COUNTRY GUIDE
With high quality of life, a stable economy, and a hard-working nation, The Netherlands is renowned as a popular destination for business. Here’s what you need to know about Dutch payroll and HR.
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42
Amsterdam
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Dutch
Jan 1st – Dec 31st
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27.65%
20-45%
If you wish to set up a business in the Netherlands, your application must be approved by the nation’s Chamber of Commerce. This is known as the Kamer van Koophandel, or KVK. It will take around twelve weeks to complete this process.
You cannot set up a business as an individual. You will need the aid of a Dutch notary. This professional will help you register your business with the KVK and the Belastingdienst, the Dutch Tax and Customs Administration. Your business needs at least one director, but this does not need to be a resident of the Netherlands.
There is no legal requirement for a local bank account to remit payments to the authorities or employees, but it’s best practice to do so. You can set up a local bank account in the name of your business once you’ve registered with the KVK. You won’t need a residential address in the Netherlands to do this, just ID and proof and your international address.
A full-time job in the Netherlands, known as a voltijd, is usually contracted to 38 – 40 hours over a five-day working week. It’s essentially the traditional western nine-to-five working pattern. An employee cannot work for more than 12 hours per shift, capping the weekly working hours at 60.
Expect to pay roughly 1.15 time an employee’s gross annual salary to make a new hire in the Netherlands.
There are a range of statutory pay requirements in the Netherlands, governing minimum wage, sick pay, various types of parental pay, and severance pay. Let’s take a look at the core considerations for each:
Effective from July 1st 2023, the monthly minimum wage in the Netherlands is set to €1,995.
The hourly minimum wage varies depending on the number of hours worked per week. The current hourly minimum wage rates are as follows:
Dutch employees are well cared for and sick pay is the perfect example, as it’s very generous. Employers are expected to pay a minimum of 70% of an employee’s annual salary for up to two years if the employee cannot work. The statutory sick pay regulations for 2023 are:
Many employers offer a full 100% salary, so bear this in mind when drawing up a contract. This may be the difference between an employee accepting your offer or that of a competitor. If necessary, consider an insurance policy against employee sick pay.
Maternity pay: benefits are paid out by the Employee Insurance Agency (UWV). Employees are entitled to 100% of their earnings throughout their maternity leave, but the Dutch government will only cover up to €256.54 per day. Employers typically choose to supplement anything above this for higher wages, but are not legally obliged to.
Paternity/partner pay: For the first workweek, partners typically receive their full salary. For the additional five weeks, the UWV provides a wage replacement, which is up to 70% of the daily wage. Again, employers typically choose to supplement their employees pay to the full amount, but are not legally required to.
Additionally, from August 2nd 2023, new parents in the Netherlands can get nine weeks of paid parental leave at 70% of their daily rate, up to a maximum of €155 a day. This is part of the expansion of the paid parental leave system, which replaces part of the unpaid leave system.
Severance pay (also known as transition payment, or ‘transitievergoeding’) is regulated as follows:
Employee rights are well protected and employment contracts cannot be terminated at will by employers in the Netherlands. You must have a good reason to terminate a contract. Typically, this will need to gross misconduct, dissolution of a role or consistent substandard performance despite attempts to help.
If you wish to terminate the contract of an employee, you’ll need permission from the Uitvoeringsinstituut Werknemersverzekeringen, or UWV. This is the Employee Insurance Agency of The Netherlands. If you can convince the employee to accept termination by mutual consent, you’ll save your business a lot of hassle.
The notice period required is one month for every year of service, capped at four months.
In the Netherlands, you’re responsible for making a number of deductions from an employee’s salary during payroll, as well as making your own contributions as an employer. Here, we’ll cover what you need to know about the Dutch tax and social security system:
You will also need to withhold income tax from the wages of your employees and pay these to the Belastingdienst. Income tax rates in the Netherlands are:
The 30% rule (also known as, “The 30% tax ruling”) applies to international employees that move to the Netherlands for work. The essence of the 30% rule is that the employee has their annual salary reduced by 30%. However, these funds are provided in the form of an expenses package that is not taxed.
