Introduction
Pilot scheme
Requirements and duration
Defining innovative start-ups
RVO assessments
Applying lowest salary criterion
Employee participation
Can start-ups apply for unlimited residence permits?
Family members
Comment
On 1 June 2021 the Netherlands initiated a pilot scheme titled "Essential personnel for start-ups" to resolve practical difficulties faced by start-ups hiring employees from outside the European Union, the European Economic Area (EEA) or Switzerland. In order to obtain a residence permit for employees, companies must offer a salary higher than one normally offered to start-up employees. The Dutch highly skilled migrant program, the Knowledge Migrant Scheme, previously defined this as €4,752 for foreigners aged 30 and over, and €3,484 for those under 30. On the other hand, foreigners who graduated in the Netherlands with a bachelor's degree, master's degree or PhD, or foreigners with a master's degree or PhD from one of the world's top 200 universities are offered €2,497. (All amounts are gross per month and exclude holiday allowances.)
This €2,497 salary was manageable for start-ups but it made the pool from which they could hire new employees quite small. The current pilot scheme should solve this issue and make it easier for start-ups to obtain a residence permit for new employees to enable them to work in the Netherlands.
With this pilot scheme the Netherlands creates a temporary exemption to the work permit obligation in Article 2 of the Dutch Foreigners Employment Act (Wet arbeid vreemdelingen), which simply states that an employer needs to have a work permit for employees who do not have EU, EEA or Swiss nationality.
The scheme takes into account the common remuneration structure within start-ups by applying a lower salary criterion and an additional requirement that the employee has a stake in the company. This manner of remuneration ensures that the employee is essential to the start-up's growth or attainment of a bigger market share, as no entrepreneur would give away a part of their company unless it were necessary.
The exemption to the work permit obligation is only applicable if:
- the employee has an employment agreement to work for a company;
- the company is an innovative start-up with scalable business activities;
- the company has agreed a fixed salary in money that amounts to at least €2,497 gross per month, excluding holiday allowance; and
- an unconditional employee stake of at least 1% in the company is received in addition.
A main advantage is that a start-up that complies with these requirements does not have to become a recognised sponsor. It therefore already saves the legal fees that are payable to the Immigration and Naturalization Service (IND) for such an application of €2,062, as well as the obligation to pay the employee a higher salary in order to be able to obtain a residence permit for them.
The question arises as to what is deemed to be an innovative start-up. This is determined by the Netherlands Enterprise Agency (RVO), which checks the following:
- innovative capacity;
- scalability of business activities;
- financial position; and
- capacity and structure of the company.
To check if the start-up has innovative capacity, the RVO checks for:
- a new product, service or technology; or
- an innovative organisational set-up and working method within the company. For instance, but not limited to, activities in line with the top sector policy, commitment to energy transition, Sustainable Development Goals (SDGs), or an innovative policy as part of the Dutch digitisation strategy.
The RVO considers a start-up to be scalable if it can continue to deliver the product or service sustainably while it achieves rapid and sustainable growth.
The natural next question is what the meaning of "sustainable" is in this context. It means that the start-up can continue to meet all its obligations financially during this period of rapid growth and that the rapid growth is determined by an accelerated, non-linear development of value.
The RVO will present its assessment of the start-up to the IND consisting of a business plan that has been submitted, a prognosis and a financial analysis. This evaluation is similar to those the RVO already undertakes for residence permits for entrepreneurs and those who are self-employed, as well as for recognised sponsorship.
The assessment of the RVO is valid for three years, and commences as soon as the first residence permit is granted. Currently, a residence permit can be granted for a maximum of one year and likely will be increased to three years from 1 January 2022.
This pilot scheme will run for a period of four years and after two reviews (after two and four years) the decision will be made as to whether or not this pilot will become a permanent policy.
Applying lowest salary criterion
The salary criterion does not dependent on age or qualifications of the employee. Just like other salary criterion applicable to residence or work permits in the Netherlands, this one is indexed each year.
The RVO checks whether the employee has obtained or will obtain a stake in the company of at least 1% of the company. The employee's stake needs to fulfil the following conditions:
- it must be demonstrably contractually agreed (easiest is thus in a written contract signed by both parties);
- it must not be dependent on individual performance conditions; and
- it must become unconditional within three years of the start date of the employment agreement.
It is therefore possible to agree on conditions as long as they are not connected to the performance of the individual employee. They can, however, be linked to the growth of the company, within reason.
Can start-ups apply for unlimited residence permits?
The pilot scheme is limited to a maximum of five residence permits per start-up, even if the start-up complies with all the requirements. If a sixth permit is applied for, the IND will reject the application. It is possible to apply for more residence permits, but there can be a total of only five employees in the same start-up in possession of a residence permit for essential personnel. So should an employee leave and be replaced by a new employee, a new residence permit for that employee as essential personnel for the start-up can be applied for.
The employee's partner or spouse can obtain a residence permit with free access to the Dutch labour market. The back of the residence card states will state: "arbeid toegestaan, tewerkstellingsvergunning niet vereist" (work freely permitted, no work permit required).
Note that such free access to the Dutch labour market only remains in place for longer than four years.
The new scheme is introduced by virtue of Article 1, Paragraph 1, Subsection (b) of the Besluit uitvoering Wet arbeid vreemdelingen (Decree Implementing the Foreigners Employment Act) in conjuction with Article 3.20e of the Voorschrift Vreemdelingen (Regulation on Foreigners).
The new scheme opens the door for start-ups to hire talent from outside the European Union, EEA or Switzerland. They can therefore more easily compete with bigger, already established companies in the Netherlands, without the need for the deep pockets that the conventional competition possesses. With this scheme, there is no need for the start-up to become a recognised sponsor and therefore the previous limitation on hiring staff from outside the European Union, EEA or Switzerland is removed.
For further information on this topic please contact Mandy Janzen-Westerburgen at Maes Law by telephone (+31 6 31 94 35 70) or email ([email protected]). The Maes Law website can be accessed at www.maeslaw.nl.