How to hire and pay remote workers in the Netherlands

International hiring gives you access to top talent, irrespective of where workers are based. If you’re looking to hire highly skilled employees or contractors in Europe, the Netherlands is an excellent option.

The Dutch labor market is attractive for many reasons. Not only does the Netherlands have one of the top education systems in the world, but 90% of the population is proficient in English. But given the complex tax, labor, and compliance laws that exist in the country, it can be challenging to hire and pay workers in the Netherlands.

Fortunately, hiring contractors and remote employees in the Netherlands can be easy (and affordable) if you follow the right strategy. That’s why we’ve created this step-by-step guide — to take the guesswork out of hiring in the Netherlands. In this article, we'll navigate Dutch labor laws and tax practices so that you can hire and pay workers in the Netherlands with confidence.

How do foreign businesses pay remote workers in the Netherlands?

To pay your remote workers in the Netherlands, you have three options:

Open a legal entity in the Netherlands.

To hire remote employees in the Netherlands, you need to open a legal entity in the country. However, this process is expensive and time-consuming. Besides, managing payroll, benefits, taxes, and compliance can get complicated, especially without a well-established local team.

Work with a global employment partner

Working with a global employment partner makes it easy for your company to hire remote employees in the Netherlands quickly, efficiently, and in full compliance with applicable labor laws. A global employment provider can take on the responsibility and legal risks of international employment, leaving you to focus on hiring top talent and growing your business.

Pay workers in the Netherlands as contractors

One way to pay remote workers in the Netherlands is to hire them as independent contractors. It’s usually easy and quick to work with a contractor, as there are no legal overheads to consider. If you hire contractors in the Netherlands, for example, you don't need to withhold payroll tax and offer benefits. However, you’ll have to ensure that you aren't misclassifying your workers, as this could have serious consequences for your business.

In what currency do companies pay remote workers in the Netherlands?

As in most European countries, remote workers in the Netherlands are paid in Euros (EUR). If your company is based in the U.S. or any other country outside the European Union, be aware that you will likely need to account for currency conversions while making payments.

What are the tax rates for tax brackets in the Netherlands?

Remote workers in the Netherlands pay taxes based on three schedules (each referred to as a “box”).

Box 1 includes the following:

• Employment income

• Homeownership

• Periodic payments

• Benefits relating to income provisions

The tax rate depends on the employee's annual gross income:

• €0 to €37,149 = Varies between 19.03% to 36.93% (depending on whether you’ve reached state pension age)

• €37,149 to €73,031 = 36.93%

• €73,031 and above = 49.5%

Box 2 refers to taxable income from a substantial interest and is taxed at the rate of 26.9%.

Box 3 applies to taxable income from savings and investments and is taxed at the rate of 32%.  

Which parts of salary in the Netherlands are taxable?

Dutch law requires you to make certain withholdings from the employee's salary for income tax purposes and the employee's national insurance contributions. You are also asked to pay certain social security premiums for your employees.

Components of salary that incur full taxes in the Netherlands

Net salary is income after taxes, social security payments, and pension contributions have been deducted. The salary also includes bonuses, holiday allowance, and other benefits.

Components of salary that incur partial taxes in the Netherlands

Some items like transportation, meals, and training courses are exempt from taxes until a threshold is met. At that point, the excess is considered taxed wages for your employee. Other items are not taxed, like work clothing or refreshments at work. In the Netherlands, these are considered “zero valuations.” 

Is per diem taxable in the Netherlands?

Per diem refers to payments that reimburse employees for expenses like lodging, travel, and meals. It's paid instead of reimbursing actual travel expenses directly. 

For example, if your remote workers in the Netherlands use their own means of transportation, you can pay them a tax-free allowance of up to €0.22 per kilometer. It doesn't matter whether your employee uses the means of transport to commute to work or for a business trip. Any amount exceeding €0.22 per kilometer will be taxed as the employee's salary. 

Is there a difference between an allowance and a reimbursement in the Netherlands?

In the Netherlands, you can reimburse certain expenses, like travel costs, without tax liability.

You can also spend part of your total taxable wage on allowances, benefits in kind, and provisions for your employees without tax liability. The local government in the Netherlands refers to this as the discretionary margin. As of 2022, the discretionary margin is 1.7% of taxable salary up to €400,000. After that, you pay a wage tax which is 80% over the amount that exceeds the discretionary margin.

What payroll deductions are employers required to make in the Netherlands?

When you hire remote employees in the Netherlands, they are subject to payroll tax. Payroll tax needs to be withheld from the employee's salary every month and paid to the tax authorities in the Netherlands. It consists of:

• Wage tax

• Social security contributions

• Premiums for employer insurance

• Income-dependent healthcare insurance contribution

The wage tax is included under the payroll tax calculation on the employee's payslip. The total social contribution for employees is 27.65%, which is broken down into different types of benefits. Employer-paid social security contributions for insurance include unemployment insurance, occupational disability insurance, and childcare allowance contribution. Under the 2023 Health Insurance Act, the general health insurance premium rate is 6.68%, and 5.43% for pensioners, entrepreneurs, and self-employed workers.  

