Guide: Hiring your first employee… how does that work?
The vast majority of entrepreneurs in the Netherlands today start out as self-employed. After all, you can set up a sole proprietorship fairly easily, you can often work from home and with all the digital and online possibilities of today, you can do a lot as a self-employed person. However, successful businesses are growing rapidly and many of those self-employed people notice over time that it is time for the next step: more hands to be able to do more work and continue to grow.
But more hands: that sounds easier than it is. Because do you have to start hiring people right now? Or hire other, sometimes expensive, self-employed workers for temporary jobs? And what if, just after you have taken on all kinds of obligations, you suddenly have to deal with business setbacks? In this article you will read information, tips and things that you should take into account as soon as you as an entrepreneur reach the point where you are considering hiring your first employee.
Looking for staff in the hospitality industry
The issue of staffing is particularly relevant in the hospitality industry and at events. Precisely the sectors that were hit hard by corona and where good employership pays off in loyal staff.
Working with freelancers: pros and cons
Most self-employed people choose to hire other self-employed workers in the first instance, instead of taking on staff directly: freelancers. Of course this has its advantages:
- It is of course reasonable to conclude an agreement with another self-employed person risk free. You know what the costs are and you can make clear agreements about what needs to be delivered. After the job or the collaboration, you are not committed to anything. You can always decide to work together more often, but if you don't want to, for whatever reason, there's no man overboard.
- Little paperwork. The administrative hassle when entering into an agreement with a freelancer is also not that bad. Of course there must be a contract in which you record what you agree on, but there are excellent concepts available that you can easily fill in. In good consultation, almost all self-employed people can figure it out.
- But working with freelancers also has its advantages in terms of work. That's how they often are driven and enterprising - the are after all, entrepreneurs too – and are they expert in their field. Through the collaboration you can learn from each other, so that you will also notice positive effects in the longer term, after the collaboration has probably long since expired.
The perfect solution, you might say. However, hiring freelancers also has drawbacks:
- One of the largest has already been briefly mentioned: cost. Hiring a freelancer simply costs a lot more than having your own employee do the same work. After all, freelancers often work for multiples of euros per hour compared to their own employee.
- Another disadvantage that many entrepreneurs face is unreliability. Suppose you hire a freelancer to work for you for a day, but the night before that freelancer is given the opportunity to work for another client for a week for a more generous fee. You can be called off without batting an eyelid and the work will be left behind.
- A freelancer doesn't work in front of you, but commissioned by you. Ultimately, however, a hired freelancer will always be own sakeputting his own sandwich first. This can lead to irritations and unexpected turns, and in some cases even unfinished work. Sometimes you can legally do something, but you also have to want to make the time and sense for it.
'Permanent' freelancers? Pay attention to the rules of the Tax Authorities
Now there are plenty of freelancers who are incredibly reliable and really involved in your company. And if the costs are not too bad, then there is really no problem, is there? In principle not, and especially work with freelancers if you can do that in a healthy, pleasant way, but keep in mind one pitfall: the freelancer who suddenly turns out to be an employee.
The tax authorities have drawn up clear guidelines with which you can determine whether someone is self-employed or secretly employed:
- Do you have to do the work yourself, or can you outsource things without consultation?
- Is there a relationship of authority, whereby the client determines how the work should be carried out?
- Do you receive salary? (As in: more than just an expense allowance)
Want to know more about this? Read more about when a client can suddenly become an employer.
The Tax and Customs Administration has the last word
It is important to realize that these rules of the Tax Authorities are leading. So even if you mutually agree that it concerns a freelance agreement and not an employment contract, if it falls under the 'salaried employment' box according to the guidelines of the Tax Authorities, then so be it. And then there must be an employment contract, with all the unforeseen consequences that entails. So beware of 'permanent' freelancers with whom you work continuously. Check together beforehand what the rules are and how you organize the collaboration. A lot is possible, but make sure you avoid surprises afterwards.