This can be used to find accommodation, for example, so the employee is not out of pocket. Meanwhile, the reduced salary theoretically means that the employee pays less income tax, and the employer is liable for lower social security payments. The 30% rule is optional, not obligatory.
Not everybody is eligible for the 30% rule. The following restrictions are applied:
Once agreed, the 30% rule is active for five years at a time. The qualification criteria are reviewed every January though. If your circumstances mean that you no longer qualify for the 30% rule, such as a salary failing to reach the minimum threshold, your ability to claim this tax relief will be revoked.
Employees that earn €37,149 or less per annum pay 27.65% of their salary in social security taxes, as well as income tax of 9.7%. Employees that earn €37,150 or more are exempt from paying social security tax as their income taxes are much higher. That means no social security premiums are charged on earnings exceeding € 37,150, only Dutch income tax of 36.93% and 49.5% on earnings exceeding €73,032). This is deducted from employee salaries and paid by employers.
Employers must also pay social security contributions on behalf of their employees, depending on the length of their contracts. They must pay 2.64% for employees with an indefinite term, 7.64% for temporary workers, 8.55% for disability insurance and 5% for childcare.
Employee Social security in the Netherlands covers the following:
Employer Social security in the Netherlands covers the following:
Payment Deadline: End of the month following pay period paid with the payroll tax.
Statutory/government pension is covered within the payroll deductions. This is referred to as AOW (Old Age Pension):
It can be mandatory for employers to also have their own pension scheme, under the collective labour agreement. Whilst supplemental pension contributions aren’t mandatory, it is an expectation of all employees that they will be provided with a company pension scheme. This is because the state provision within the Netherland is very low, and employees do supplement this with private plans. The contributions are age related and a contribution ceiling will apply.
Occupational Pensions (Pensioenfondsen):
Moving onto to the key areas you need to consider to make sure you stay fully compliant with Dutch employment law, now, we’ll cover the various rules and legislation governing payroll and HR compliance in the Netherlands:
On a monthly basis, employers need to file the tax return electronically for the pay period. At the end of the tax year, employees are issued with an annual payroll statement outlining their earnings for the year. These are to be issued by the end of February the following year.
On a monthly basis the following payroll changes must also be provided:
Officially, an employer-sponsored pension scheme is not mandatory under Dutch law. However, the government can force a business to offer a pension to employees if they consider this appropriate. As a result, over 90% of employers in the Netherlands offer a pension scheme. This makes it advisable to do so to attract talented employees. Your competitors will likely do so.
When an employee joins the following information is required:
Employees must be registered with the authorities within 3 days of the employee joining the company.
Under Dutch law, the probationary period of an employee is capped at two months maximum. If you are bringing in a new hire on a fixed-term contract, this is reduced to a one-month cap. If the contract is for less than six months, you will not be permitted to assign a probationary period.
When an employee leaves, the final payment for salary is due on or before the net pay date following the end of employment. There are no reporting requirements for leavers.
The following rules apply to employment terminations in the Netherlands:
Non-residents of EU/EEA nations will need a work permit to employed in the Netherlands. The two most common examples are:
• GVVA – a verblijfsvergunning (Dutch residence permit) combined with the right to work for a Dutch business for three months or longer. The GVVA is only open to permanent employees, and the employer will need to prove to the Immigration and Naturalisation Department (IND) that the role could not be filled by a Dutch national.
• Kennismigrant – a special dispensation permit for selected, highly skilled vacancies in short supply in the Netherlands. If you can prove to the IND that an employee qualifies for a kennismigrant, there is no need to search for a local counterpart first. This permit will only be issued to employees that earn high salaries.
Statutory employee benefits in the Netherlands are very generous—it's clear from the requirements that they’re a nation that values work-life balance and wellbeing. The benefits you must offer employees include:
And to become a competitive employer in the Netherlands, you’ll need to go above and beyond offering just the statutory benefits. Culturally, employees expect more than what you’re legally required to offer. Popular supplementary benefits include:
Full-time Dutch employees are entitled to a minimum of 20 days of paid holiday, in addition to 8 paid public holiday days.
