Payroll in the Netherlands: A Comprehensive Guide for 2026

Introduction

Payroll in the Netherlands requires monthly loonheffing (combined wage tax and social insurance) withholding from every employee, employer-side contributions to unemployment (WW), disability (WIA), healthcare (ZVW), and sickness (ZW) funds, a mandatory 8 percent holiday allowance (vakantiegeld) paid annually, and monthly wage declarations (loonaangifte) filed with the Belastingdienst.

A foreign company without a registered Dutch entity cannot obtain a loonheffingennummer (payroll tax number) from the Belastingdienst, which means it cannot legally withhold tax, file wage declarations, or pay employees.

The Netherlands has one of the highest employee tax regimes in the world. The loonheffing system bundles wage tax and social insurance into one framework, but the employer's obligations extend beyond it. The mandatory 8 percent vakantiegeld accrues every month and lands as a lump-sum payout in May, creating a cash flow spike that has to be provisioned from day one.

Employers must also continue paying at least 70 percent of salary for up to 104 weeks of sick leave, and collective labour agreements (CAOs) frequently layer sector-specific rules on top of statutory minimums.

This guide covers the payroll process, statutory contributions and tax treatment, paid leave entitlements, compliance risks, and how to run payroll without a local entity.

How can you run payroll in the Netherlands?

A company paying people in the Netherlands has two routes, and the choice comes down to headcount, time horizon, and whether it wants to build the administrative infrastructure that Dutch payroll requires across the KvK, the Belastingdienst, and the UWV.

Option 1: Set up a Dutch entity

You register a BV (besloten vennootschap, private limited company) through a civil-law notary, file the incorporation deed with the Chamber of Commerce (KvK), and receive a KvK number and a Citizen Service Number (BSN) or RSIN for the entity. Before the first salary is paid, you register with the Belastingdienst to obtain a loonheffingennummer (payroll tax number), which is required to withhold loonheffing and file wage declarations.

After that, the employer is responsible for withholding tax and other deductions before transferring these funds to the correct government body each pay period: monthly loonheffing filings and payments, employer-side social contributions (WW, WIA, ZVW, ZW), 8 percent vakantiegeld accrual and annual payout, pension administration where a sector CAO applies, and annual wage statements (jaaropgave) to every employee by February.

Payroll records must be retained for at least seven years. This route generally suits larger teams and a longer time horizon.

Option 2: Pay through a provider

Another way to run payroll in the Netherlands is to work with a payroll service provider that already holds a registered Dutch entity, a loonheffingennummer, and the Belastingdienst and UWV registrations.

An employer of record goes a step further and acts as the legal employer, so the employment contract, loonheffing withholding, social contributions, and vakantiegeld obligations sit with them. This route generally suits smaller or exploratory teams, since payroll starts on an entity that already exists.

Skuad manages payroll for multiple countries from one simple dashboard. Outsourcing your payroll in the Netherlands to Skuad means statutory contributions, payslip delivery, and compliance are handled across supported markets from a single platform, so your finance team works from one pay cycle instead of several country processes.

Here is what Skuad helps with:

• Supports payroll processing in 70+ currencies from a single platform
• Facilitates statutory deductions including employer social contributions across supported markets on every pay run
• Supports payslip generation and downloadable payment history for each employee
• Helps consolidate payroll reporting across 160+ countries in one dashboard

Either way, gross salary is only part of what a Dutch hire costs. Employer social contributions (18-20 percent), the mandatory 8 percent vakantiegeld, pension contributions where a CAO applies, and up to 104 weeks of sick pay at 70 percent of salary stack on top of it.

What does the payroll process in the Netherlands involve?

Payroll in the Netherlands applies to employees only. Independent contractors (ZZP'ers) are engaged under a service agreement and fall outside the loonheffing framework entirely. Employees go through a monthly payroll run with statutory deductions and a payslip (loonstrook), while contractors invoice you directly with no employer social contributions due. The components below cover the employee payroll workflow.

1. Employee information

This should include full name, date of birth, address, passport, Dutch Citizen Service Number (Burgerservicenummer or BSN), nationality, a signed payroll tax declaration (loonbelastingverklaring) indicating whether to apply the general tax credit (heffingskorting), and bank account details.

The BSN must be recorded before the first payroll run because it is used for every Belastingdienst filing. The loonbelastingverklaring determines whether the heffingskorting is applied at this employer. Employees are entitled to a "general tax credit" (heffingskorting), but it may only be applied at one employer at a time. Applying it at two employers simultaneously results in a year-end tax debt, typically ranging from €1,500 to €4,000.

