How to hire and pay independent contractors in the Netherlands

Improvements in collaborative technology and the rise of remote work have made it easier than ever to find top talent regardless of location. If you’re thinking of expanding your team in Europe, you might have considered hiring independent contractors in the Netherlands. 

The Netherlands has ranked number five in the Global Innovation Index 2022. With an excellent digital infrastructure and highly-skilled workforce, the country is a natural choice for those looking to hire remote independent contractors.

While the Netherlands is an international hub of creativity and innovation, the country also has unique regulations. Besides, Dutch employment law can be complicated. The penalties for non-compliance can be serious, but Remote is here to share the local insights you need to hire independent contractors in the Netherlands. 

In this article, we’ll take a look at Dutch labor laws, tax and compliance practices, and how you can hire and pay contractors in the Netherlands easily and safely.

Unique considerations of managing contractors in the Netherlands

Despite being a progressive country with robust worker protections and benefits, the Netherlands was one of the few countries that had shielded businesses from the penalties and liabilities associated with misclassifying employees as contractors. However, this protection ended in 2020 with the introduction of the Balanced Employment Market Act (WAB).

Following the passing of this Act, companies now face significant legal ramifications for misclassifying contractors. 

In September 2021, a Dutch court ruled that Uber drivers were employees, not contractors, and were entitled to workers' rights under Dutch labor law. In addition to being held responsible for back pay, increased wages, and benefits for their employees, Uber was fined $58,940 for failing to compensate drivers according to the labor agreement for taxi drivers. 

To avoid similar misclassification risks, hiring managers should familiarize themselves with Dutch law. The employer is responsible for determining the work relationship status of a worker, so a clear distinction must be made between contractors and employees. Regardless of how your company labels the relationship, the Dutch court will look into the specific details of the working relationship to make a legal resolution. 

What is the difference between an independent contractor and an employee in the Netherlands? 

Whether a worker is considered an employee or an independent contractor under Dutch law depends on the type of working relationship that an employer has with its worker. Dutch law views it as “substance over form,” indicating that personal understanding between the two parties or a contract doesn’t play a role in determining whether a worker is an employee. 

The Dutch government has a way to determine whether a worker is an employee or a contractor. The auditors look into the specifics of the working arrangement and try to answer these questions:

• How much freedom does the worker have in organizing their work?

• How is the worker paid?

• Are paid vacation or sick leave included?

• Does the worker have several clients or only one?

• Does the worker assume an entrepreneurial risk?

• Does the worker provide materials, supplies, and equipment for the job

• Does the worker perform additional tasks over the agreement?

• Is the work occasional or consistent?

• Who pays what taxes?

You can find more details about this topic in our guide on employee and independent contractor misclassification. The Dutch government has provided an online employment relationship evaluation tool to help you determine how to classify a worker. However, keep in mind the tool is only for reference purposes. The results from the online tool aren't binding and can't be used as a legal defense. 

What are the risks of misclassifying Dutch employees as independent contractors? 

As the Uber lawsuit illustrates, the consequences of treating workers as employees while classifying them as independent contractors can be significant. 

In the Netherlands, as in many other countries, misclassification fines and penalties can be devastating to your business. If a court finds that you've misclassified an employee, you may have to: 

• Pay regulatory fines for violating labor laws and labor union agreements. 

• Back pay for employees, including benefits.

• Back pay taxes and social program contributions.

• Suffer additional business penalties and even outright bans

Dutch laws provide strong job protection for employees, so it may not be easy for you to terminate your contractors either.

Finally, you may lose your intellectual property protection. A legal battle over who owns the work brought on by a misclassified employee could result in your IP rights being transferred to the employee. Even if you win such a battle, negative publicity could deter investors and other companies from working with you. Read our helpful article with more information about avoiding misclassification penalties in the Netherlands.

Remote’s scalable contractor software platform can help you minimize noncompliance risk. Remote helps you handle the complicated parts of international contractor management — payroll, compliance, and IP protection.

How do I pay an independent contractor in the Netherlands?

Common ways to pay an independent contractor in the Netherlands include:

• international money order 

• bank transfer

• traditional money transfer services 

• freelance worker platforms  

• digital payment apps like Wise or PayPal.

Although you are not required to pay taxes or benefits for independent workers, you still need to make sure you’re paying minimum wage or above. You are also responsible for documenting working hours for contractors who work on a project basis. 

Dutch employment and tax laws are complex, but they offer contractors more protections than many other countries. 

To avoid transfer fees, and to make payments in the local currency compliantly, you could consider using a contractor management platform like Remote. We have the knowledge and expertise to help your company manage contractors not just in the Netherlands, but globally. 

What are the labor laws in the Netherlands?

Labor law in the Netherlands is governed by the Dutch Civil Code, Collective Labor Agreements, internal regulations, and employment or contractor contracts. Keep in mind that the Netherlands provides exceptional protection for workers. For a deeper understanding and advice on your specific situation, you should consult with an expert in Dutch labor law. Here are some general guidelines to support your research:

• The minimum wage for employees aged over 21 is €1,934.40 monthly. Dutch law dictates that all workers, including contractors, are entitled to the statutory minimum wage.

• Full-time employees are entitled to 20 days of paid leave yearly.

• Pregnant women are entitled to 4–6 weeks of leave before their baby is born and ten weeks after.

• Parents with children who are eight years old or younger are entitled to take unpaid parental leave.

• Employees may be entitled to other types of leave depending on the circumstances. 

• Termination of employment is tightly regulated and usually requires notice of up to 4 months.

• Employers are responsible for paying unemployment, health, and disability insurance.

• Employees have to pay taxes on income and contribute to their pension, long-term care, and the orphans and widow/widower pension fund.

Tax and compliance practices for hiring independent contractors from the Netherlands

Apart from complying with Dutch tax law, you need to meet the requirements of your country of origin. If your company is based in the US, the Internal Revenue Service (IRS) requires that you report how much you pay to independent contractors who earn over $600 per year. Even when you don't have to pay taxes on independent contractors, you still have to collect their taxpayer-identification numbers and other personal information.

You'll need to submit a Form W-8 BEN to the IRS if your contractor is based outside the US. If your independent contractors charge through their own entities, you may need a Form W-8BEN-E. In some cases, businesses are also required to file Form 1096. 

Although paying taxes with international contractors can seem challenging, it doesn't have to be. Remote automates the process of collecting relevant information from your contractors, so tax compliance for US companies is easy. As soon as you onboard contractors to your work platform, they will be instructed to fill out the relevant paperwork and submit any supporting documents. 

How do I convert an independent contractor in the Netherlands to an employee?

There are many benefits to converting contractors to employees. Proactive employers trying to retain an individual can develop loyalty by offering benefits to independent contractors, but this tactic often yields short-term results (and still leaves you to contend with misclassification risk). Of course, the best way to retain high-performing contractors will always be to convert the worker into a permanent employee.

Remote can seamlessly convert international contractors into full-time employees on your behalf and ensure compliance with all relevant local labor laws, regardless of where in the world you are hiring.

The best way to hire international contractors 

Hiring independent contractors in the Netherlands can give your company the talent and flexibility needed to grow and innovate. 

The compliance responsibilities involved shouldn’t discourage you from growing an international workforce.

Remote makes it easy to hire and pay independent contractors in the Netherlands. Check out our contractor management platform to see how you can: 

• Create legally compliant contracts for onboarding contractors

• Use automated invoicing approvals and set up payments to save time

• Automatically pay contractors in their local currency

Ready to sign-up? Get started with a few clicks and onboard your contractors in minutes.