NETHERLANDS: An Introduction to Employment

Dutch Employment Law in 2025 and Beyond

Driven by ongoing labour-market reform, a growing focus on equal pay, and increased European regulatory influence, Dutch employment law is undergoing significant change. As we look at 2025 and 2026, employers and employees continue to navigate new compliance obligations, evolving contract frameworks and landmark case-law developments. At the same time, the fall of the Dutch government in June 2025 adds a layer of uncertainty. The extent to which the outgoing cabinet’s proposed legislative changes will be implemented remains to be seen. In addition, the lingering tight labour market is forcing employers to be more strategic in terms of compensation and reward structures. In M&A transactions, employment and remuneration remain in focus. With the possibility of an economic downturn on the horizon, asset deals and restructuring transactions bring employment law issues and organisational changes to the fore. This overview highlights key developments shaping the world of work in the Netherlands.

Implementation of the EU Directive on equal pay

To close the existing gender-pay gap, the EU adopted the Pay Transparency Directive. This landmark piece of legislation introduces far-reaching measures aimed at strengthening the equal-pay principle. EU member states have until 7 June 2026 to incorporate its provisions into their domestic legal regulations. The Dutch government published a draft implementation bill on 26 March 2025.

In the Netherlands, implementation of the directive will take place through targeted amendments to the Equal Treatment of Men and Women Act (Wgbmv), the Works Councils Act (WOR), and the Placement of Personnel by Intermediaries Act (Waadi). The implementing bill introduces a number of substantive changes, such as: (i) extensive reporting obligations for large employers; (ii) enhanced information rights for employees and job applicants (such as salary transparency and criteria in determining salaries); and (iii) a broader role for works councils through expanded co-determination rights, for which legislature included the most powerful right of a works council: the right of consent (eg, with respect to the distribution of employees into certain categories).

In 2027, for the first time, “large” employers will be required to report on how they comply with new pay-transparency obligations. While that may seem far off, the road to compliance is anything but short. Organisations should start preparing now, if they have not already done so, particularly when it comes to designing reporting processes and gathering necessary data. This is particularly urgent given the increased role for works councils, as their involvement in these matters – both procedurally and substantively – will require careful coordination and time.

AI in employment law

Artificial Intelligence is increasingly influencing employment practices. One significant development is the use of algorithmic management, where AI-driven tools are behind decisions related to hiring, performance evaluation and workforce planning. While these tools can streamline traditional HR processes, they also introduce new complexities and legal questions, both from an employment and a governance and GDPR perspective. The EU AI Act – legally binding in the Netherlands – introduces extensive transparency and accountability requirements for using these systems, and requires that the works council be involved before such systems are created.

Legal developments are also expected in areas such as AI governance, employee monitoring and workforce restructuring. Although AI adoption has been more prominent in tech and platform companies, its influence is increasingly felt across a wider range of industries, including sectors that were less affected by technological change in the past, such as various white-collar professions. This forces employers to rethink workforce structures, adapt job roles, or manage redundancies and organisational changes in response to AI and technology-driven changes.

Employees or self-employed contractors?

The classification of working relationships remains a hot topic, as mandatory employment law limits parties’ freedom to choose the type of contract they enter. Key developments on classifying a working relationship are the following:

• Supreme Court case law – the Deliveroo case from 2023 established that all circumstances should be considered when assessing whether an employment agreement exists. This includes: i) the nature and duration of the work; ii) how the work and working hours are determined; iii) the embedding of the work and the worker in the organisation; iv) whether there is an obligation to personally perform the work; v) how the contract was created; vi) the amount of remuneration; vii) whether the worker runs a commercial risk; and viii) whether the worker acts as an entrepreneur when participating in economic activities, ie, constituting “external entrepreneurship”. In the Uber case, the Supreme Court clarified that there is no hierarchy among these factors, meaning that “external entrepreneurship” is not of lesser or secondary importance in determining whether an employment agreement exists. Two workers doing the same job side by side for one party, on the basis of the same contractual terms and conditions, may still have different legal status, depending on whether they show the characteristics of an entrepreneur outside of the relationship with that specific party.
• Tax enforcement – as of 1 January 2025, the Dutch Tax Authorities resumed enforcement actions on pseudo self-employment. Nonetheless, given the complexity of the topic, a “soft landing” approach is adopted until 1 January 2026.
• Legislative proposals – the government recently announced – although it has since resigned – that the proposed Bill Clarifying Assessment of Employment Relations and Legal Presumption (Wet VBAR), which initially proposed a secondary role for “external entrepreneurship”, would be amended to align with the Uber case. The VBAR aims to help clarify whether a worker is employed or self-employed by laying down a statutory assessment model, prescribing criteria that will need to be taken into account. This bill also introduces a legal presumption that an employment agreement exists when working at an hourly rate of approximately EUR36 or less.
• Platform Directive implementation – legislation aimed at implementing the Platform Directive must be enacted by 2 December 2026. No legislative proposal has been published yet.

Fundamental pension reform

The Dutch Future of Pensions Act (Wet toekomst pensioenen), which came into effect on 1 January 2023, fundamentally reforms the Netherlands’ pension system. The legislation calls for the transition of the current predominantly-defined-benefit framework into a defined contribution-based system, aiming for greater transparency, personal ownership and alignment with labour-market mobility. To comply with the new regime, employers must transition existing pension arrangements by 1 January 2028. Disputes and discussions about these transitions can be expected among employees, dormant members, pensioners, trade unions, works councils and pension providers.

Proposed changes to stock-option taxation for innovative startups and scaleups

Dutch legislature is looking to make employee stock options more attractive for innovative startups and scaleups. Income from options is, in principle, taxed as employment income (up to 49.5% in 2025) when the shares acquired through the exercise of the option become freely transferable. The proposed amendment intends to limit the taxable base for this taxation to 65% instead of 100%, thereby lowering the effective tax rate. Before the fall of the cabinet, the target implementation date for these changes was 1 January 2027.

Broader employee participation on the rise

Where broad employee participation is already prevalent in startups and scaleups, and a common feature at public companies, we are seeing more mature, privately held companies offering employees an opportunity to participate. On the back of the Ownership Works movement in the US, private equity portfolio companies are increasingly looking for ways to give the broader employee population an equity or equity-like incentive. The traditional management incentive plan structure used for key management, being sweet equity structured through the mix of ordinary and preference shares, can be less suitable for a large population due to the administrative burden and required corporate documentation. As such, we see companies introducing stock appreciation right (SAR) bonuses to allow for more simplicity while at the same time rewarding more employees for value creation. If structured diligently, the effective tax burden for an employee can go down, making the SAR a viable alternative to a sweet equity investment.

Legislative proposals

Before resigning, the Dutch government had announced several employment law initiatives, including plans to reform non-compete clauses in order to restrict their use, as well as measures to strengthen the position of flexible workers. With the fall of the government, most legislative proposals will likely be declared too controversial to pursue. Consequently, proposed legislation will not be debated or adopted by parliament until a new government is installed, causing significant delays in the legislative process, as elections will first need to be held and a new government will have to be formed.