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Payroll and benefits in Netherlands

Every country in the world has its own rules and regulations when it comes to payroll and benefits. In the Netherlands, payroll involves registering as an employer with the Tax Administration, withholding payroll taxes and reporting and paying the tax you owe each month. 

Employers in the Netherlands also need to understand the various rights, protections and benefits that employees are entitled to by law. If you want to build a team in the Netherlands, it can also be helpful to understand the additional benefits that employers can choose to offer their employees, even if they’re not compulsory. This can help you to attract and retain the best talent, making your Dutch expansion more likely to be successful.

Minimum wage in the Netherlands

Employees in the Netherlands are entitled to at least the minimum hourly wage, which is set by the Dutch government. The minimum wage is the amount that employees must be paid per hour, before tax. Before 2024, the Netherlands also had a minimum monthly, weekly, and daily minimum wage, but this is no longer the case. The hourly minimum wage applies to all workers aged at least 21 years old. There is also a minimum wage for younger workers. 

Hourly minimum wage in the Netherlands

On 1 July 2024, the Dutch legal minimum wage for workers aged 21 and over will rise by 3.1% to € 13.68 per hour. As of 2024, there is no longer a daily, weekly, or monthly minimum wage in the Netherlands. The total amount an employee earns in a day, week, or month depends on the number of hours they work 

Agreeing on a monthly salary

If an employee works a fixed number of hours each month, they and their employer can agree on a fixed salary based on the average number of hours they work every month. This is calculated by taking the total number of hours that the employee works per year and dividing it by 12. 

This type of arrangement is often set out in a collective labour agreement, but employers in the Netherlands can also agree to a fixed monthly salary with individual employees. In this case, it should be set out in the employee’s contract. 

Deducting costs from minimum wage employees

Employers in the Netherlands have to withhold taxes and contributions from their employees’ pay. The mandatory payroll taxes are income tax, social security contributions and unemployment insurance. 

When an employee is earning the minimum wage in the Netherlands, employers are not usually allowed to deduct any further costs from their wages. There are certain exceptions to this rule which mean employers can sometimes withhold costs related to housing or health insurance, plus other costs for disabled employees. 

Minimum wage in the Netherlands after tax

In the Netherlands, income tax is charged at a progressive rate with four tax brackets. Employees can also deduct certain expenditures from their taxable income and may be eligible for tax credits. It’s important to make sure your employees in the Netherlands understand how much they’ll take home after tax, not just their gross income. Average salary in the Netherlands 

According to the Central Statistics Bureau, the average salary in the Netherlands in 2023 was €4,420 including overtime for full-time employees. The average annual salary for full-time employees was €62,110 including bonuses.

Payroll in the Netherlands

Like all countries, the Netherlands has certain rules and requirements that apply to employer payroll. For example, employers have to keep detailed records of their payroll and file a payroll tax return each month to declare the taxes they owe. How to set up payroll in the Netherlands 

To set up payroll in the Netherlands, a business has to register as an employer with the Netherlands Tax Administration (Belastingdienst). After an employer registers, they receive:

  • A payroll tax number
  • A payroll tax return letter

These two important documents allow employers to run payroll, withhold payroll taxes, and remit them to the Tax Administration.

Running payroll

Employees in the Netherlands are paid monthly, usually at the end of the month. Employers must deduct certain taxes from their employees’ wages. After running payroll, they have to file a payroll tax return and remit the taxes they’ve collected to the Tax Administration by the end of the following month. 

Wages have to be paid in euros in the Netherlands. Employees must also receive at least the minimum wage as a bank transfer, which acts as proof that their employer has paid them at least this amount. If you pay employees more than the minimum wage, you can choose to pay the remainder in another way.

Employer payroll taxes in the Netherlands

Employers have to deduct payroll taxes from their employees’ wages and pay these to the tax authorities. Employer payroll taxes in the Netherlands consist of:

  • Wage tax and national insurance contributions
  • Social security contributions
  • Health care insurance contributions

Payslips

Providing employees with a payslip is an important part of running payroll in the Netherlands. Employers have to give their employees a payslip the first time they pay them, and then every time there is a change in their salary or deductions. If you pay an employee the same amount every month (and make the same deductions) you don’t necessarily have to give them a payslip each time. 

There’s certain information that has to be included on each payslip by law, such as the employee’s gross salary, components, deductions, and allowances. Employers can be fined if they fail to provide a payslip or give an employee a payslip containing incorrect information. 

13th salary

Many employees in the Netherlands receive a 13th salary payment at the end of the year. Unlike in some other countries, this isn’t a legal requirement, but it is expected. Some collective labour agreements require that employers pay their employees a 13th salary. 

How to outsource payroll in the Netherlands

If you want to hire employees in the Netherlands but don’t have a legal entity there, you might choose to outsource your payroll to an employer of record or global payroll provider, like CXC. This allows you to begin growing your team in the Netherlands without the cost and delays associated with setting up an entity. It can also help you to ensure compliance with labour laws and tax regulations, thanks to your EoR provider’s knowledge of the market. 

Payrolling vs. payroll in the Netherlands 

In an international context, payroll refers to the process of paying a company’s employees, including deducting the necessary taxes and charges and remitting them to the right authorities. However, the Netherlands also has a concept called ‘payrolling,’ which can make things confusing. 

In the Netherlands, payrolling is a way of hiring staff, where a ‘payrolling’ company engages and pays workers, and then effectively loans them to clients. This is similar to hiring workers from an employment agency (or ‘temp’ agency) in other countries. When discussing payroll in the Netherlands, it’s important to be sure that you’re talking about the right thing.