Everyone who works in the Netherlands is covered by the pension scheme. The contributions are withheld by the employer from the employees' salaries and remitted to the Tax and Customs Administration in the Netherlands.

Want to see a full breakdown of employment costs for new hires in the Netherlands? Check out our free Employee Cost Calculator tool.

What is the minimum wage in the Netherlands?

The minimum wage in the Netherlands in 2023 is €1,934 per month. As an employer looking to hire remote employees in the Netherlands, you'll need to be mindful of any minimum wage changes.

How much is overtime pay in the Netherlands?

The Netherlands does not have specific legislation around overtime pay. Therefore, whether the remote worker receives overtime pay depends on what was agreed to in the employment contract. 

What are the local labor laws in the Netherlands?

Dutch employment law regulates the legal relationship between you and your workers. Employment contracts do not have to be in writing and can be completed verbally. 

Some key features of Dutch labor law include but are not limited to the following:

• The minimum age of employment of 18 years old.

• The minimum wage for employees 21 or older is €1,934.

• The maximum working hours per week are 60 (12 hours per day).

• All full-time workers have a statutory leave of 20 days.

• Workers are entitled to a minimum rest period of 11 consecutive hours after work.

• Expecting mothers are entitled to 16 weeks of pregnancy and maternity leave. Fathers can take up to 5 weeks of paternity leave.

• Workers are entitled to two years of sick leave. Other kinds of leaves include adoption leave, short or long-term care leave, unpaid leave, and extraordinary leave.

• Notice of termination (up to 4 months, depending on employment duration)

• Transitional allowance (one-third of the monthly salary per calendar year)

The Equal Treatment Law protects employees against discrimination in the Netherlands. The law prohibits discrimination on race, religion and belief, political affiliations, gender, pregnancy, sexual orientation, nationality, and civil or marital status.

How to pay contractors in the Netherlands?

If you hire a contractor in the Netherlands, you must ensure that there is no employment relationship. If there is, you will have to pay payroll taxes. Moreover, there is an inherent risk of misclassification when you're employing workers abroad.

Different countries have different definitions of employees and contractors for the purposes of employment law and taxation. If you misclassify a worker as a contractor rather than an employee, you could incur stiff penalties, even if it was an honest error. Unfortunately, it's easy to misclassify a worker. For example, you may have hired a contractor to do a small job, and their responsibilities grow over time. Unless you do frequent classification reviews, you could miss the fact that your contractor is now technically an employee. 

Worker classification laws in the Netherlands are complex. In 2021, the Netherlands updated the law and increased enforcement of the rules around contractor misclassification. As part of its new laws, the Netherlands developed an online tool to assist employers to identify the correct employment status of their workers.

After answering a series of questions, the tool will give you one of the following findings:

• The work can be performed by a contractor.

• The work cannot be performed outside an employment agreement.

• The working relationship is unclear.

If a worker in the Netherlands is misclassified, you will be liable for payroll taxes, fines, and penalties. You may also be subject to lawsuits, especially if you were found to misrepresent the relationship knowingly. 

To avoid legal issues, you may need to convert a contractor to an employee. Some signs that indicate it’s time to make the switch are when:

• You are out of compliance in the contractor's country.

• You want your contractor to play a greater role in your company.

• You want to offer benefits to your contractor.

• You want to provide a better employee experience.

• You want to protect your company's intellectual property.

• You want to save money in the long term.

• Your contract with the worker is outdated.

• You want to avoid losing your contractor to the competition.

• Your contractor wants to become an employee.

If you’re worried about misclassification, use our Contractor Misclassification Calculator to check if you’re at risk.

How to pay remote employees in the Netherlands?

You can pay remote employees in the Netherlands via a local entity. However, you should be aware of the risk of permanent establishment. Permanent establishment is a tax term for businesses that have an ongoing presence in a country. The question is whether your company is established enough in the Netherlands to be subject to taxes. Each country has its own criteria to determine whether a business is classified correctly. 

The safest and easiest way to avoid permanent establishment risk is to work with an employer of record (EOR), like Remote, that can help you understand the specific laws in the Netherlands. The EOR takes on the burden of local legal requirements to ensure you can employ workers in the area. Remote operates as an EOR in the Netherlands as well as many other countries. 

Read our expert guide on how to choose an EOR that works best for your business needs.

Pay remote workers in the Netherlands with Remote

Hiring remote employees in the Netherlands can be one of the best ways to scale your business. But given the complexities around Dutch local labor laws and tax practices, it can be difficult to stay compliant.

Using an EOR like Remote means that you don't have to hire in the Netherlands via a local entity and handle everything yourself. Remote can handle all the legalities of international hiring, leaving you free to focus on growing your business. Remote offers the following services to make your life easier:

• A centralized platform to manage your workers globally

• The ability to approve invoices and make payments quickly in the local currency

• Intellectual property protections

• Protections against misclassification and permanent establishment risks

• Full compliance with Dutch labor laws and tax legislation.

For expert advice on global employment, download our helpful guide to hiring remote employees. If you’re ready to expand your team in the Netherlands, get in touch! We would love to discuss your plans to expand your global workforce. 

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