Remote Payroll Guide: the Netherlands

If you’re hiring employees in the Netherlands, it’s crucial to have a smooth payroll process and to remain compliant with all local labor laws. And it doesn’t have to be complicated – that’s where Remote’s Global Payroll service comes in. 

Netherlands Payroll Overview

• Employment law provides strong labor conditions and protections for employees, so employing people will generally be an important investment and commitment.
• Temp agencies are popular options for more flexible workforce arrangements. For these and many other reasons, the following are only guidelines in the broadest sense, and professional legal services are recommended when employing in Netherlands.
• Visit the Ministry of Social Affairs and Employment page to see some official employment information.
• All businesses that hire employees have to register with the Tax and Customs Administration to obtain a payroll tax number.
  • Companies in the Netherlands pay and withhold several types of tax. Employers withhold salaries tax and social insurance contributions from their employees' salaries. Companies pay corporation tax on their profits. Dividend tax is withheld from dividends (profits) distributed to shareholders. There are also several environmental taxes. Tax conventions have been signed with many countries to avoid the double taxation of international companies.

When does the Netherlands fiscal year run?

The fiscal year in the Netherlands runs from January 1 to December 31. This period is used for financial reporting and taxation purposes.

What is the typical payroll frequency in the Netherlands?

Typically, salaried employees in the Netherlands will receive their pay once each month.

When do Netherlands employees get paid?

Remote’s Global Payroll customers can select their pay date.

It is common for employees to receive their pay at the end of each month, typically on the last working day. However, the specific payday can vary by employer. For example, some employers may choose to pay on the 25th of each month to ensure employees receive their funds before the month ends.

When is the payroll cut-off date in the Netherlands?

For Global Payroll customers, the cut-off date will be based on the pay date that is selected.

The Netherlands paycheck example

You can view the details on The Netherlands - Payslip (Payroll)

What statutory deductions are required in the Netherlands?

Statutory deductions are payroll deductions that are required by the government. In the Netherlands, these may include:

• Income Tax (Loonheffing): Income tax is withheld from an employee's salary based on their income level and tax bracket. The tax rates are progressive, with higher income levels subject to higher tax rates. You can find more information about tax rates on the official website. Additionally, consulting a tax professional or accountant familiar with Dutch tax law can be very beneficial for specific scenarios.
• National Insurance Contributions (National Insurance Contributions - Volksverzekeringen): These contributions fund social security programs in the Netherlands and cover four main areas: General Old Age Pensions Act (AOW), General Survivor's Act (ANW), Exceptional Medical Expenses Act (AWBZ), and Child Benefits Act (AKW).
• Employee Insurance Contributions (Employee Insurance Contributions - Werknemersverzekeringen): These contributions fund employee insurance programs, including unemployment insurance (WW), sickness benefits (Ziektewet, ZW), and disability benefits (WIA).
• Municipal Taxes and Levies: Municipalities in the Netherlands may impose their taxes and levies, such as property taxes (onroerendezaakbelasting or OZB) and waste disposal charges.
• Pension Contributions: While not mandatory by law for all sectors, pensions in the Netherlands can be required or mandatory for your specific sector.
• Health Insurance Premium (Zorgverzekeringswet - Zvw): The health insurance premium is a mandatory deduction to cover the costs of the Dutch healthcare system. Employees are required to have health insurance.

Depending on your specific situation, there may be additional taxes and levies, such as wage tax and employee contributions to specific industry funds.

What is the National Insurance system (social security)?

Social insurance schemes in the Netherlands provide a temporary income during, for instance, unemployment, old age, illness, or incapacity for work. There are 2 types of social insurance schemes in the Netherlands:

• Employee insurance schemes that are mandatory for every employee
• National insurance schemes that are compulsory for everyone who works or lives permanently in the Netherlands

Both employers and employees (who earn over a small minimum threshold) must contribute to the National Insurance during payroll. These payments are automatically calculated by Remote’s Global Payroll service.

Is a pension fund required in the Netherlands?

• There are three main pillars in the Netherlands pension system:

1. General Old-Age Pensions Act (AOWAlgemene Ouderdomswet) is administered by the Ministry of Social Affairs. It is a basic state pension provided to all residents of the Netherlands upon reaching the state retirement age, which is gradually increasing to 67 years and three months. The amount of AOW pension you receive depends on your marital status and the number of years you have lived or worked in the Netherlands.