2. Salaries and wages

This should include:

• Whether the employee receives a fixed monthly salary or an hourly wage
• Gross pay before deductions
• Hours worked, including overtime
• The overtime rate
• Benefits contributions
• Additional income such as bonuses or a 13th-month payment
• Holiday allowance (vakantiegeld) accrual
• Net pay after deductions.

The average working week in the Netherlands is 40 hours. Under the Working Hours Act (Arbeidstijdenwet), this standard working week cannot exceed 45 hours over a four-week rolling average, and a single shift cannot exceed 12 hours. If a worker does work beyond their weekly hours, they must be compensated with overtime pay. The rate is typically 125 to 150 percent of the hourly base, though the exact percentage is set by the employment contract or CAO.

A 13th-month payment is not required by Dutch law but is common practice, particularly where a CAO applies. The mandatory 8 percent vakantiegeld is separate from any 13th-month arrangement and must be paid at least once per year, typically in May.

3. Deductions

This should include loonheffing (combined wage tax and social insurance), employer-side social contributions, and pension contributions where applicable.

Employer contributions (paid on top of gross salary):

Employee contributions (withheld via loonheffing):

Income tax and employer reporting

• The loonheffing system bundles wage tax and social insurance premiums into one withholding. The employer deducts it from gross salary and remits it to the Belastingdienst each pay period via the wage declaration (loonaangifte), due by the end of the following month.
• Income tax is progressive. On income up to €38,883, the combined loonheffing rate is 35.75 percent (8.10 percent income tax plus 27.65 percent social premiums). On income from €38,883 to €78,426, the rate is 37.56 percent. On income above €78,426, the rate is 49.50 percent.
• Late filing triggers a penalty (verzuimboete) starting at €68, scaling with delay and amounts involved.

Currency and payment

• A business must pay its employees in the Netherlands in euros (EUR).
• Bank transfer on the last working day of each month is standard practice, though some sectors use weekly or four-weekly cycles.

Payslips and record-keeping

• Employers must issue a payslip (loonstrook) with each salary payment, keeping a record of the above information and providing a copy to your employee.
• Payslips must show gross salary, loonheffing deductions, employer and employee social contributions, pension deductions, vakantiegeld accrual, net salary, and the pay period covered.
• At the end of each calendar year, the employer must issue a wage statement (jaaropgave) to every employee.
• Payroll records must be retained for at least seven years under Dutch tax law.

What are the key statutory requirements for payroll in the Netherlands?

Before hiring in the Netherlands, it is important to understand the statutory requirements underlying the payroll process. Two areas define most of the compliance risk for foreign employers: income tax treatment (including the 30% ruling for expats) and minimum wage obligations.

Income tax

The Netherlands taxes employment income through the loonheffing system, which combines wage tax with social insurance premiums into a single progressive withholding.

Social premiums (AOW, ANW, WLZ) only apply to income up to €38,883. Above that threshold, the rate is pure income tax.

The following components of employee income are subject to loonheffing:

• Base salary
• Bonuses, commissions, and 13th-month payments
• Overtime pay
• Holiday allowance (vakantiegeld)
• Benefits in kind, including company car private use (bijtelling, typically 22% of catalogue value), employer-paid housing, and relocation benefits above the exempt threshold

Reimbursement of genuine business expenses under the Work-Related Costs Scheme (werkkostenregeling) is not treated as taxable income, provided it stays within the employer's discretionary margin (vrije ruimte) of 2% on the first €400,000 of total wage bill and 1.18% above that.

The 30% ruling (expatregeling): Qualifying international employees can receive up to 30 percent of their gross salary as a tax-free allowance through 2026. The minimum salary threshold is €48,013 gross per year after the 30% deduction (€36,497 for employees under 30 with a master's degree). The maximum duration is five years. From 1 January 2027, the rate reduces to 27 percent for all holders.

Minimum wage

The Dutch government reviews minimum wage rates twice a year, with any relevant changes coming into play on January 1st or July 1st. Since 1 January 2024, the Netherlands has used a statutory hourly minimum wage rather than a fixed monthly amount, so the monthly figure depends on the employee's contracted weekly hours.

Youth rates apply to employees aged 15 to 20, scaled as a percentage of the adult rate (for example, age 20 receives approximately 80 percent, age 18 approximately 50 percent).

The 8 percent vakantiegeld is calculated on top of the minimum wage, not included in it. An employer paying exactly the hourly minimum but failing to accrue vakantiegeld separately is paying below the legal floor.

