Five Pitfalls when hiring local staff abroad
Are you hiring staff abroad? Avoid problems and be prepared by reading about five of the most common pitfalls!
As an employer, hiring a local salesperson or representative abroad, you might assume, quite understandably, that you can simply apply your own rules, because those are the ones you know.
However, this is not without risk!
Employing staff in the Netherlands
Are you considering employing permanent or temporary staff in the Netherlands? Than make sure you are well informed on the obligations you should fulfil.
We have listed the most important topics, click to read more on:
Employing staff in the Netherlands >>The pitfalls described below are based upon the situation of a British company wanting to hire an employee in the Netherlands. Practice shows that a lack of knowledge on the following five points regularly causes problems:
For you as an employer, it seems logical to offer your employees in the Netherlands a British employment contract. After all, you are not familiar with the local rules of Dutch labour law. However, if a Dutch employee lives in the Netherlands and also works there, this can lead to considerable problems. For example, when an employee falls ill or when you have to let an employee go.
How does it work?
Even though, in theory, you can choose which labour law to apply, the “mandatory provisions” of the labour law of the country in which the employee usually works take precedence and can overrule the English provisions of the employment contract. This concerns, for example, provisions on dismissal, probationary period, continued payment during illness and working hours.
What can go wrong?
Suppose you and your Dutch employee agree on a probationary period of three months because that is what you are used to in the United Kingdom. After 6 weeks, you come to the conclusion that the employee does not quite fit in. You invoke the agreed probationary period and unilaterally terminate the employment contract taking into account the notice period. However, the employee works in the Netherlands and can invoke the Dutch rules concerning the trial period, which are mandatory.
What does this mean?
In the Netherlands, you may agree on a probationary period, but this may not exceed one month in combination with a fixed-term employment contract and two months in combination with an employment contract for an indefinite period. A probationary period that exceeds this period of one or two months is null and void. The employee thus remains employed until the employment contract is validly terminated; either because it is a fixed-term contract that ends automatically, or because you start dismissal proceedings in accordance with the Dutch rules. Incidentally, in Belgium it is no longer permitted to agree on a trial period at all, which means that a trial period in an employment contract with an employee in Belgium is null and void from day one.
How can you avoid these problems?
In practice, we advise you to adhere as much as possible to the law of the country where the employee is socially insured, so that labour law and social security are aligned. This means that in this specific example, you offer your Dutch employee, who is socially insured in the Netherlands, a Dutch employment contract, which may be drafted in English as far as the employee is sufficiently acquainted with this language.
Interfisc clients can easily make use of a draft employment contract under Dutch law which is available in German, French, English and Dutch.
Click here for more information about international employment law advice.
Many employers who take on an employee in another country want to treat their employees at home and abroad as equally as possible. Thus, we often hear that a British employer does not offer a supplementary pension scheme to his employee in the Netherlands, because employees in the United Kingdom are only entitled to the compulsory “workplace pension”. However, employers in most countries, including the UK, pay a compulsory employer’s contribution to the statutory pension of their employees, whereas in the Netherlands, it is the employee who pays 100% of the statutory pension´s contributions. Another thing is that, in the Netherlands there are increasingly more compulsory social sector pension funds, which a foreign employer may also be obliged to join and pay contributions to. Employers themselves are obliged to investigate whether such an obligation exists in their field of business.
State pension
In addition, the state pension in most countries is related to the employee’s salary, whereas a Dutch employee who is retired will only receive a minimum benefit. This minimum benefit is lower than the statutory minimum wage and the same for all residents.
How can you prevent this?
Including residents of the Netherlands who have never worked are entitled to the state pension/AOW. Hence, the state pension in the Netherlands is not related to wages. For this
reason, about 90% of the employees in the Netherlands do have a supplementary pension plan arranged by the employer or a social sector pension fund.
Finally, it is important to note that not offering a pension scheme, while the vast majority of employers in the Netherlands do so, may cause candidates to prefer employers that do offer a supplementary pension. Also for this reason, it is better to compare your Dutch employee with other employees in the Netherlands and not with your employees in the United Kingdom.
Click here for more information about the importance of additional insurances.
It is good to know that in most countries you can also employ staff without having to establish a local branch. This applies in any case to the Netherlands, Belgium, Germany and the United Kingdom. In Italy and France, however, special establishment formalities must be completed in order to be registered as an employer, often involving a notary public or other public body. You can read more about this in our factsheets.
