Netherlands Payroll Services

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Netherlands Payroll Services

At Bradford Jacobs, our Employer of Records (EOR) platforms provide reliable solutions for companies wishing to establish their presence in the Dutch economy. From the first steps of setting up operations to ensuring compliance with the local payroll laws and regulations, we offer dedicated Netherlands Payroll solutions that can be personalized to your requirements.

We aim to make business expansion easy. At Bradford Jacobs, we navigate the administration of the Dutch payroll system for you, and we also make the returns and associated payments for income tax and social security contributions directly from our payroll system to the local tax authorities. We do the work, so you do not have to.

When expanding into a new country, you may encounter some challenges regarding payroll, but allow us to take the reins and answer any of your questions and concerns with our trusty guide on payroll for the Netherlands.

What Netherlands’ Payroll Options are available for Companies?

  • Remote payroll - This option allows businesses to operate under a single payroll system, by adding employees in the Netherlands to your parent company’s payroll. However, these employees must operate under different regulations, which is likely to cause problems.
  • Internal payroll - You may operate payroll for your subsidiary, especially if you are committed to growing your company’s presence in the Netherlands. However, this does require hiring dedicated HR staff who understand Dutch employment and compliance laws.
  • Netherlands’ payroll processing company - If you are considering outsourcing, then working with a Dutch payroll company will help in processing your payroll – but not when it comes to compliance.
  • Netherlands’ payroll outsourcing - However, there is another option available that solves both concerns – by working with Bradford Jacobs. We can handle payroll and compliance for all your employees in the Netherlands. We take the administrative stress off your shoulders so you can focus on what you do best.

Netherlands Payroll Services

Establishing payroll in the Netherlands demands a total understanding of the employment laws and many levels of taxation regulations. The authorities strictly apply fines and sanctions for non-compliance with the legal aspects of payroll, taxation, and employment.

It is best to ‘play safe’ and outsourcing payroll services in the Netherlands will deal with the following:

  • Registering with the tax authorities through the Dutch Tax and Customs Administration (Belastingdienst).
  • Registering with the Social Security Bank (SVB) which coordinates the social insurance systems – national insurance for individuals legally living in the Netherlands and employee insurance for those working in the country.
  • Registering with the Employee Insurance Agency (UWV), which operates under the Ministry of Social Affairs and Employment (SZW) and handles benefits covering such as unemployment and sickness.
  • Obtaining the citizen service number (BSN) for all employees so they can interact and liaise with national, regional, and municipal authorities.
  • Negotiating the 30% tax exemption for skilled expats (where applicable)
  • Reconciling national and any local taxes to assess for refunds or extra payments
  • Applying for employees’ special expatriation status (if applicable)
  • Calculating employees’ monthly salary and sending their pay slips
  • Researching for any available tax incentives
  • Submitting employees’ and employers’ wage tax returns and social insurance forms
  • Creating and submitting your company’s annual accounts and year-end statements
  • Creating payment schedules for salaries and national insurance contributions
  • Ensuring accurate personal income tax returns are filed for you and your employees, where required

The above checklist highlights why the vast percentage of foreign companies expanding into the Netherlands’ strictly regulated business environment hand their payroll to Employer of Record (EOR) providers such as Bradford Jacobs. 

By outsourcing payroll your company syncs with tax and employment regulations without risking sanctions or financial penalties for late or incomplete filing. You focus on your goals and expansion, free of any concerns over payroll. Questions? We have the answers. 

What is required to set up Payroll in the Netherlands?

A foreign company planning to operate payroll in The Netherlands by establishing its own subsidiary must follow various procedures, and these vary according to company type. Exclusively foreign-owned companies can enroll in the Commercial Register. Once established, the new company must follow strict registration procedures before they can operate payroll for their staff. These include:

  • Registering with the Dutch Customs and Excise Administration (Belastingdienst).
  • Registering with the Social Security Bank (SVB), which coordinates the social insurance systems – national insurance for individuals legally living in the Netherlands and employee insurance for those working in the country.
  • Registering with the Employee Insurance Agency (UWV), which operates under the Ministry of Social Affairs and Employment (SZW) and handles benefits covering such as unemployment and sickness.
  • Obtaining the citizen service number (BSN) for all employees for liaising with national, regional, and municipal authorities.

What Entitlement, Termination Terms apply to Netherlands Payroll?

The Dutch Civil Code is the most important source of employment law, and it can be particularly strict concerning dismissal and termination. Back in 2015, these elements were fundamentally amended by the 2015 Work and Security Act, which made dismissal or termination more complex for employers. Further legislation in 2016 and 2017 strengthened the legal position of employees.

Mandatory employee benefits in the Netherlands covers a wide area, and managing benefits and compensation comprises a key element of Human Resources management. Bradford Jacobs’ thorough understanding of these sectors of Dutch employment law ensures all requirements will be met in a trouble-free process.

