The Netherlands (Nederland in Dutch) is a country located mainly in Northwestern Europe. Netherlands literally means “lower countries” in reference to its low elevation and flat topography, with only about 50% of its land exceeding 1 metre above sea level, and nearly 17% falling below sea level. The country of the Netherlands is the principal component of the Kingdom of the Netherlands, which also includes the constituent countries of Aruba, Curaçao, and Sint Maarten; and the three special municipalities of Bonaire, Saba, and Sint Eustatius.
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Payroll in Netherlands – 2021 Updates
Due to covid-19, the following measures were taken by the Netherlands authorities:
- The government has lifted several corona measures on 25 September. It is no longer mandatory to keep 1.5 metres distance. However, the government continues to advise keeping a safe distance.
- If your business is affected by the corona crisis, you can apply for financial support. See the article Corona support for entrepreneurs after 1 October 2021.
- From 1 October 2021, you can no longer apply for the special extension of tax payments.
- Until 31 December 2021, the SME credit guarantee (BMKB) scheme helps SMEs that are affected by the coronavirus secure bank guarantees and bridge financing.
- For agricultural entrepreneurs, the equivalent of the BMKB-C is the Credit Guarantee scheme for Agriculture (BL-C).
- The Business loan guarantee scheme (GO) runs until 31 December 2021.
- Small Credits for Corona Guarantee Scheme (KKC): SMEs with relatively small financial needs may be eligible for a bridging loan of up to €50,000 under the Small Credits for Corona Guarantee Scheme (Klein Krediet Corona garantieregeling or KKC). This credit measure runs until 31 December 2021.
- Entrepreneurs who have a loan from microcredit provider credits do not have to repay their loan for a period of 6 months. During this period, the interest is reduced to 2%.
- Re-launch credit for SMEs (TOA): SMEs in financial difficulties that are making use of the WHOA can apply for TOA credit to help them get back on their feet after the corona crisis.
The intended phasing out of the Growth Facility Schemehas been extended to 15 June 2023.
The Dutch Trade and Investment Fund (DTIF) has been extended to include pre-delivery advances. This extra package is on offer until the end of 2021.
Dutch Payroll – Basic Facts
All businesses must register with the Dutch Tax Authorities and receive a payroll tax number. All income taxes and social insurance contributions are at a federal level and all employers in the Netherlands are responsible for withholding tax at source.
Employers are also required to maintain a basic minimum standards of workplace protection including minimum wage and standard hourly work week. Additional non mandatory employee benefits are regulated by single contracts and agreements. Employers withholding payroll taxes generally must retain each of their employees’ payroll records for at least seven years.
All workers, even foreign workers coming from outside the European Union, are taxed on all Dutch income and must file a tax return with the government.
The tax year runs from 1st January to 31st December.
Tax and Social Security Considerations
Income Tax
The Netherlands has a progressive income tax system with increasing tax rates for increasing total annual income. These rates change almost every year. Income tax is due to be paid to the authorities by the last day of the month following the month in which the income was generated.
2021 Income Tax(from employment)
Tax bracket (income range) | Applicable tax rate |
---|---|
€ 0 - € 68,507 | 37.10 % |
€ 68,508 and up | 49.50 % |
Included in the tax rate are premium social security which are levied primarily in the first bracket.
* Total Tax Rate= Income Tax + National Insurance Contributions
Payroll taxes consist of the following:
- Wage tax
- National insurance contribution
- Employed persons' insurance scheme contribution
- Income-dependent Health Care Insurance Act contribution
Social Tax
The total social contribution for employees is 27.65%, which is broken down into different types of benefits (17.9% old age social security, 0.1% dependent/spouse, and 9.65% for long term care).
Compensation and Benefits
Minimum Wage and Wage Payment:
The legal minimum wage in the Netherlands is based on age and is revised every six months in line with inflation. The minimum wage consists of a basic wage and various allowances, such as for shift work and irregular working hours. It applies to all employees of 22 years of age and over. The minimum wage is based on a full-time employee working between 36-40 hours a week and is paid weekly or monthly.
