How to Draft an Employment Contract in the Netherlands
As you probably know, you should always be aware of the legal requirements when it comes to employment agreements in The Netherlands. In short, there are basically two types. I.e. a more standard employee contract and a work agreement (also called flow-company or business partnership).
An Employee Contract includes services such as wages, holiday pay et cetera, while Work Agreements cover things like intellectual property rights for example; this article will only discuss these latter type arrangements since they can have significant impacts on your company’s future growth potential if handled incorrectly.
Do you want to know more about what to put into a Dutch Employment Agreement (and what not)? Just read the following and/or contact us directly. We’ve got you covered!
Definition of an Employment Agreement in the Netherlands
Any type of labour relationship between a natural person and an organization that meets the following criteria, automatically qualifies as an employment agreement:
- the worker is obliged to perform the work personally;
- the organization is obliged to pay the wages; and
- there must be a relationship of authority between the organization and the worker.
If these conditions are met, then the consequence is that the worker has the status of an employee.
There is only one type of employment agreement under Dutch law, which is regulated in Book 7, title 10 of the Dutch Civil Code (DCC). Although there is only one type of employment agreement, there are certain sub-types to which other rules apply with respect to certain elements of the employment agreement. I.e. the agency work employment contracts and the payroll employment agreements.
Directors are also considered to be employees if they operate under an employment agreement (this is different for directors of listed companies; they are obliged to work on the basis of a management agreement). Their status differs from the status of other employees with respect to dismissal law.
The Importance of an Employment Agreement
An employer is bound to the specific rules of employment law that applies to the contract between his employee and him. In some situations, there may arise a discussion as to whether there is an employment contract applicable. For the following reasons, it is important to determine whether parties have entered an employment contract:
- If there is an employment contract, the specific rules of employment law apply.
- The type of contract also determines which court is competent to take rule over any disputes between the parties.
- In the case of an employment contract, national insurance contributions and the income-related health insurance contributions must be deducted from the employee’s wage tax and employee insurance contributions must be paid.
Rules specific to Labor Law
The legislator has in several places included provisions in the law that only apply if parties have entered an employment contract. For example the Dutch Civil Code applies to the legal relationship between an employer and an employee. For example, the Minimum Wage and Minimum Holiday Allowance Act (in Dutch: Wet Mimimumloon en Minimumvakantiebijslag) and the Collective Labor Agreement Act (in Dutch: Wet op de Collectieve Arbeidsovereenkomst) also apply.
As soon as it is clear that there is an employment contract, the employee can appeal to the (for him/her often protective) provisions of employment law, such as:
- continued payment of wages in the event of illness
- dismissal protection; and
- vacation entitlements.
Competent Judge
The subdistrict court is competent (in the first instance) to rule over all labor law disputes, regardless of the amount of the claim.
Types of Employment Contracts
Successive Fixed-term Employment Contracts
Any employment agreement, whether a normal employment agreement or one of the sub-types, can be agreed for a definite period of time, for the duration of a project or for an indefinite period of time. The parties are free to choose which contract suits their needs.
A fixed-term employment agreement between an employee and employer can be concluded for any period of time; however, the possibility to conclude consecutive fixed-term employment contracts is restricted. In principle, the last employment contract between the parties is converted into a permanent employment agreement (the so-called ‘chain regulation’) when: (i) more than 3 consecutive fixed-term contracts have been entered into and the gap between each consecutive contract is equal to 6 months or less or (ii) the repetition of consecutive fixed-term employment contracts exceeds 3 years and the gap between each consecutive contract is equal to 6 months or less.
An employer is considered to be a ‘successive employer’ if an employee is hired by this employer and the employee continues to perform the same (or nearly the same) work as he or she performed for his or her former employer. Whether an employer is considered to be a successive employer is also relevant for the allowed trial period, the statutory notice period and the amount of transition payment upon dismissal.
Part-time Employment Contracts
There is no specific legal definition for a part-time worker. There are no specific limits on the use of part-time workers and also no mandatory requirements for employment contracts specific to part-time employees. Employers are not allowed to discriminate between employees based on differences between working hours unless such discrimination can be objectively justified.
Conditions of employment have to be applied pro rata, unless it is infeasible or discriminatory to do so (eg. the working hours an employee is allowed to spend on obligatory training). Therefore, part-time workers are entitled to pro rata equal pay, social benefits, paid holidays and leave.
On-call Employment Contracts
Another contract option is an on-call employment agreement in which parties do fix the amount of working hours beforehand (a zero-hours employment contact) or only agree to a certain minimum or maximum (or both) number of working hours. In an on-call employment agreement, the parties can agree that during the first six months of the employment agreement the employee will only receive wages for the hours he/she actually works. In collective labour agreements other rules may apply with respect to on-call employment.
Conclusion of an Employment Agreement
Dutch law does not require that an employment agreement must be concluded in writing. However, some terms of employment do have to be put in writing, eg probationary periods and a non-competition clauses. The employer has to provide each employee with a written or electronic statement containing a list of the following information within one month of commencing work (Article 7:655 DCC):
- Name and place of residence of the parties
- Employee’s location
- Function / nature of labor
- Time of entry into service
- The duration of the employment (if it is a fixed-term contract)
- Number of vacation days (at least method of calculation)
- Notice period for employer/employee
- Wage and instalment payout
- Usual working hours per day or per week
- Whether the employee will participate in a pension scheme
- If the employee will be working outside the Netherlands for more than one month: all kinds of additional information in this respect
- The (possibly) applicable collective labour agreement (CLA)
- Whether the employment contract is an agency workemployment contract.
If point 6 up to and including 9 is already included in an applicable CLA, a reference to that CLA will suffice.However, it is common practice to put most of these particulars in an employment contract.
Legal Presumptions
Presumption of the Existence of an Employment Agreement
In order to avoid ambiguities and uncertainties as to whether or not there is an employment relationship in the context of an employment agreement, the legislator has included a legal presumption in Section 7:610a of the Dutch Civil Code. If the conditions are met, an employment agreement is presumed to have been entered into.
The legal presumption serves to protect the employee. After all, the employee no longer has to prove that an employment contract has been concluded if all the requirements of Section 7:610a of the Dutch Civil Code have been met. It is up to the employer to refute this legal presumption.
The legal presumption with regard to the existence of the employment agreement can be invoked as:
- someone has performed work for three months, on a weekly basis, for remuneration on behalf of another person; or
- someone has worked at least 20 hours per month for three months for remuneration on behalf of another person.
If an employee has fulfilled one of the two conditions mentioned above, it is suspected that an employment agreement has been concluded. In that case, all employment law regulations must be observed.
If the conditions for the legal presumption are met, the employer has two possibilities to refute the legal presumption of Section 7:610a of the Dutch Civil Code:
- The employer states and proves that the parties never had the intention to enter into an employment agreement and that they did not actually behave in that way at a later stage. The employee must respond substantively to these statements of the employer and can therefore not only refer to the legal presumption.
- The employer indicates that it was the intention to conclude an employment contract, but states and proves that the employer and employee actually behaved differently. As a result, an agreement other than an employment contract would have been entered into.
Presumption of the Number of Contracted Working Hours
If an employee has had an employment agreement for at least three months, the volume of work in one month is deemed to be at least equal to the average volume of work over the previous three months (Section 7:610b of the Dutch Civil Code). This article is particularly important for employees who do not always work the same number of hours per month, such as on- call workers.
It may be that the employer can demonstrate that he wants to provide the on-call worker with work, but that there is simply no work available. In that case, there may be a reasonable ground on which the legal presumption of employment does not have to be applied. However, case law is divided on this point.
