Since 1 June 2021 the Netherlands started a pilot called: ‘essential personnel for startups’. This due to the fact that in practice it was very difficult for startups to hire employees from outside the EU / EEA / Switzerland. Because in order to obtain a residence permit for their employees a fairly high salary criterion was applicable and possible participation cannot be taken into account. For foreigners of 30 years and older this was € 4.752,-, for younger than 30 years of age this was € 3.484,- and for foreigners who were graduated from the Netherlands or from a top 200 university somewhere in the world this was € 2.497,- (all amounts are gross per month, excluding holiday allowance). The last-mentioned salary criterion is doable for startups but it made the pool from which they could fish new employees quite small. The current pilot should solve this issue and make it easier for startups to obtain a residence permit with which the new employee is allowed to work in the Netherlands.
With this pilot The Netherlands creates a temporary exemption to the work permit obligation based on article 2 of the Dutch Foreigners Employment Act (‘Wet arbeid vreemdelingen’), which simply states that an employer needs to have a work permit for the employee without an EU / EEA / Swiss nationality. Next to that it takes into account the within startups common remuneration structure by applying a lower salary criterion and on top of that, the requirement that the employee participates in the company. This entails that the employee is therefore partially employed as an employee but also shares in the risks, the success and the chances of the company. Such a manner of remuneration ensures that the employee is essential for the startup to grow / attain a bigger market share, as no entrepreneur would give away a part of his/her company without the need to do so.
Requirements and duration
The above stated exemption is only applicable if 1) the employee has an employment agreement for working for a company, which company is 2) an innovative startup with scalable business activities and 3), who has agreed a fixed wage in money, amounts to at least € 2,497 gross per month, excluding holiday allowance and 4), who on top of that receives an unconditional employee participation of at least 1% in the company.
A huge advantage is that a startup that complies with these requirements does not have to become a recognized sponsor and therefore already saves the legal fees for such an application at the IND of € 2,062 next to having to pay the employee a higher salary in order to be able to obtain a residence permit!
Is your company an innovative startup?
The question rises, what is deemed to be an innovative startup? All of this is checked by the Netherlands Enterprise Agency (‘Rijksdienst voor ondernemend Nederland’ or abbreviated as ‘RVO’). RVO checks the following:
1) innovative capacity; and
2) scalability of business activities;
3) the financial position;
4) capacity and structure of the company (speaks for itself).
To check if the startup has innovative capacity, RVO checks if the following is available:
- a new product, service or technology; or
- an innovative organizational set-up and working method of the company. For instance, but not limited to, activities in line with the top sector policy, commitment to energy transition, the sustainable development goals (SDG’s), innovative policy of the Dutch digitization strategy.
Ad 2 and 3)
The RVO considers a startup to be scalable if the startup can continue to deliver the product or service sustainably while it achieves rapid and sustainable growth.
The next question that arises is of course, but what does sustainable in this context mean? Well, with sustainability the following is meant: if the startup can continue to meet all its obligations financially during this rapid growth. If there is rapid growth is determined based on if there is an accelerated non-leneary commodity development.
What is needed by the RVO to do the assessment?
The RVO will base its above stated assessment on the by the startup to the Dutch Immigration and Naturalization Service (‘Immigratie en Naturalisatiedienst’ or abbreviated as ‘IND’) submitted business plan, prognoses and financial analysis. This assessment is similar to the assessments RVO already does for residence permits for starting entrepreneurs and self-employed persons as well as for recognised sponsorship.
The assessment of RVO has a validity of 3 years, which starts from the moment that the first residence permit is valid.
Currently such a permit can be granted for a maximum duration of 1 year and most probably as of 1 January 2022 for the duration of 3 years.
This pilot will run for a period of 4 years and after 2 moments of evaluation (after 2 and after 4 years) the decision will be made if this pilot will become permanent policy or not.
What is important to know about the applicability of the lowest salary criterion?
The salary criterion does not dependent on age or on the fact that the employee has a specific diploma! Just like other salary criterion applicable to residence- and/or work permits in the Netherlands, this salary criterion is indexed each year.
What does the employee participation entail?
The RVO checks whether the employee (ultimately) has obtained or will obtain an employee participation in the company of at least 1% of the company. Such an employee participation needs to be:
1) demonstrably contractually agreed (easiest is thus in a written and by both parties signed contract);
2) without being dependent on individual performance conditions; and
3) the employee participation needs to become unconditional within 3 years after the start date of the employment agreement.
It is thus possible to agree on conditions as long as these are not connected to the individual performance of the employee. It can however be linked to the growth of the company or such and of course within the bounds of reason.
If a startup complies with all the requirements, can it apply for as much residence permits for essential personnel as it likes?
No, the pilot is limited to maximum five residence permits per startup. If a sixth is applied for, the IND will reject the application. This is thus not a choice of the IND. When already five residence permits are granted, a sixth has to be rejected! It is thus possible to apply for more residence permits, but there can only be five employees in total with a residence permit as essential personnel for startups employed by the same startup. So should an employee leave and a new employee is found, a new residence permit for that employee as essential personnel for the startup can be applied for. Applying for another residence permit is still possible though.
Position of family members
The partner / spouse of the employee can obtain a residence permit with the labour market connotation: ‘free on the Dutch labour market, no work permit required’ (‘arbeid toegestaan,
tewerkstellingsvergunning niet vereist’).
Do take into account that this labour market connotation only remains if the pilot is continued after 4 years!
Where can you find this new pilot?
This new pilot is stated in article 1o, paragraph 1, sub b of the Decree Implementing the Foreigners Employment Act (‘Besluit uitvoering Wet arbeid vreemdelingen’ or abbreviated as ‘BuWav’) jo. Article 3.20e of the Dutch Foreigners Regulation (‘Voorschrift Vreemdelingen’ or
abbreviated as ‘VV’).
This new pilot for essential personnel for startups opens up the possibility for startups to also hire talent from outside the EU / EEA / Switzerland and therefore more easily compete with bigger, already established companies in the Netherlands, without the need to have a huge wallet, such as the already established competition. With this pilot, there is no need for the startup to become a recognized sponsorship and therefore the threshold to hire talent from outside the EU / EEA / Switzerland is taken away.
For the exact requirements and the nitty gritty details, please do not hesitate to contact Mandy Janzen-Westerburgen!