Requirements for Foreign Employees to Work
If an employer wants to hire a foreign employee in a legal manner, several requirements have to be met. First of all, the foreign employee has to be in the possession of a residence permit. Secondly, the employer is obliged to obtain an employment permit. Employees with Dutch nationality and employees from one of the countries of the European Economic Area and Switzerland are exempt from these rules.
When an employee works in the Netherlands, Dutch law does not necessarily govern the employment relationship. A foreign employee could remain in the employment of his foreign employer on the basis of his foreign employment contract with a choice of law in favour of the laws of the foreign country and then (for example) be seconded to the Netherlands. In other words, the employer is not obliged to offer employees from another country a Dutch employment contract when they are transferred to the Netherlands. Employees can continue to work on the basis of their current (foreign) employment contract.
In case of an international employment relationship, the Dutch tax authorities grant special tax benefits to foreign employees who are temporarily assigned to a Dutch subsidiary or branch from abroad, e.g. employees who reside in the Netherlands or employees who are recruited by a Dutch employer. Under the so-called 30% Ruling, 30% of the employee’s salary may be paid out as tax-free compensation for costs. In general, an addendum should be added to the employment contract declaring the applicability of the 30% Ruling in respect of the agreed wages.
Does a Foreign Employer need to Establish or Work through a Local Entity to Hire an Employee?
Foreign employers can hire employees in the Netherlands either through a local entity or a foreign entity. Before deciding on how to structure their business in the Netherlands, foreign employers are advised to consider the tax consequences.
Limitations on Background Checks
During the pre-employment phase, only personal data specifically required for the position that the applicant applied for, can be screened. Standard screening procedures are normally not allowed in the Netherlands. The employer can only ask about an applicant’s health situation if a medical examination is required for the job by law. Of course, it is prohibited to discriminate against applicants on the grounds of – among others – gender, race, age, civil status, religion, and so on. On 25 May 2018, the new EU Regulation on privacy entered into effect. All companies were given two years to comply with the new rules laid down in the regulation. If the employer fails to do so, fines up to EUR 820.000 or 10% of the yearly turnover can be given.
Restrictions on Application/Interview Questions
The Recruitment Code of the Dutch Association for Personnel Management and Organizational Development contains basic rules that employers should observe during the recruitment and selection process. The purpose of this code is to provide a standard for a transparent and fair recruitment and selection procedure. This Code is not binding, but employees can derive protection from these rules. The Code for example prohibits the requirement of a photo of the applicant prior to the applicant being invited to an interview.