The layering of loonheffing brackets, employer social contributions (18-20 percent), mandatory vakantiegeld accrual, pension contributions where a CAO applies, and up to 104 weeks of sick pay at 70 percent of salary means that total employment cost should be modelled per hire before extending an offer.

Skuad's employee cost calculator supports this by showing the employer-side breakdown for a Netherlands hire before onboarding begins.

Skuad acts as the legal employer so your company can hire, onboard, and pay employees without setting up a local entity, local legal counsel, or in-house payroll infrastructure.

Here is what Skuad helps with:

• Acts as the legal employer across 160+ countries
• Facilitates statutory contribution workflows covering employer social premiums and pension obligations across supported markets
• Supports payroll processing in 70+ currencies with accurate withholding and statutory deductions
• Helps with work permit and visa coordination for foreign hires
• Supports employment contract generation aligned with local labor laws

Book a demo to see how Skuad supports payroll without entity setup.

What are the paid leave rules in the Netherlands?

Full-time employees in the Netherlands are entitled to at least 20 days of paid annual leave, with most employers offering 25 to 32 days through company policy or a CAO. Beyond that baseline, sick leave, maternity, paternity, parental, and adoption leave each follow their own rules under the Work and Care Act (WAZO). Employers need to track all of these separately because underpayment of leave entitlements is treated as a wage violation.

Paid annual leave

Any statutory days of paid leave accrued from the previous year must have been taken by July. It is the employer's responsibility to notify the employee when accrued leave is about to expire. Non-statutory (bovenwettelijke) leave days typically have a five-year expiry window.

Sick leave

The employer carries the full cost of sick pay for 104 weeks. The Employee Insurance Agency (UWV) provides Sickness Benefits Act (Ziektewet) payments only for specific categories such as temporary workers, agency workers, or employees whose contract ended during illness, not for regular employees on open-ended contracts.

Public holidays

Dutch law does not automatically grant a right to paid public holidays. Whether a public holiday is a paid day off depends on the employment contract or CAO. In practice, most employers observe the following days as paid holidays:

There are 11 commonly observed public holidays in the Netherlands:

• New Year's Day
• Good Friday
• Easter Sunday
• Easter Monday
• King's Day (27 April)
• Liberation Day (5 May, observed as a full holiday every five years)
• Ascension Day
• Whit Sunday
• Whit Monday
• Christmas Day
• Second Christmas Day

Specific dates shift each year based on the Easter calendar.

Maternity leave

Paternity and partner leave

Fathers or partners are entitled to one week of paternity leave following the birth of the child, paid in full by the employer. The further five weeks of additional birth leave are paid at 70 percent by the UWV, not by the employer.

Parental leave (ouderschapsverlof)

Adoption leave

Employers can apply for up to six weeks of adoption leave from the Employee Insurance Agency on behalf of their employees. Pay is 100% of daily wage, capped at €304.25/day (2026), funded by UWV.

Short-term care leave

Employees are entitled to up to twice their weekly working hours in care leave per 12-month period to look after a sick child, partner, or parent, at 70 percent of salary. Short-term care obligations are employer-funded.

Leave types, qualifying periods, and funding sources (employer-paid vs UWV-funded) all differ depending on the category, so an employer hiring in the Netherlands needs to provision for vakantiegeld, 104-week sick pay, and UWV-funded parental leave claims from day one.

Skuad supports leave administration across supported markets as part of the employment relationship, so your team does not need to track Dutch leave rules independently.

Here is what Skuad helps with:

• Supports statutory leave entitlement tracking aligned with the employee's contract
• Facilitates maternity, paternity, and parental leave workflows, including benefit claims through the registered entity
• Helps maintain leave records and payslip accuracy across 160+ countries from a single dashboard
• Assists with public holiday calendar management for each employee on the platform

What are the main payroll challenges in the Netherlands?

The Netherlands layers loonheffing, employer social contributions, mandatory vakantiegeld, sector-specific CAO obligations, and a 104-week sick pay duty on top of every employment relationship. Three areas trip up most foreign employers:

Payroll compliance

Dutch payroll compliance sits across the Belastingdienst, the UWV, and whatever CAO governs the employee's sector. The most common errors are structural rather than one-off.

