Payroll and HR in:
The Netherlands

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.

payroll and hr in the netherlands
Local currency


Dialling code


Pay periods


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Tax year

Jan 1st – Dec 31st



Company tax


Social security


Wages tax


Getting started with payroll in the Netherlands

The Netherlands wages and pay

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:

  • A 36-hour workweek: €12.40 per hour
  • A 38-hour workweek: €11.75 per hour
  • A 40-hour workweek: €11.51 per hour

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:

  • Minimum percentage of wage: Employers are required to pay employees who are ill at least 70% of their last earned wages.
  • Duration of payment: This sick pay must be provided for a maximum period of 104 weeks (two years).
  • Minimum wage considerations: If the 70% payment falls below the statutory minimum wage, the sick pay entitlement is adjusted upwards to meet the minimum wage requirement.
  • Second year payment: In the second year of sickness, the employer is required to continue paying at least 70% of the wage, but this does not necessarily need to meet the minimum wage threshold.

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:

  • Eligibility: Employees are entitled to a transition payment from the first day of their employment contract. This applies to permanent contracts as well as fixed-term contracts, and also to on-call contracts. The obligation to pay the transition payment applies if:
    • There is a valid ground to dismiss an employee.
    • The employer does not extend the permanent or fixed-term contract.
    • An employee resigns due to seriously culpable conduct or negligence on the part of the employer (such as discrimination).
  • Calculation of Payment: The transition payment depends on the employee’s monthly salary and the number of years of employment:
    • Employees receive 1/3 of their monthly salary per full year of service from their first workday.
    • For the remaining part of the employment term, the payment is calculated using a specific formula: (gross salary received over the remaining part of the employment contract / gross monthly salary) x (1/3 gross monthly salary / 12). This formula is also used if the employment contract was shorter than one year.
  • Maximum Limit: As of January 1, 2023, the maximum transition payment is €89,000 gross, or if the employee’s annual salary is higher than €89,000, then it is capped at one gross annual salary. This maximum amount is adjusted annually based on the development of contract wages

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.

The Netherlands payroll and employment deductions

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:

  • Gross annual salary of €37,149 or less: 9.28% (plus social security taxes)
  • Gross annual salary of €37,150 – €73,301: 36.93%
  • Gross annual salary of over €73,031: 49.5%

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:

  • Only permanent employees can take advantage of the 30% rule – freelancers and the self-employed are not eligible. However, if you set up a BV and employ yourself as a Director, you can benefit from the 30% rule.
  • Agreement to the 30% rule must be made in writing by employee and employer.
  • The employee must have moved to the Netherlands exclusively for the role in question.
  • The employee cannot have lived and/or worked within 150km of the Dutch border for longer than eight months over the last two years. This means employees that previously lived and worked in Kent, Luxembourg, Belgium Eastern Germany or Northern France will not qualify for the 30% rule.
  • The role must be relevant to the experience and expertise held by the employee, and the employee must perform duties that cannot easily be completed by a Dutch national. Employers will likely need to prove that they tried, and failed, to hire a local employee before looking overseas. 
  • The employee’s gross salary must be €38,961 or above after the reduction of 30% (€50,568 before the reduction) unless they hold a master’s degree and are aged 29 years and eleven months or younger. In this case, the minimum salary is reduced to €29,616 (€38,500 before the reduction). There is no minimum wage for trainee doctors or scientific educators to qualify for the 30% rule.

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:

  • Old Age Pension (AOW)
  • Orphans and widow/widower pension (ANW)
  • Long Term Care (WLZ)

Employer Social security in the Netherlands covers the following:

  • Unemployment Insurance
  • Health Insurance
  • Childcare Premium
  • Health Care Act

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):

  • Eligibility: Generally, everyone who resides or works in the Netherlands builds up the state pension (AOW) over the years. The state pension age is gradually changing and will reach 67 years in 2024, and then 67 years and 3 months in 2028.
  • Employer contributions: Employers pay AOW contributions to the Dutch Tax and Customs Administration and withhold part of the contribution from the employee’s wages or payments.
  • Employee contributions: Employees contribute towards the AOW through deductions from their wages. This is a part of the overall social security contributions, which total around 27.65% of their gross salaries, including contributions to the Dutch pension fund and long-term care fund.