Hiring someone: the pros and cons
Despite all the benefits of working with freelancers, almost all entrepreneurs with a growing business ultimately choose to hire staff. That first step is always difficult: after all, hiring your first employee is an exciting moment. You do not go ice cream overnight. This is mainly because you have to arrange a lot once you become an employer. Think of salary administration, tax matters, employment contracts, pension schemes, and of course the application process itself. You can't just arrange to hire your first employee on a quiet Friday afternoon.
However, there are also a lot of advantages, which generally outweigh these drawbacks. After all, your own employee works a lot cheaper in the long run than if you constantly have to hire other parties. Moreover, that employee really works for you. You set working hours and within those times the work that needs to be done for your company is the main thing, no matter what happens. No competition with other clients, no unexpected turns: the work is simply done. This gives peace of mind and confidence in your business continuity. That is of course worth a lot. Reason enough to hire staff if the growth of your company gives reason to do so.
- Find staff? Read these 6 tips for recruitment and selection
DOWNLOAD the eBook: Found! 43 online recruitment tips for website, content and social media
+ BONUS! Five tips for an efficient photo shoot
However, there is still a lot of work between deciding that you want to hire someone and actually posting the final vacancy. For example, you have to ask yourself what kind of person you are looking for, what work that person will have to perform and whether that will become a full-time position, an on-call contract or something in between.
Properly analyzing what your company needs and drawing up a well-considered search profile is half the work. You are going to hire someone and that has a lot of impact on your company, for which you work hard every day. This is one of the most important moments of your entrepreneurial career, so take the time to prepare. These are things you want to do right the first time.
Can't figure it out or do you doubt every consideration you make? Then it is good to know that there are countless experts who can help you with recruitment.
Engaging employment agencies, is that useful?
The most logical step is of course to engage an employment agency, but is that useful? The most important thing to know is that when you work with temps, they are not employed by your company, but by the agency. You pay a fee to that employment agency (the wage costs plus a wage) and the employment agency takes all the administrative work off your hands. That is why an employment agency is often called a payroll. Very handy, but: it's not cheap. After all, at that employment agency, the chimney must also smoke.
A second disadvantage of temporary workers is that they resign relatively easily. For example, if they can earn a dime per hour from a neighbor. Sometimes they can even switch to another employer while staying with the same employment agency. In other words: temporary workers do not so much choose to come and work for you, but are offered to you by their actual employer. That can turn out well, but just as often it ends less desirable.
Yet many employers choose to work with an employment agency. Why then? In the first place because they are only too happy to get rid of that administrative work instead of being rich. Especially if you need staff more often, you may not want to be constantly recruiting but just want to be able to call a contact who can open a can of staff for you. We are mainly talking about larger employers, not the self-employed person who wants to hire someone for the first time.
Self-employed workers who recruit through an employment agency mainly do so to be flexible. The number of contract hours (and in fact the entire employment contract) can be changed at any time with a temporary employment contract. So you are not really committed to anything. It also makes it easy to 'try out' staff. Don't you like Pete? Then you call your employment agency, indicate that Pietje does not have to come back, and Jantje is on the doorstep the next day. In a manner of speaking, then. Do you like Pete? Then you can always hire it yourself. You don't even have to substantiate those kinds of decisions, because you are not accountable to anyone.
- Would you like to know more about hiring working students? Read about it here employing students as workers.
- The advantages and disadvantages of an employment agency? Read about it here payroll advantages and disadvantages.
What you do have to pay attention to – and that applies not only if you recruit through an employment agency, but also if you recruit independently – is that you do not discriminate. An employment agency may not facilitate or offer this either. When compiling a search profile, you are therefore emphatically not allowed to make a distinction on the basis of gender, origin, orientation, age or other personal characteristics. Nor should you include those characteristics in your consideration of whether or not to hire someone, much less use them to explain employment contract decisions.