2. Occupational pensions is an employment benefit. Both employees and employers contribute to the contribution agreed in collective employment agreements into a pension fund where the employer is affiliated.

3. Private Pensions are voluntary and supplementary to the state and occupational pensions. Contributions to private pensions may be tax-deductible up to certain limits, providing an incentive for individuals to save for retirement.

Can I use Remote’s pension provider in the Netherlands?

You will need to secure a pension plan for your Netherlands employees. This is not included in our Global Payroll offering. If you would like, we can introduce you to the broker we use for our EOR employees, however you will be responsible for managing the plan.

Who is Remote’s pension provider?

In the Netherlands, Remote works with a premium provider, Aegon, for a fair and equitable scheme.

What is the Netherlands pension contribution?

In the Netherlands, employers are required to contribute 15.20% as a Mandatory Occupational Pension Scheme on a maximum of EUR 128,810 of taxable base salary.

What is sick leave in the Netherlands?

• In the Netherlands, employees are entitled to sick pay from the first day of sick leave for the first two years of illness that prevents them from working. Employers are responsible for covering the employee's salary during sick leave, with no reimbursement available from the government.
• Under Dutch law, employees are entitled to sick pay that is from the first day of sickness for the first two years of illness that prevents them from working.
  • During the first year of illness, employees receive 70% of their normal wages. If this amounts to less than the minimum wage, employers should supplement it up to the minimum wage amount
  • During the second year of illness, employees receive 70% of the employee's normal wages. Employers do not need to supplement if the amount is less than the minimum wage
  • If the employee is off sick because of organ donation, pregnancy, or giving birth, employers need to pay 100% of their normal wages.
  • There is no statutory limit to the amount of sick leave an employee can take. If an employee is still ill after two years of statutory sick leave, the employer is not obligated to continue paying the employee's wages. The employee will likely become eligible for a benefit from the UWV (Employee Insurance Agency).
    • In case of long-term sick leave, the employee's condition needs to be assessed by a company doctor no later than 6 weeks from the start of the sickness. After 2 weeks of sick leave, Remote contacts the employee to understand if the sick leave will be further extended and if necessary, initiates an Occupational Health process with ARBO365. The employee will be contacted to schedule a call with the company doctor, who will evaluate the employee and create a Problem Analysis form. The Problem Analysis contains the company doctor's recommendations, which must be followed for the employee’s successful reintegration back to work.

Visit the government website and UWV website for more information.

What is Maternity Pay (‘zwangerschaps- en bevallingsuitkering’ in the Netherlands?

The Employee Insurance Agency (Uitvoeringsinstituut Werknemersverzekeringen, UWV) pays 100% of the employee’s income during the leave period. The maximum daily pay is EUR 256.54 and it is taxable.

Their holiday allowance continues to build up during the pregnancy and maternity leave. Employer is not allowed to ask you to take up your holidays during the leave.

Visit the government website for more information.

How long is Statutory Maternity Leave?

In the Netherlands expecting mothers are entitled to a total of 16 weeks of maternity leave.

• Before the due date – between 4-6 weeks (the flexibilization period)
• After childbirth – at least 10 weeks

In case of twins or multiple births employees are entitled to at least 20 weeks of maternity leave. They must take 8 to 10 weeks of this leave in one go right before your expected due date.

How do employees qualify for Maternity Pay?

Employees must:

• Prove you are pregnant by getting a maternity certificate (‘zwangerschapsverklaring’) from their doctor or midwife. Keep this certificate for at least 1 year after your maternity leave has ended, as UWV may ask for it at a later date.
• Provide the due date when applying for maternity pay on your behalf. This information is included on the maternity certificate.
• Tell your employer when you would like your maternity leave to start. They are free to choose any date as long as it is 4 to 6 weeks before the day after the due date. Employer must apply for maternity pay 4 to 2 weeks before the maternity leave starts.

How much is Maternity Pay?

Employees are usually entitled to 100% of their full average daily income while on maternity leave. However, employers can decide to only cover what is socially insured.