Dutch employees are also entitled to a taxable 8% holiday allowance, known as the vakantiegeld. This is designed to incentivise employees to take their vacation days, retaining an appropriate work-life balance and avoiding burnout. Employees are not legally obligated to spend this bonus on a trip, but it is preferred that they do so.
Most businesses pay this as a lump sum with the employee’s May salary. This is certainly easier on the payroll department, as it makes tax easier to calculate. Some businesses opt to divide this payment into monthly instalments over the year, though.
Also, in the Netherlands, any leave accrued from the previous year must be used by July, and the employer must inform the employee if this is about to expire (although this requirement is only for the statutory minimum number of days).
It’s also worth considering offering your employees in the Netherlands more than the required 20 days so you can remain competitive. Many employers offer between 24 – 32 days paid holiday per year.
The official public holidays for the Netherlands are:
However, it’s important to note that there is no legal requirement in the Netherlands for employees to be given a day off on these public holidays. Whether an employee gets a day off or not depends on the terms of their Collective Labour Agreement (Collectieve Arbeidsovereenkomst – CAO) or their individual employment contract.
Maternity leave consists of two periods: prenatal leave and postnatal leave.
The father/partner is entitled to 1 week of paid Paternity leave after the child’s birth.
Employees are also entitled to 5 weeks of unpaid leave in the first six months after birth; even though this is unpaid by the employer, they can claim up to 70.00% of their salary from the Employment Insurance Agency (Uitvoeringsinstituut Werknemersverzekeringen, UWV).
Depending on the degree of incapacity to work, the employee may be entitled to a WIA benefit after two years of illness. The employee must be at least 35% incapacitated for work to receive this benefit. The assessment will be performed by an insurance doctor from the UWV. This WIA benefit will partly replace the income of the employee. However, the benefit will be lower than the original salary. This could be prevented by taking out WGA shortfall insurance. The employee will then receive a supplement to the WIA benefit.
As an employer, you must follow some specific rules regarding employee sick leave:
Depending on the collective agreement/employment contract terms, an employee may be allowed additional leave types, on approved between the employer and employee, for the following:
If you’re looking to set up a branch of an existing business in the Netherlands, the process is simple. Just apply in writing to the KVK. The Netherlands has a double-tax treaty with the UK, so you will only need to pay business tax on local income.
Alternatively, you can set up a limited liability company. This is known as a Besloten vennootschap, or BV. This means that your parent company will not be liable for any legal or financial issues encounter by this subsidiary entity. A new business may also qualify for tax relief under the startersaftrek initiative.
The Netherlands offers a wide array of business structures. The most common are:
As you can probably imagine, the BV is the most common form of business structure in The Netherlands.
Expect to wait around twelve weeks before your new business entity is ready to trade in the Netherlands.
Yes. In the Netherlands, businesses are generally required to register for Value Added Tax (VAT) if they provide taxable goods or services. This registration is mandatory under the Dutch VAT system, which does not have a voluntary registration scheme. VAT registration typically takes 2-4 weeks to complete, post incorporation. If there are no activities e.g. sales, employment etc then you may apply for a VAT refund registration, which allows you to claim back VAT on purchases made:
Your business needs at least one director, but this does not need to be a resident of the Netherlands.
To open a BV in the Netherlands, you’ll need a minimum share capital of €0.01. The actual payment of the share capital can be completed after the incorporation has taken place.
The authorities of the Netherlands offer tax relief to certain new businesses. This initiative is known as startersaftrek. This is as a sub-division of the entrepreneur allowance known as the ondernemersaftrek or the private business allowance called the zelfstandigenaftrek.
To qualify for the startersaftrek, your business must meet the following criteria:
If you qualify for tax relief under the startersaftrek initiative, you can deduct €2,123 from your gross profit when completing your tax return.
For purposes of the incorporation of the new Dutch company, it will need to be registered at a Dutch business address. In this respect a virtual office space can be considered if no other location in the Netherlands is available to the company. Besides the business address itself, the virtual office services usually also include mail handling and forwarding services.
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