Employee vs. Contractor: How to Classify Workers in the Netherlands (Quiz included) [2024]
Just as in nearly every other nation, when you’re hiring new team members in the Netherlands, you need to correctly classify them as either employees or independent contractors. Unfortunately, Dutch law changes frequently and can be quite vague in some areas—but that doesn’t mean you won’t face penalties for getting it wrong.
The Dutch government has been cracking down hard on companies for misclassification, with fines in the millions!
Misclassification is also damaging to workers, employers, and the government. Not only does it cheat employees out of benefits and protections they're entitled to under Dutch law, such as minimum wage, overtime pay, vacation pay, and employment insurance benefits, but it also harms companies’ reputations.
Learn about how to classify your workers correctly—and stay compliant with Dutch labor and employment laws—in this guide.
Classifying workers in the Netherlands
Dutch law has different definitions for what constitutes an employee and what constitutes an independent contractor. Classifying each correctly can save you from legal trouble and ensure your business runs smoothly.
What is an employee in the Netherlands?
Unlike some other nations, the Netherlands has a rather unique way of defining who should be classified as an employee. To be an employee, you must:
- Perform your work yourself (in other words, you can’t subcontract it to someone else)
- Be paid regularly by your employer for the work you perform
- Be in a relationship with an employer where the former has, for lack of a better term, authority over some aspects of your job
- Have any of the following types of contracts:
- fixed-term contract (a temporary contract), or a
- contract for an indefinite period (a permanent contract)
Additionally, employers are well protected by Dutch law. In order to terminate an employee, the employer must get permission from the Employee Insurance Agency (UVW) or sub-district court. Furthermore, the employer is responsible for deducting taxes from the employee’s paycheck.
Dutch employees are entitled to a number of statutory benefits and protections, including:
- Vacation entitlements
- Statutory holidays
- Paid sick leave
- Health insurance
- Long-term care
- Minimum wage
- Unfair dismissal protection
What is a contractor in the Netherlands?
The definition of “independent contractor” according to Dutch law is quite loose: Simply put, it’s a self-employed individual who enters into a fixed-term agreement with an employer to deliver a project agreed upon in their contract. Interestingly, contractors are expected to have more than one client, and they cannot have over 70% of their income coming from one employer.
Furthermore, independent contractors are not entitled to the same protections and benefits as employees. The table below offers more information on the differences between the two.
Worker classification overview: Employees vs contractors in The Netherlands
Contractors
Employees
- High level of worker control.
Contractors are generally given more autonomy to determine how to complete the work and when to do it. - Equipment and tools are owned by the worker.
- Less integrated. Contractors tend to be independent, they’re more likely to work remotely, and they use their own tools and equipment.
- No entitlement to benefits. Contractors are responsible for paying their own taxes, and while they are entitled to some benefits, the list is short. They’re entitled to receive the minimum wage, fair working hours, reasonable health and safety conditions, and a few other protections.
- Limitations on payment from one employer. Contractors can only make 70% of their income from one employer.
- Time-bound engagement. Contractors are typically engaged for a specific project or period of time.
- Risk of loss. Contractors may assume more risk and liability for the work they perform.
- Non-exclusive services. Contractors cannot be contractually bound to a single company; they can provide their services to more than one organization.
- More direction from the employer. Employees are generally subject to more control and direction from their employer, who will provide guidance on how to perform the work and may set specific hours of work.
- Equipment and tools are typically provided by the company.
- Highly integrated. Employees are typically more integrated into the employer's organization, for example, they may work at the employer's premises.
- Entitled to benefits. Employees are entitled to certain statutory employment benefits and protections, such as minimum wage, overtime pay, statutory paid leave, and vacation pay. They may also be entitled to benefits like health insurance, retirement plans, and paid sick leave.
- Entire annual salary paid by one employer. Employees are entitled to have 100% of their annual wage paid by one employer.
- Fixed-term or indefinite engagement. Employees are generally hired with an employment agreement for a fixed term, or an indefinite period of time.
- Exclusive services. Employees can be contractually bound to provide services to just one company.
Tests to classify workers in the Netherlands
The labor laws in the Netherlands are notorious for frequent changes, and at this time, the Dutch government is only considering adding more guidance and possibly “tests” to help employers make the right classification. Currently, one of the only suggestions is that you take great care to take a look at an independent contractor’s paperwork and visa and determine beyond a shadow of a doubt that they are, indeed, a legal independent contractor in the eyes of Dutch law.
Penalties for misclassifying workers in the Netherlands
Penalties for misclassification are another area the Dutch government is working on, but here’s what we have so far:
- Employees immediately assume all the rights and benefits they should have had the whole time.
- The employer must retroactively pay holiday leave, pension entitlements, and so on.
- The Tax Authorities could level expensive fines of their own.
While the future is uncertain in some areas of Dutch labor legislation, it’s always best to stay on the right side of the law and pay very close attention to the changes the Netherlands will be enacting to their labor laws in the next few years, as they will certainly affect you and your workers.
Disclaimer: Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide or be relied on for tax, accounting, or legal advice. You should consult your own tax, accounting, and legal advisors before engaging in any related activities or transactions.