In most cases though, a local establishment is not necessary.
Moreover, foreign employees of a company established in another country mostly work from home. Renting a local office only involves additional costs, apart from the obligation to keep local accounts. Of course, this construction has its limitations when it comes to the nature of the work of the staff abroad as well as their responsibilities. But in practice it can be organised perfectly well in this way.
When does a risk arise?
Most countries, including the UK and the Netherlands, have mutual tax treaties in which it is agreed which country is competent to levy taxes. One of the restrictions included in e.g. the Anglo-Dutch treaty, but also in most other treaties, concerns the authority of an employee in e.g. the Netherlands to enter into contracts with clients in the Netherlands on behalf of a foreign company. If the employee does have such authority, or for example manages another employee of the company in the Netherlands, it is wise to seek advice in this respect.
In France and Italy, the authorities go a step further. As soon as business activities become more than preparatory or auxiliary, they may determine that your company has a permanent establishment abroad with the same legal, fiscal and financial obligations as a local entity (such as keeping accounts, making VAT declarations and paying corporation tax). This may be the case, for example, where the authorities determine that you have a business address. In some cases, even an employee’s home office may be considered a business address. It is therefore very important, especially in those countries, to evaluate your local activities annually and then take the necessary steps to set up an entity, if necessary.
Click here for more information about setting up a foreign branch.
Each country has its own social security system. The same goes for regulations concerning the income of a sick employee. In most countries, employers are obliged to continue remuneration of a sick employee, but only for a fairly limited period oftime, provided this employee can produce a statement or doctor’s certificate as proof. The set period and the ensuing obligations differ in each country.
Let us return to the situation in the Netherlands.
Here, employers must continue remuneration for two full years in the event of illness of an employee. Most insurance companies in the Netherlands are not willing to insure a company against this risk that does not have a branch office here. Fortunately, Interfisc does offer to insure foreign companies against this risk, creating the same level of protection as for Dutch companies. Moreover, through our own occupational health and safety service (arbodienst), we assist employers step by step to be in line with their obligations in the field of absence management of sick employees. In other countries as well, we advise employers on the steps they need to take in order to be in line with the rules.
Click here for more information about sick leave & occupation disability abroad.
In the UK, it is not customary to give employees a 13th month’s salary or any other benefit. In Belgium, France and Italy, however, there are many collective agreements that include an obligatory 13th month. To give you an idea: 90% of the employers for whom we provide payroll services in these countries are obliged to pay their employees a 13th month. Furthermore, employees in the Netherlands are legally entitled to 8% holiday pay. This is paid out annually in the month of May or June and is usually calculated based on the gross annual salary of the previous 12 months.
We therefore advise employers, when entering into remuneration negotiations with an employee abroad, to check in advance to what extent the employee is entitled to mandatory payments and to make sure that the remuneration is based on the cost calculation on an annual basis. This will create a clear picture of the annual payments to take into account. More importantly, it will avoid you being confronted with the unpleasant surprise at the end of the year of having to make an extra payment that you had not budgeted for.
Download our factsheets in order to find out what important and compulsory conditions apply in the Netherlands, Belgium, Germany, France, the United Kingdom or Italy.
difficult?
Not at all, it is just important that you know the way and make good choices. Interfisc can help you with this. If you want to know more about how exactly this works, contact us, so we can give you further information about the country of your choice.
Regardless of whether or not you as an employer have your own branch office in that country, you have to be and stay aware of these rules. We have this knowledge and keep you informed of changes.
just a payslip is not enough
In addition to taking care of your international payroll, we also ensure that you are and stay aware of any other employer obligations abroad arising therefrom. Naturally, we offer suitable solutions for these matters, such as:
Whitepaper "Pitfalls in the Netherlands" and Checklist
Do you have employees working remotely in the Netherlands? Or are you looking to hire Dutch employees? Than download our Whitepaper to avoid potential problems, it is good to be aware of the pitfalls!
Open our Checklist to read if you have arranged everything properly for your employees. Ask yourself 5 important questions.
Download Whitepaper >Checklist >Related topics

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Since 1972, Interfisc has offered international HR & Payroll solutions in the Netherlands, Belgium, Germany, France, the United Kingdom, and Italy. We do this from our offices in the Netherlands and Belgium, and with an international team of around 45 committed and caring employees.
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