The monthly minimum wage paid to workers in the Netherlands who are at least aged 21 years has increased from 1 July 2021 to 1701 euros. The weekly minimum wage paid to workers who are at least 21 years of age increased to 392.55 euros.
Overtime: Overtime is not indicated by law. Rates are established in employment contracts or collective bargaining agreements.
Hours of Work: Full-time employment usually ranges from 36 to 40 hours per week.
Holidays: Dutch law does not require employers to give workers national or public holidays or to pay additional for work on those days. A full list of all public holidays in Netherlands for 2021 can be found here.
Leave:
- Holiday leave: Full-time employees in the Netherlands are legally entitled to a minimum of 20 days (four weeks) of paid holiday leave per year. This is based on a calculation of four times the number of hours worked per week. Part-time employees are also entitled to four times the number of hours they work per week.
- Sick leave: Up to two years of paid sick leave is provided at a minimum of 70% of the most recent earned wages. Sick leave must be reported to the employer in order to make a sick leave claim.
- Maternity Leave: Employees are entitled to 16 weeks of pregnancy and maternity leave to full pay up to maximum of €223.40 per day. If the pregnancy causes an illness before or after the leave, the employee is entitled to full pay up to two years.
- Paternity/ Partner Leave:
- If the partner of an employee gives birth, the employee has a right to 1 week of partner/paternity leave after the birth. This paid leave can be taken any time in the first 4 weeks after the birth of the child. During this period of leave you must continue to pay 100% of the employee's salary.
- Parental Leave: Parents of children up to the age of eight are entitled to parental leave designed for parents to spend time with their children. Parental leave is generally, however, some employers may partially cover part of the parents salary. The maximum amount of leave per child is calculated as 26 times their weekly working hours.
- Care leave: In the Netherlands, employees are legally entitled to take short-term care leave to look after a sick relative such as a child, partner, parent or family member. Within a 12-month period, employees are entitled to take short-term care leave equal to twice their weekly working hours. During this time the employer must pay at least 70% of the salary.
Bonuses and Special Benefits: A 13th month bonus is routinely given to employees in November or December.
Termination Pay: Employers require prior permission by the work placement branch of the Employee Insurance Agency (UWV) or the subdistrict court before they can terminate the employment agreement. Employment contracts can be terminated by mutual consent, during a probationary period, or for various other reasons, including the cessation of a contract, failure to meet a condition of employment, serious negligence and other reasons.
If the period of notice is not specified in the contract or agreement; the required period is from one to four months, depending on how long the employee has worked for the company.
Workers' Compensation: Employers pay into the workers' compensation system, which is governed by the Work and Income According to Labor Capacity Act. An employee who is injured whilst working is entitled to paid sick leave for up to two years.
Foreign Workers in the Netherlands
Foreign nationals who want to work in the Netherlands must satisfy several requirements and depending on their country of origin, may need an employment permit.
Visas: Individuals from most of Europe, the Americas (including United States), and parts of Asia, need only passport and reason for entrance to enter the Netherlands.
For other foreign residents, visas for entrance are divided into four categories:
- Schengen Visas
- Family of EU/EEA Nationals
- Airport Transit Visas
- Authorization for Temporary Stay (MVV)
- Other
Payroll Taxes:
If you employ staff in the Netherlands, you are obliged to deduct payroll tax from your employees' wages. Payroll tax consists of:
- wage tax (wage withholding tax)
- social security contributions (employee and national insurance contributions)
- an income-dependent employer's health care insurance contribution (Health Care Insurance Act contribution
Under specific conditions it is possible to set off a VAT payment against a payroll tax declaration.
Treaties
The Netherlands has entered into more than 90 income tax treaties. The Netherlands also has a totalization agreement with the United States for social tax coverage purposes. An agreement has been concluded between the Netherlands and Pakistan on the verification of benefit entitlements. Under this agreement, all AOW pension payments to Pakistan are based on a maximum of 50% of the Dutch net minimum wage.
For more information about how our Global Payroll Control Platform integrates with local payroll providers in Netherlands, contact us today