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):

  • Eligibility: Employees are automatically eligible for occupational pensions when working for a Dutch employer, subject to certain criteria such as age and income thresholds.
  • Contributions: Both the employer and employee contribute to the occupational pension fund based on a percentage of the employee’s salary. The exact contribution rates can vary and are often defined under collective labour agreements.


The Netherlands payroll and HR compliance

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:

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:

  • Completed new hire form
  • Employment contact
  • Copy of employee ID
  • Work Permit/Residency permit (If applicable)

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:

  • Employer must obtain prior permission by the work placement branch of the employee insurance agency before they terminate the contract.
  • Employees can be terminated due to misconduct, performance, redundancy, or other substantial ground is specified in the new Dutch legislation.
  • There are 5 ways of terminating: Termination by mutual consent, termination proceedings before the WXV WERKbedrijf, termination proceedings before the cantonal court, termination with consent of the employee and urgent dismissal.
  • The notice period for the employer depends on the length of service (1 month for every 5 years up to 4 months).
  • Employees are entitled to severance pay upon termination by the employer.

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.

Employee benefits in the Netherlands

Mandatory employee benefits in the Netherlands

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:

Common supplementary employee benefits

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:

The Netherlands statutory leave and time off

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:

  1. New Year’s Day (Nieuwjaarsdag)
  2. Good Friday (Goede vrijdag)
  3. Easter Sunday and Monday (Eerste en tweede paasdag)
  4. King’s Day (Koningsdag)
  5. Liberation Day (Bevrijdingsdag)
  6. Ascension Day (Hemelvaartsdag)
  7. Whit Sunday and Whit Monday (Eerste en tweede pinksterdag)
  8. Christmas Day and Boxing Day (Eerste en tweede kerstdag)

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.

  • Prenatal leave: An employee must take 4-6 weeks leave before the expected due date (zwangerschapsverlof)
  • Postnatal leave: A employee must take the remaining 10-12 weeks (bevallingsverlof)) which starts from the date of the birth of the child.

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:

  1. Do not ask your employee the reason for their illness. They are not legally required to tell you, and you’re not allowed to ask about it. You may only ask when your employee thinks they’ll be able to work again and if it is possible for them to perform alternative duties during the period of illness.
  2. Report the sick leave and recovery to your company doctor or health and safety agency. You must do this within 4 working days, even if the employee has recovered by then. You don’t have to do this if the employee is a temporary or agency worker.
  3. Check if you must report sick leave to UWV. You must do so if the employee is sick for 42 weeks, their employment contract expires during period of sickness, or the employee is entitled to benefit under the Sickness Benefits Act (Ziektewet).
  4. Continue paying salary. Please refer to the earlier section on wages and pay for details on sick pay requirements.

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:

  • Short-term care: employees are entitled to up to two days of paid leave per year, although the payment will be 70.00% of the regular salary.
  • Adoption leave: employers can apply for an adoption leave allowance of up to six weeks on behalf of their employee to the Employee Insurance Agency (Uitvoeringsinstituut Werknemersverzekeringen, UWV).

Setting up a legal entity in the Netherlands

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.

Entity set-up FAQs

The Netherlands offers a wide array of business structures. The most common are:

  • Besloten vennootschap, or BV – the equivalent of a private limited liability company
  • Naamloze vennootschap, or NV – the equivalent of a public limited company
  • Coöperatie, a partnership of equal standing among several members
  • Vereniging, a non-profit association with a single aim related to the public good
  • Stichting, a non-profit charitable foundation

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:

  • The refund request for year X must be submitted before July 1st in year X+1;
    after that date the refund can be denied.
  • The period for which a refund is requested must be at least 3 months and at
    most a full calendar year. The only exception for this minimum is when you
     have a refund request for “the rest of the year” in case you’ve had different
     requests covering the previous parts of said year.
  • There is a refund threshold of € 50 / € 400 depending on the refund period.
  • With the refund request forms, you will need to submit proof that the BV is in
    fact a company liable to tax.
  • Alongside the refund forms you will also need to submit copies of invoices and
    import documentation (if applicable).

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:

  • You must not have been a business owner for at least one year of the last five, supporting your claim that this is a new business venture
  • You are eligible for the zelfstandigenaftrek, and have not claimed this more than twice in the last five years
  • You must not have changed your business structure (i.e. from a BV to a sole trader) within the last year

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.

Country nuances

Interested in expanding into the Netherlands?

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