What is a CAO (Central Labour Agreement)?
Collectieve Arbeids Overeenkomst or in English Collective Labour Agreement
If you run a company in the Netherlands, you may have to deal with collective labour agreements, which specify collective agreements concluded between employers, employers’ organisations, employees and employee organisations regarding wages and other conditions of employment. The government is not a party to these agreements.
A CAO can be entered into per company and per business sector. The CAO must be registered with the Ministry of Social Affairs and Employment. If a CAO has been declared universally binding for your sector, you are obliged as an employer to comply with it. You must state in the individual employment contracts whether a CAO applies.
Obligations under collective labour agreements for businesses outside the Netherlands
If your business is based outside the Netherlands and you temporarily post employees to the Netherlands, the EU Secondment Directive will apply to you. Under this directive, you must always check whether there is a mandatory CAO for your sector. If there is, you as a foreign business must observe a number of key provisions in this CAO. These include provisions about the minimum wage, working hours and breaks and holiday entitlements.
If there is no CAO, you have to make an individual agreement with the employees about the labour conditions, preferably in writing. The legal rules are the basis for this agreement.