That all sounds very logical, were it not for the fact that forty percent of pregnant women in the Netherlands are or have had to deal with discrimination in the workplace. Similar figures are available for applicants with a foreign-sounding name. In your cooperation with an employment agency, make sure that you are honest, sincere and pure. You should not want to work with temporary employment partners who are guilty of discrimination, and you certainly do not want to be known as an employer who does so.
Finally, useful to know: a temporary worker who becomes ill will not cost you anything. You only pay for expenses and hours worked. All other allowances – leave, illness, etc. – are for the account of the temporary employment agency. That is offset by the fee of that employment agency, so you don't actually have to do it for the low costs.
Permanent contract, temporary contract, trial period?
An employment agency or other recruitment partner can therefore help you quickly and easily find suitable personnel. Yet most entrepreneurs, especially if only one employee (or a limited number of employees) is needed, choose to hire someone themselves, not least because this is the cheapest solution.
This does mean that you can directly use a labor contract has to come. This is usually done in writing. Strictly speaking, this is not required, because a verbal agreement is also valid, but you will have to put matters such as salary, working hours and employment conditions on paper anyway. Normally, you also include all of these in the employment contract that is intended for an individual employee, especially if there is no collective labor agreement.
Even if you hire someone yourself, there is still a lot to choose from. You can give someone a contract offer for a limited period of time, or an immediate contract for an indefinite period of time. Such a contract for an indefinite period of time has the advantage that it expresses confidence. You can attract the best candidates with it. After all, it is an important advantage for the employee, such an agreement for an indefinite period of time. The big downside: you're stuck with it. Once employed for an indefinite period of time, the employee is well protected by Dutch law. You cannot just let such an employee go or adjust the number of contract hours. You thus impose a certain obligation on yourself.
That is why many entrepreneurs opt for a fixed term contract, for example for three or six months. You can cancel such an agreement with due observance of a month's notice as of the end date, or you can extend it if you like the cooperation. You will first have to thoroughly familiarize yourself with what is possible and allowed. You can't keep renewing fixed-term contracts forever. At a certain point you are legally obliged to offer a contract for an indefinite period of time. This must be done after the third extension or after two years of employment. Any temporary employment period, which may have preceded the direct employment contract, counts as one contract. So if you take over a temporary worker after two years of temporary work, you must immediately offer him a contract for an indefinite period.
A good interim solution is a contract for a definite period, with a long term (for example, twelve months), but including a probation for example four weeks. The agreement can then be unilaterally terminated within that probationary period – if it is really disappointing – but otherwise the employee has the security of having a job for at least one year. This way you both run as little risk as possible and you can enter into an employment contract in a healthy way.
Legal requirements and other consequences if you become an employer
As soon as you start taking on your first employee, you are by definition no longer self-employed without staff. From now on you are an employer instead of a self-employed person. This does not necessarily mean that you have to adjust your legal form (often: sole proprietorship). A sole proprietorship can also hire staff. However, it is good to check with the Chamber of Commerce what is possible and what consequences hiring staff has for your legal form. When you actually hire staff, you are obliged to provide these and other to notify the Chamber of Commerce . of changes in staffing levels.
However, there are even more requirements and consequences that you have to take into account once you become an employer. In the first place, you are obliged to properly investigate who you hire: the identification obligation. You are not allowed to hire people who are illegally staying in the Netherlands.
Employment contract: collective labor agreement or no collective labor agreement
You must then draw up an employment contract. You record a lot of things in it, including salary, working hours, the duration of the agreement, any probationary period, the place where you work and the position in question. Online you will find many example agreements that you can use as a basis.
It is important to check whether there is a collective labor agreement in your field that you must adhere to and what agreements it contains. This does not only concern salary, but also holiday pay and other employment conditions. They vary by industry. Four situations are possible:
- You have already agreed a collective labor agreement with an employee organisation.
- You are already a member of an employers' organization that has agreed a collective labor agreement with trade unions.