Statutory benefits in the Netherlands

Statutory benefits are benefits that are mandatory for employers to provide to their employees. Statutory benefits for employees in the Netherlands include the right to earn at least the national minimum wage for their age group. Below, we’ll discuss some other key benefits for employees in the Netherlands. 

Paid leave and holiday allowance

Employees in the Netherlands are entitled to at least four weeks of holiday leave each year. That means they should get at least four times the hours they usually work each week as paid time off. For full-time workers, this amounts to 20 days of leave. Some companies in the Netherlands choose to set a more generous holiday policy. In addition to paid time off, employees in the Netherlands are entitled to a holiday allowance. This is an additional payment that’s meant to help them enjoy their holidays. The minimum holiday allowance an employer in the Netherlands can pay their employees is 8% of their gross wages from the previous year. 

Employers don’t have to pay employees a holiday allowance if: 

  • A collective labour agreement says they don’t have to
  • The employee earns more than three times the minimum wage 

Most employers pay holiday allowance in a lump sum in May or June. If you want to pay it at a different time of year or in instalments, you’ll need written consent from your employees.

Other leaves

In addition to paid time off for holidays, employees in the Netherlands are also entitled to various other types of leave, including parental leave, emergency leave, and special leave. Employers must grant their employees at least the statutory minimum leave as defined by Dutch employment law, but they can choose to give them more. 

Maximum working hours

Employees in the Netherlands have the right to work a maximum of 60 hours a week and 12 hours a day. They also shouldn’t work more than an average of 48 hours a week over any 16-week period, or 55 hours a week over a 4-week period. 

Sick leave

Employees in the Netherlands are entitled to paid sick leave if they become unwell and are unable to work. Employers are obliged to pay employees at least 70% of their wages for up to two years. If this amounts to less than minimum wage, it must be topped up to the minimum wage amount for the first year. 

Notice periods and termination rights

Employees in the Netherlands have certain rights related to notice periods and the termination of their contracts. The statutory notice period for employers depends on the employee’s length of service. The statutory notice period for employees is one month. Employers can agree on a longer notice period with their employees. However, if the employee’s notice period is longer than a month, the employer’s notice period has to be at least twice as long. 

There are also laws in the Netherlands that protect employees from unfair dismissal. For example, employees can’t be dismissed in the first two years of being on sick leave, or during pregnancy or maternity leave. It’s also illegal to dismiss an employee because they want to take parental leave or refuse to work on Sundays. 

National insurance and employee insurance

The Netherlands has a robust social security system designed to protect employees in the event of incapacity, illness, or unemployment, among other things. To pay for this, employees have to pay two types of insurance: National Insurance and Employee Insurance. Employers have to deduct these contributions from employees’ wages. 

Employee Insurance is compulsory for every employee, and National insurance is compulsory for everyone who works or lives in the Netherlands on a permanent basis. Employers in the Netherlands have to deduct the relevant contributions from their employees’ wages and pay them to the Dutch Tax and Customs Administration. 

Netherlands health insurance schemes

Anyone living and working in the Netherlands has to take out their own insurance to cover the cost of healthcare. All insurers are obliged to offer the same ‘standard package,’ the terms of which are set by the government. Insurers have to charge everyone the same premium for the standard package, regardless of their age or state of health. 

Employees who earn over a certain threshold have to pay additional insurance contributions, known as the ZVW contribution. Employers must deduct this extra payment from their employees’ wages and remit it to the Health Insurance Fund.

Employee benefits Netherlands

Companies in the Netherlands can choose to offer their employees benefits in addition to their statutory entitlements. Providing additional employee benefits can be a valuable way of showing employees that you value them and can ultimately make it easier to attract and retain talent. 

Travel expenses

Many employers in the Netherlands choose to reimburse their employees for travel expenses if they live more than 5km from their place of work. For example, you could pay your employees back for the money they spend on public transport to get to work. Alternatively, some companies pay their employees mileage to cover the cost of coming to work with their own transport. The Tax and Customs Administration has set a limit of €0.19 per kilometre for mileage reimbursements. 

Pensions

In the Netherlands, everyone is entitled to the state old-age pension (AOW) as long as they have worked in the country for long enough. Employers can also choose to provide their employees with a separate pension plan, which both parties contribute to. In some industries, it’s compulsory for employees to offer their employees a pension through an industry pension fund. 

Additional leave and holiday allowance

Employers can also choose to offer their employees extra paid leave in addition to their statutory entitlements. For example, you could give employees more than the compulsory 20 days of annual leave, or pay them an additional holiday allowance. Some employers also choose to pay overtime in the form of extra holiday days. 

13th salary

In the Netherlands, the 13th salary is only mandatory for certain sectors, where it’s required by the Collective Labour Agreement (CAO) that applies. However, you can also choose to pay all of your employees the 13th salary as an additional employee benefit. This shouldn’t be confused with the holiday allowance, which is compulsory for all employees. 

Work-from-home stipend

Employees who work remotely from home often incur certain expenses, such as the cost of office equipment or utilities. Employers in the Netherlands can choose to offer their remote employees a stipend that helps them cover these expenses. 

Additional insurance

Some companies choose to offer their employees different types of insurance, such as additional health insurance or insurance that covers them in case of accidents.

Compliant, seamless payroll and benefits in the Netherlands and beyond

Getting payroll and benefits right is not just a legal issue. Every country also has its own customs, norms and expectations about employee compensation. And if your operations aren’t in line with your workers’ expectations, they may not stick around for long. 

Thankfully, we know what we’re doing. When you work with CXC to engage workers in the Netherlands, we’ll handle everything from tax withholding to employee bonuses on your behalf.

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