The Netherlands has a labour law that is protective towards the employee on one side and on the other side flexible towards employers. When hiring people in the Netherlands it is useful to make yourself familiar with this law to prevent disappointments or having unexpected costs on your labour force.

To avoid the stress and worries about hiring employees in the Netherlands, Octagon can provide Dutch labour advice and services .

  • Employment contracts
  • Collective labour law agreements
  • Payrolling solutions
  • Contracting solutions

Labour law specifics

This article shows some specific that are not very common in other countries.

Vacation allowance (8%)

It is mandatory to reserve 8% vacation allowance during the year. This will be paid to the employee in May or June as ‘vacation money’ to help paying for the annual leave. A monthly gross salary is by default without the 8% vacation allowance. An annual remuneration amount shown to a candidate in an offer is usually a total amount including the 8% vacation allowance

Employer tax

The employer has to pay employer tax on the salary of the employee. This is not the regular income tax that is paid by the employee on the gross salary but it is an additional tax. The employee doesn’t even see it on its payslip and it is paid by the employer and is an important part of the total employment cost for the employer. This tax is usually between 19-22% depending on the industry sector.

Vacation Days

A minimum of 20 paid vacation days per year is mandatory, 24 vacation days per year is average for an employee. On top of this there are 7 or 8 public holidays that are paid holidays.


Sickness coverage is a big issue in the Netherlands. The employer has to pay a minimum of 70% of the base salary when the employee is sick, up to a period of 24 months. It is expected that the 24 months period will be reduced to 12 months in the coming years but for now it is 24 months by law. This is a big risk, especially for smaller companies. It is recommended to take an insurance to (partly) cover this risk.

30% tax ruling

Expats can request a so called 30% tax ruling where up to 30% of the salary can be paid tax free to the employee. The regulation is only valid for people who comply with specific conditions set by the Dutch Tax Office. The ruling can only be granted after approval by the Dutch tax office.

Probation period

Labour contract have a probation period of 2 months max (indefinite contract type) in which employer or/and employee can cancel the contract without any obligations.
After the 2 months’ probation period an employee can cancel a contract with a one month notice period.  After the probation period an employer can only cancel the contract with permission of the UWV and usually costs a half months pay for each year the employee has worked for the employer.


In some sectors it is mandatory to pay for a pension scheme. The amount differs per sector and can range from 4-12%. From this percentage the employee usually pays between 30-50%. Usually a pension is offered to provide an attractive package.

Company car

It is common to provide a lease car that can also be used for private use. If the employee decides to use the lease car privately, there is a tax premium that needs to be paid by the employee based on the value of the car.

Hiring solutions

When the offer has been accepted by the candidate, Octagon can offer different hiring r employment. Each of these set ups have its own unique benefits depending on the clients’ needs. Below are two solutions that can be used for hiring the candidate:


The candidate is an indirect employee of the company. In this set up, the candidate would be on our payroll and we would be managing their HR-related matters while they work for the client company.


Outsource the legal and administrative aspects of employment and let Octagon take care of all payroll related subjects.
More info