worth looking at the available employment options before automatically setting up a new legal entity.

Hiring your first employee in the Netherlands?

Agile Recruitment helps international companies employ and pay employees in the Netherlands.
We help you understand the available employment options, determine the right setup and get the payroll process in place. We remain your point of contact throughout the process, so you don't have to navigate the different parts of Dutch employment on your own.

Learn more about our Employment Services in the Netherlands