The most important considerations include:

National Minimum Wage: The minimum wages paid to employees over the age of 21 in full-time employment increased from €1,684 to €1,701 (US$1,997) from July 1, 2021. The new weekly rate is €392.55 (US$460) and €78.51 (US$92) per day. The law does not lay down a minimum hourly wage as hours vary between businesses depending on the number worked in a week.

Part-time workers calculate their entitlement by taking the minimum weekly wage, dividing that by the number of hours in a full working week and multiplying the result by the number of hours they work. More can be seen here (https://www.government.nl/topics/minimum-wage/amount-of-the-hourly-minimum-wage).

Health Care: The Netherlands’ universal health care system, rated among the best in Europe and administered by the government, is available via public and private schemes. All Dutch residents must be covered for basic public health insurance (ZVW).

Exemptions include under-18s whose parents are covered and European Union (EU) / European Economic Area (EEA) citizens who are covered by the European Health Insurance Card (EHIC). Visitors from outside the EU and EEA must have private health insurance.

Private healthcare funds are funded both by contributions from employees, starting at around €100 (US$117) annually, and from employers paying an amount depending on employees’ salaries. The government covers all citizens for long-term care and nursing, through the WLZ program.

Notice Periods: Must be given both when a company releases staff or when an employee terminates their employment. Employees on a permanent or indefinite contract must always be given notice.

Dutch law provides for the following terms of notice:

  • Fewer than 5 years’ service – 1 month
  • More than 5 years, fewer than 10 years– 2 months
  • More than 10 years, fewer than 15 years – 3 months
  • 15 years’ service or more years – 4 months

Employers do not have to give notice in the following circumstances:

  • During the employee’s trial period
  • Summary dismissal due to gross misconduct, for example
  • Employee resigns with immediate effect following breach of contract, for example

Notice periods can be contractually shortened or if a Collective Labor Agreement (CAO) permits, but in the absence of either, then statutory terms apply. If the employee’s notice period is more than one month, the employer’s reciprocal notice period must be twice as much up to a maximum of six months.

Redundancy, Termination and Severance: Regulations for dismissals are strictly applied in the Netherlands, where employers must have a valid reason for terminating employment. If the employee agrees with dismissal, there are two options:

  • If dismissals are mutually agreed the employer must record the terms in a written statement and consider unused vacation and notice period
  • If the employer terminates employment and the employee agrees with the reason in writing. In this case they receive a transition payment, similar to a severance payment that applies if the employee has been in position for a minimum of two years

In neither of these cases applies, the employer needs approval from the Employee Insurance Agency (UWV). However, employees have a 14-day ‘reconsideration period’ to revoke their agreement and do not need to give a reason. If the employer does not record the reconsideration period in the termination agreement it increases to 21 days by default.

Where employees do not agree with the reason for dismissal, employers need permission from the UWV. Grounds include economic reasons or the employee’s long-term incapacity for work.

Other potential reasons for dismissal, such as poor performance or conflict, can be adjudicated by a sub-district court or an independent dismissal committee under a Collective Labor Agreement (CAO).

Working Hours and Rest Periods: The Dutch generally respect clearly defined working hours. Regulations govern how many hours per day people may work and their entitlement to breaks. These regulations are included in the Working Hours Act and the Working Hours Decree (ATB).

A working week generally comprises between 36 and 40 hours, or seven to eight hours per day scheduled between 6am and 6pm, five days a week. There is a maximum number of hours set at 60 per week and 12 hours per shift.

After a working day, employees must have 11 consecutive hours of non-work time. Working a five-day week, an employee must have at least 36 consecutive hours of non-work time in a 14-day period.

Employees receive 30-minutes rest after working over 5½ hours, which can be split into two 15-minute breaks. More than 10 hours must include at least 45 minutes rest, again split into a number of breaks. But if the employee works for 5½ hours, he must at least have 15 minutes’ break.

Overtime: This is a legislative grey area in Dutch labor law, which has no specific provisions regulating overtime or any compensatory payments. Agreements regarding overtime may be agreed contractually, in employee handbooks or by a Collect Labor Agreement (CAO).

Sick Leave: Legally, Dutch employees receive sickness benefit for the first two years of their incapacity to work, paid either by the employer or via the Employee Insurance Agency (UWV). Sick pay is a minimum 70% of salary, including overtime payments and other personal benefits.

Incapacity due to pregnancy complications, giving birth or organ donation entitles the employee to their full salary. Payments start after two ‘waiting days’. Employers must report the sick leave to the UWV if the employee is off for 42 weeks.

If their employment contract ends during the sick leave this is dealt with by the UWV’s Social Medical Affairs division. If they are still unable to work after two years, they may receive benefits under the Work and Income (Capacity for Work) Act.

