Payroll in Netherlands

What does the payroll process in the Netherlands involve?

The Netherlands has its own payroll process that looks something like this:

• Obtain the employee or contractor’s information - including their passport as well as their Dutch Citizen Service Number (Burgerservicenummer or BSN).

• Calculate gross pay - the total amount earned by your employee each month before tax.

• Calculate net pay - the total amount taken home by your employee each month after tax and social security contributions.

• Create the payslip - keeping a record of the above information and providing a copy to your employee.

• Transfer tax and deductions to the relevant authorities - the employer is responsible for withholding tax and other deductions before transferring these funds to the correct government body. 

While payroll workflows do appear to be similar across countries, they all have their own distinctions. 

For example, did you know that the Netherlands has one of the highest employee tax regimes in the world? They’re third to Romania and Russia. Or were you aware that employees from the Netherlands are entitled to a "general tax credit" (heffingskorting)?

There’s a lot of information that’s vital for employers to get right, so let’s find out more about what’s required for payroll in the Netherlands — and how Skuad can help you nail it. 

What do you need to know about payroll in the Netherlands?

A few payroll basics for the Netherlands

The standard currency in the Netherlands is the Euro (€, EUR). The payroll frequency is monthly and is usually paid to employees on the last day of the month. 

Working hours in the Netherlands

The average working week in the Netherlands is 40 hours, so 9 hours per day. This standard working week cannot exceed 45 hours unless the worker goes into overtime. 

Overtime rules in the Netherlands

If a worker does work beyond their weekly hours, they must be compensated with overtime pay. The upper limit on overtime hours will be disclosed in collective agreements or the employment contract. 

Minimum wage requirements in the Netherlands

Employees over the age of 21 in the Netherlands are entitled to a minimum wage of at least €1,725 a month. Younger employees may receive lower rates. 

The Dutch government reviews minimum wage rates twice a year, with any relevant changes coming into play on January 1st or July 1st. 

Severance pay in the Netherlands

In the Netherlands, severance pay is referred to as ‘transition compensation’ (transitievergoeding). It is calculated with a formula that multiplies the ‘S-factor’ — length of service with the ‘R-factor’ — remuneration. 

• S-factor: add one-sixth for every six months of service for the first 10 years of employment. Add one-quarter for every six months of service longer than 10 years.
• R-factor: monthly wage, including base pay, bonuses, overtime, profit sharing, and holiday pay. 

If you didn’t sign up to using confusing formulae in order to stay compliant in the Netherlands, let Skuad take care of your payroll. 

The Netherlands payroll tax and deductions

Compulsory employer and employee salary contributions in the Netherlands are broken down below:
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Employer contributions:

• WAO/WIA Aof : Invalidity Insurance Fund

• 5.49% for small businesses
• 7.05% for medium to large businesses

• WW premium: Unemployment Fund

• 0.34% AWf layer
• 5.34% Awf high

• ZVW : Healthcare Insurance Act

• 6.75% (maximum contribution income €59,706)

• Whk: Work Resumption Fund

• 0.21% to 3.36%

• Sickness Benefits Act

• 0.17% to 2.72%

• Child Care Premium

• 0.50%
  ‍

Employee contributions:

• AOW: Old Age Pension

• 17.9%

• ANW: Orphans and widow/widower pension

• 0.10%

• WLZ: Long Term Care

• 9.65%

• Awf: General Unemployment Fund - for employees with permanent employment contracts for an indefinite period

• Up to 2.70%
  ‍

Income tax

• On salaries up to and including €69,398 - 37.07%
• On salaries above Over 69,399 - 49.50%

In order to stay compliant with payroll regulations in the Netherlands, you must get tax and deductions correct. Book a demo of Skuad’s payroll services today. 

Employee leave entitlement in the Netherlands

Public holidays

There are 11 official public holidays in the Netherlands. In 2024, that looks like:

• January 1, New Year's Day
• March 29, Good Friday
• March 31, Easter Sunday
• April 1, Easter Monday
• April 27, King's Day
• May 5, Liberation Day
• May 9, Ascension Day
• May 19, Whit Sunday
• May 20, Whit Monday
• December 25, Christmas Day
• December 26, 2nd Day of Christmas

Paid leave

Full-time employees in the Netherlands are entitled to at least 20 days of paid annual leave, though employers tend to offer up to 32 days in total. 

Any statutory days of paid leave accrued from the previous year must have been taken by July. It’s the employer’s responsibility to notify their employee when this accrued leave is due to expire. 

Sick leave

The statutory minimum sick leave in the Netherlands is 26 weeks. Below are a few nuances:

• The rules on sick leave in the Netherlands are governed by the Sickness Benefits Act (Ziektewet). Under this Act, employees are entitled to receive 70% of their salary for a period of up to 104 weeks if they are unable to work due to illness.
• After the first 26 weeks of sick leave, the Employee Insurance Agency (UWV) will take over and pay the employee 70% of their salary for up to 104 weeks.
• If an employee is still unable to work after 104 weeks, they may be entitled to disability benefits.
• The amount of sick leave that an employee is entitled to may also be affected by their collective bargaining agreement (CBA). CBAs may set a longer minimum period of sick leave or a higher percentage of salary that is paid during sick leave.

Maternity / Paternity leave

Employees who are ‘expecting’ in the Netherlands should receive at least 16 weeks of maternity leave, made up of prenatal and postnatal leave. 

• Prenatal leave (zwangerschapsverlof): 4 - 6 weeks leave before the due date
• Postnatal leave (bevallingsverlof): 10 - 12 weeks leave following the birth of the child. 

Please note: While it’s possible for the Employee Insurance Agency (Uitvoeringsinstituut Werknemersverzekeringen, UWV) to pay maternity pay straight to the employee, it’s usually paid by the employers, who are then reimbursed by the Employee Insurance Agency. 

If the pregnancy or childbirth renders the employee unable to fulfill their work duties, then the employee is eligible to benefits that are equivalent to the total salary for up to one year post-birth. 

Fathers or partners are entitled to one week of paternity leave following the birth of the child. They are entitled to a further five weeks of unpaid paternity leave — though they can claim up to 70% of their salary from the Employee Insurance Agency. 

Other leave allowances

• Short-term care: Dutch employees may take two days of paid leave per year during which they’re entitled to 70% of their salary.
• Adoption leave: employers can apply for up to six weeks of adoption leave from the Employee Insurance Agency on behalf of their employees.

Payroll compliance in the Netherlands

Employers are legally obligated to ensure that their employees are correctly registered for tax and social security purposes.

To avoid fines or business penalties, your company will need to closely follow employment and payroll regulations, as well as make sure that all taxes and contributions are paid correctly and on time. 

Worried about staying compliant with Dutch payroll regulations? Book a demo with Skuad to take that worry off of your plate.