- You are not a member of an employers' organization, but you are covered by a collectively binding collective labor agreement (you can check this here on the website of the Ministry of Social Affairs and Employment)
- You follow a collective labor agreement, so-called incorporation clause. This can be static and refer to an existing collective agreement until it expires, or dynamic, regardless of its future content.
All current collective labor agreements can easily be consulted online. Part of this collective labor agreement is often participation in a pension scheme. The employee can decide whether or not to use it. As an employer, you must make the possibility known. If you adhere to a collective labor agreement, you must state this in the employment contract. And: if the employment contract contradicts the collective labor agreement, the collective labor agreement takes precedence. No collective labor agreement? Then you make your own agreements with the employees, which you can record in a personnel handbook or an employment contract. The terms of employment must meet the Minimum Wage Act, Working Hours Act and the Civil Code (book 7 from article 610 onwards).
- Hiring an employee? Look beyond just salary and pension. Read here the importance of fringe benefits.
Register as an employer with the tax authorities
Then as an employer you will have to: register with the tax authorities. This ensures that you will be able to pay the necessary levies to the tax authorities (de income tax and employee taxes). On the website of the Tax and Customs Administration you will find extensive information about this process and about the forms that you have to fill in. Take your time because these are not short forms.
You are also obliged to keep proper records of all those actions – paying salary, withholding levies and taxes, etc.: the payroll administration or salary administration. This is where you record pay slips and annual statements. Are you not such an accounting prodigy? Then it can be useful to hire an accountant for these administrative obligations. It must be mandatory and it must be correct.
Other things to consider: Check with your insurer if you need to review your business insurance as well, now that you're hiring. What does this mean for your business insurance? Should it be expanded? Arrange this before the new employee's first working day.
And: contact your accountant, if any, to discuss the tax consequences of being an employer. You may be able to organize things differently now that you have become an employer. Tax law is complicated, so be well informed about the options that are available and the benefits that you can take advantage of.
Good employership is mandatory
You not only want to be an employer, but also a good employer. In the Netherlands we know the concept of 'good employership'. It's even in the law. But what does it mean to be a good employer?
There is no finite list of characteristics that make an employer a good employer. In principle, this means that you must offer good working conditions, deal with your employees in a reasonable and fair manner, not impose unreasonable sanctions, ensure a healthy working climate and prevent excessive work pressure. Abusing, for example, a probationary period (and firing someone within that probationary period without proper substantiation) is also not in line with being a good employer. In the corona time, we saw that good employership goes further than just the rules: do you think along with your staff? Are you loyal to your employees? This in turn pays off in loyalty to you as an employer.
Good employership is opposed to good employeeship. It's a two way road. You can therefore expect respect and a healthy work ethic from your employees. In that sense, treating each other with respect is indeed laid down in law, without all kinds of concrete examples. If it ever comes to a labor dispute, it will harm your business if it turns out that you have not acted as a good employer. So always remember: how would I like to be treated as an employee myself?
Help, it's going bad!
The bullet is through the church: that first employee will be there. You have prepared everything and are determined to become a good employer. You have arranged your obligations, drawn up an employment contract, all the necessary administration is in order and the vacancy is ready to go out into the world. Doing well! Yet a lot of entrepreneurs are still uncertain and doubting about this point. What if my business suddenly goes bad? What if I hire someone and after the probation period the relationship suddenly deteriorates? What if…?
It's normal to be nervous about hiring the first employee. Many entrepreneurs who are doing it for the first time choose to talk to other entrepreneurs friends who already have staff. To get personal advice, or a tip from practice. It is in any case wise to obtain information from professionals, such as a tax specialist or a lawyer. That is never wasted money, because you prevent problems that could have caused much more wasted money in the long run.
So be well informed, don't go over the top and prepare yourself well. There is a good chance that your first employee will simply turn out to be a very sympathetic, hard-working professional who also wants to make a success of that employment. And turns out not to be? Nine times out of ten you actually get it. Remember: you have come to the point that you need extra hands for a reason. You got there because you're good at what you do: running your business. So go ahead with that as well.