Holiday Leave: Full-time employees have at least four working weeks paid holiday per year. However, employers often offer up to 25 days, or more. Vacation leave must be used no more than six months after the end of that year unless employees have reasonably been unable to take holiday.

Holiday allowance is 8% of total gross salary, paid in May or over 12 months at the employer’s discretion.

Collective Labor Agreements (CAOs) or contracts determine whether public holidays equate to a day off. The CAO may also provide that a Christian public holiday can be substituted for an alternative religious holiday, such as Eid Al-Fitr at the end of Ramadan or Chanukah.

Maternity Leave: Maternity leave totals four to six weeks before the birth and at least 10 weeks post-natal, with the mother allowed to add the remaining two weeks to her leave after the birth. Leave may be extended if birth is after the due date.

Multiple births increase the allowance to at least 20 weeks leave. If the mother dies during childbirth their partner is eligible for the maternity leave.

Employers apply to the Employee Insurance Agency (UWV) for the maternity allowance for their employee, who receive their 100% daily salary capped at €223.41 (US$261).

Paternity / Partner Leave: Fathers (or partners) who work full time (40 hours per week) are entitled to receive 1 weeks paid leave during the first four weeks after the baby is born on full pay. Also, since July 2020 there has been an increase of another 5 weeks at 70% of salary, taken in the first six months after birth.

Public Holidays: Employers actually have no legal right to benefit from a day off on official public holiday; this is usually dealt with either by contract or collective agreement.

  • New Year - January 1
  • Easter Sunday and Monday - during March/April
  • Queen’s Day - April 27
  • Liberation Day - May 5 (not a day off every year)
  • Ascension Day - May/June
  • Pentecost Sunday and Monday - May/June
  • Christmas Day - December 25
  • St. Stephen’s Day - December 26

What Taxation Rules apply to Netherlands Payroll?

As with most international payroll regulations, the employer withholds deductions on behalf of the employee to be remitted to the relevant tax authorities.

Dutch tax rules apply to three categories:

  • Box 1 includes employment income from salary, bonuses, self-employed income, and home ownership and these are subject to tax bands. 
  • Box 2 taxes interest from a minimum 5% shareholding at 26.90%. 
  • Box 3 taxes income from savings and investments at 31%.

Dutch residents are taxed on total income from all worldwide sources. Non-residents pay personal tax on income sourced in the Netherlands and usually fit into Box 1. Expats are considered a tax resident in the Netherlands if they live there for more than one year or if, as a married person, their family is with them.

Foreign companies hiring workers in the Netherlands must comply with local regulations. Payroll tax returns are submitted per pay period for each type, including wage deductions, national insurance, and social security contributions. These returns must be submitted electronically to the tax authorities along with any other individual data elements.

Other important rules include:

  • National Income Tax: Dutch residents are taxed on total income from all worldwide sources. Non-residents pay personal tax on income sourced in the Netherlands and usually fit into Box 1 of the three-tier Dutch system, which includes all income from salaries, bonuses, self-employment, and directors’ fees. National Social Insurance contributions are taken at 27.65% of employee salaries. Taxable income is subject to a 37.35% rate up to earnings of €68,507 (US$80,330) with a top rate of 49.50% above that.
  • Social Security Taxes: Premiums are paid on annual incomes up to €33,791 (US$39,622) towards old-age pensions (17.9%), surviving relatives (0.1%) and long-term care (9.65%).

Rules on other taxes:

  • Corporate Income Tax (CIT): The standard rate is 25% with 16.5% applying to the first €200,000 (US$234,500) of taxable income for Small and Medium Enterprises (SMEs), and 9% to some categories of intellectual property. Resident companies are taxed on their worldwide income. Foreign companies are considered resident if incorporated under foreign law but managed in the Netherlands.
  • Withholding Tax (WHT): The standard rate on dividends is 15%, with exemptions available for European Union and European Economic Area member state residents.
  • Other Taxes: National Insurance Tax (as part of deductions from income); Employee Insurance Tax (paid by employers with rates depending on the industry and sector); Inheritance, estate and gift taxes vary between 10% and 40%; Property Tax (assessed annually); Transfer Tax applying to transferring property ownership; Insurance Tax of 21% paid by Dutch residents on premiums.

To read more about the taxation system in the Netherlands, check out our Netherlands Tax page.

Stress Free Global Expansion

Bradford Jacobs’ Employer of Record (EOR) solutions smooth your route into the Netherlands and every new territory targeted for worldwide expansion. Registration procedures, tax laws and dealing with relevant authorities are potentially hazardous barriers to your expansion, risking severe fines for non-compliance or late returns. Bradford Jacobs is on call every step of the way to ensure your company clears all the hurdles to establishing a successful presence in the Netherlands.

Contact us today for more information.