If your company operates in the Netherlands, your employees are on a Dutch payroll and you are subject to the regulations and obligations of the local taxation system. As an employer, you’ll face certain obligations you wouldn’t necessarily come across in other countries. As soon as you hire staff, you are a ‘withholding agent’. You will be required to keep up-to-date payroll records and withhold tax and social security premiums each period (usually every month). The government uses these premiums to fund unemployment and disability benefits.
There are also obligations regarding correct documentation, such as contracts and employee manuals, and you will need to keep service providers such as insurers and pension funds informed. Other information to be aware of includes:
1. Obligations regarding holidays and leave of absence
Employees are entitled to at least four weeks of holiday leave a year, which is 20 days for a full-time employee. Most employers in the Netherlands also allocate some non-statutory holidays. In many sectors, the standard is 25 holidays per year.
2. Obligations regarding absenteeism and sick leave
If an employee is absent due to illness, you’ll usually have to continue paying around 70% of their gross wages for two years. During the first year of their absence, this payment cannot be below the minimum wage. After two years, you won’t have to pay the employee anything unless they’re still on an active contract.
However, if there’s a risk of a long-term absence, you and your employee are jointly responsible for enabling the individual’s return to work in some capacity. The Uitvoeringsinstituut Werknemersverzekeringen (UWV; Employee Insurance Agency) oversees the Dutch social security system, including unemployment and occupational disability benefits. It ensures both parties are making adequate efforts to ensure his or her return to work.
3. Determining an employee’s wages
Employees are entitled to a minimum wage, which is indexed every year on January 1 and July 1. If a collective labour agreement (CLA) applies to your workforce, salary levels and other conditions may have already been negotiated. You are free to exceed these amounts, of course.
4. Allowances and benefits
In addition to their basic salary, you will also need to pay your employees an annual holiday allowance of at least 8% of their wage, based on their gross wage. The holiday allowance is usually paid out in May or June, or you can agree to a monthly payment instead.
5. Outsourcing payroll administration
You can save yourself a lot of “red tape” by fully or partially outsourcing the payroll administration of your Dutch personnel to a local specialist. In this way, you can delegate a wide range of administration and management obligations, including:
- Payroll administration
- Applying measures, levies and discounts
- Preparing employment contracts, personnel manuals and/or regulations
- Maintaining contact with the Dutch Tax Department and UWV
- Arranging the remuneration of non-Dutch employees (for example, the 30% rule or salary split).
How can we help?
At Bol International, we have a dedicated team specialised in HR and payroll matters. Our experts work with companies around the world to help them set up and run their operations smoothly in the Netherlands. Click here to see how Bol International can help you.