If the employee earns more than EUR 5,754.40 of gross monthly income including holiday allowance, the employer may choose not to top up the rest of the salary.

In most cases, UWV will transfer the maternity pay directly to the employer. You will then continue paying their salary in the same way they always have.

How to apply for Maternity Pay as an employer

To arrange maternity pay for your employee, complete the Maternity pay application form (‘Aanvragen WAZO-uitkering’). You will need to log onto the employer portal with your EH3 level eHerkenning account to do this.

You will need your employee’s due date when completing the form. This information is included on your employee’s maternity certificate (‘zwangerschapsverklaring’). They can get this certificate from their doctor or midwife.

Visit the UWV website to read more.

What is Partner/Paternity Leave in the Netherlands?

In the Netherlands, fathers or partners (also same-sex partners) are entitled to one week of paternity leave within the first four weeks after 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.

After paternity leave, the employee can take up to five weeks of additional paternity leave (i.e. five times the number of hours that you work per week) within the first six months after birth. You must request additional paternity/ partner leave four weeks in advance.

The first week of paternity leave (geboorteverlof) is paid by the employer. During the additional leave,  you are entitled to a benefit of 70% of your wage (daily maximum: EUR 179.58 (=70% of maximum daily wage).

Visit the government website for more information.

How long is Parental Leave?

Employees with children aged up to 8 have the right to parental leave in the Netherlands. It can partly be taken as paid leave.

Per child, each entitled parent can get at most 26 times the number of hours they work per week. Parents get paid the first 9 of the 26 weeks of parental leave. They receive a benefit from the Employee Insurance Agency (Uitvoeringsinstituut Werknemersverzekeringen, UWV).

Employees must take paid leave in the child's first year. Employees are allowed to take this leave as soon as they start working for you.

Visit the government website for more information.

How much is Statutory Shared Parental Pay (ShPP)?

You must allow this leave, and it can be taken part-time or full-time.

During parental leave, you are not legally required to pay their salary unless this is agreed in the collective labor agreement (CAO) or employment contract.

The UWV benefit for paid parental leave amounts to 70% of the daily wage. 

Employees are entitled to 70% of their salary during this extended paternity/partner leave for a maximum of €179.58 per day.

If the daily income is less than the minimum income (social minimum), you may be entitled to a supplement based on the Supplementary Benefits Act (Toeslagenwet).

Holiday allowance for employees in the Netherlands

In the Netherlands, every employee is legally entitled to a holiday allowance, which is 8% of their gross salary of the previous year – referred to as vakantiegeld in Dutch. While it’s not the same as a 13th month, it’s roughly equivalent to an extra month’s salary before tax. Furthermore, this additional amount is typically already included in the base salary negotiations with the employee.

It’s usually paid out as a lump sum in May or June but the timing depends on the employment contract or CBA. Exceptions include when a contract ends or is terminated before May, and when there are alternative arrangements in place: it can also be paid out every month and can even be paid out early if agreed in advance.

Holiday allowance is subject to a special tax rate, just like bonuses and other parts of the salary that they only receive once a year.

How is it calculated?

Employees in the Netherlands are required by law to receive at least 8% of their salary as holiday allowance. This also applies to employees with a zero-hours contract. The minimum rate for temporary workers is 8.33%.

Holiday allowance is calculated based on the gross salary of the previous year, including overtime, performance premiums, any commissions, supplements for working unsocial hours and payment in lieu of holiday days, and is adjusted pro-rata: the amount employees receive depends on the number of months they have been employed. It does not include bonuses, expenses, and profit distribution from shares.

On the payslip, the employee may simply see the holiday allowance split across the year.

Visit the government website for more information.

What is the 30/20/10% rule in the Netherlands?

It is a tax advantage for highly skilled migrants moving to the Netherlands for a specific employment role. When the necessary conditions are met, the employee can receive their salary 30% tax-free for the first 20 months. For the second 20 months, they will be eligible for a 20% tax-free allowance. In the final 20 months of the 5-year facility, they will be eligible for a 10% tax-free allowance.

This reimbursement is intended as compensation for the extra costs that international employees can incur when moving to a new country for their work.

Visit the official government website here and here for more information.