How to formalize an employment relationship with a new employee? Step-by-step instructions for companies and entrepreneurs
20.02.2023
If you plan to hire a new employee, you need to determine what contract your employment relationship will be formalized. There are several options for attracting labor:
- you can conclude an agreement with an agency or a self-employed specialist or hire an employee in your own staff,
- the work schedule of a hired specialist can be flexible or permanent,
- employment may be temporary or permanent.
How to determine the type of employment contract concluded with a new employee? We suggest using a three-step scheme for this.
Step 1: Contact an external organization or self-employed person or hire an in-house specialist?
To answer this question, it is necessary to analyze the situation. The employer must understand why he needs a new employee, assess the state of his company, formulate his own vision of the company's prospects in real and future market conditions and competition. Both options for hiring a worker have their advantages and disadvantages.
When hiring a third-party organization or specialist to perform certain work, the employer shifts part of his risks onto their shoulders. In particular, an external party is responsible for absenteeism. However, in this option, the employer will have to pay a gross salary of about twice as much as if he hired a specialist in the state. The reason is that all the expenses that the employer has to bear - vacation pay, taxes and medical insurance - are included in the hourly rate of an external employee. More about salary in the Netherlands - in our article.
Theoretically, hiring an employee in your own staff is more promising. In the process of work, the employee learns new knowledge and masters skills that will later be used for the benefit of the employer. However, before making such a decision, it is necessary to analyze:
- Can you afford labor costs? You need to clearly figure out how much the employee will cost you monthly, taking into account wages, vacation pay, social security contributions, the thirteenth salary, bonuses, car rental payments and other expenses.
- Can you handle the extra work? Increasing the staff requires more work on personnel management, organization of its work, recruitment and selection of employees. You need to clearly understand whether you can handle these new tasks on your own.
- Can you bear the risks? When hiring employees in the state, all risks are borne by the employer (for example, an employee's absence from work due to illness). Part of the risks can be insured by insurance companies, but such insurance will also require additional funds.
If you decide to hire an external specialist or agency, stop at this step of our instructions. If you decide to hire a person, go to the second step.
Step 2: Long-term or temporary employment contract?
The longer a person works in a company, the better he knows his organization and its activities. The growth of competence increases the benefit of the employee for the employer. In general, if you expect that the performance of the functions assigned to the employee will require a lot of time, it makes sense to conclude a permanent employment contract for an indefinite period. You can use a probationary period to check how well an employee meets your expectations.
A temporary employment contract is preferable in the following situations:
- Your business is characterized by time-limited peaks of activity, for example, seasonal ones. Then it makes sense to hire additional staff only for this time.
- New employees are needed to perform a specific job, for example, to repair a building or structure. If the deadline for completing this task is relatively short, it makes sense to conclude a temporary employment contract. A similar situation: if you want to gain knowledge on a particular subject, hire an expert temporarily.
If you decide to enter into a permanent employment contract, stop at this step of the instruction. If you decide to hire a worker temporarily, go to the third step.
Step 3: How to choose a work schedule: on call or a fixed working day?
On-call hours are preferred if:
- A job for an employee appears every week, but on a part-time basis.
- Work appears periodically, but it is possible to determine in advance when the employee is needed.
An employment contract with a fixed working time is preferable in cases where:
- You have enough work every week.
- You hire a specialist with experience to develop your company. Such a specialist can increase the overall efficiency of the work, but he needs time to study the situation and offer specific recommendations.
Sometimes a good option is to conclude a temporary employment contract with a further possibility of switching to a permanent contract.
Any employment contracts periodically need to be re-analyzed for their compliance with modern realities. You may see that a temporary contract should become a permanent one, or that on-call work should be replaced with a fixed schedule.
Nalog.nl provides a wide range of services for entrepreneurs, if necessary, you can get consultation from our specialists.