Three compliance failures account for most of the risk:

• Vakantiegeld miscalculation: The 8 percent holiday allowance must be accrued separately on top of gross salary and paid out at least annually, typically in May. Failing to accrue or underpaying it exposes the employer to back-pay claims stretching up to five years with added interest.
• Heffingskorting double-application: The general tax credit (heffingskorting) may only be applied at one employer. If a new hire fills in the loonbelastingverklaring incorrectly and both the old and new employer apply it, the employee typically owes €1,500 to €4,000 in additional tax at year-end.
• Loonaangifte filing errors: The wage declaration must be filed with the Belastingdienst by the end of the month following the pay period. Late filing triggers a penalty (verzuimboete) starting at €68, scaling with delay and amounts involved. Payroll records must be retained for seven years.

The 104-week sick pay obligation is the cost that catches most foreign employers off guard. The employer carries the full salary continuation at 70 percent (often 100 percent in the first year under a CAO) for two full years, and the employee is protected from dismissal throughout. Provisioning for this from the first hire is not optional.

Skuad's Shield compliance module flags regulatory and contract risks across supported markets.

Misclassification

Misclassification (schijnzelfstandigheid) is the highest-profile compliance risk in the Netherlands right now. The Belastingdienst lifted its enforcement moratorium on false self-employment on 1 January 2025, and full enforcement with formal fines has been active since 2026.

The Belastingdienst does not look at the contract. It applies the nine Deliveroo criteria set by the Dutch Supreme Court in 2023: supervision, integration into the organization, exclusivity, commercial risk, working method, substitution, entrepreneurial behavior, duration, and the nature of the work. If the actual relationship meets the test for employment, the label on the contract does not protect you.

If a ZZP relationship is reclassified, the hiring company owes backdated loonheffing and employer social contributions from 1 January 2025 (or up to five years for deliberate misclassification), pension contribution back-payments where a CAO applies, a penalty surcharge (vergrijpboete) of up to 100 percent of the assessment for deliberate cases, and all accrued statutory leave entitlements. Both the client and the contractor bear liability.

Skuad helps reduce that exposure. As the legal employer of record, Skuad holds the employment relationship, contracts, and statutory filings through a registered local entity. For legitimately independent engagements, Skuad's contractor management platform supports compliant agreements with built-in classification checks.

Here is what Skuad helps with:

• Assists with worker classification checks before onboarding, so the engagement model is set correctly at the start
• Supports locally compliant employment agreements and contractor agreements across 160+ countries
• Facilitates statutory registrations and filings through owned and partner entities in supported markets
• Helps track regulatory changes across supported markets so your contracts and filings stay current

Cost variation by contract type

Two employees doing the same job at the same gross salary can produce meaningfully different employer costs depending on their contract type and whether the 30% ruling applies.

On top of these percentages, pension contributions apply wherever a sector CAO mandates participation in an industry pension fund (bedrijfstakpensioenfonds). Employer pension contributions typically add another 5 to 15 percent of pensionable salary. The 104-week sick pay provision should also be factored in as a contingent cost from day one.

Total employment cost should be modelled per hire before extending offers. Skuad's employee cost calculator supports this by showing the employer-side breakdown for a Netherlands hire before onboarding begins.

How to run payroll in the Netherlands without a local entity?

Setting up a Dutch BV through a civil-law notary and the KvK requires a notarial incorporation deed, a registered Dutch address, registration with the Belastingdienst for a loonheffingennummer, and enrolment with the UWV.

The filing calendar it creates never stops: monthly loonaangifte submissions to the Belastingdienst, employer social contributions across WW, WIA, ZVW, and ZW, annual vakantiegeld payouts in May, jaaropgave wage statements to every employee, seven years of payroll record retention, and 104 weeks of sick pay provisioning for every hire.

Skuad supports that operational load in the Netherlands, covering employment contracts, statutory contributions, payroll in 70+ currencies, statutory benefits, and payroll record-keeping, so your team can spend its time on the hires themselves.

Companies across SaaS, logistics, e-commerce, and technology use Skuad to build Netherlands teams, stay aligned with Belastingdienst, UWV, and CAO requirements as rules change, and pay people accurately each cycle without local payroll infrastructure.

With Skuad as your payroll partner, you no longer need multiple payroll systems operating across the world, and Skuad provides you with a single dashboard where you can view and analyze global payroll data across 160+ countries, including the Netherlands.

Book a demo to see how Skuad supports payroll for a Netherlands hire without entity setup.

FAQs

1. How often is payroll run in the Netherlands?

Payroll in the Netherlands is typically processed monthly, with salaries transferred on the last working day of the month. Employers file a wage declaration (loonaangifte) with the Belastingdienst for each pay period, with payment due by the end of the following month. Weekly cycles exist in some sectors.

2. What are the mandatory payroll contributions in the Netherlands?

Employers in the Netherlands generally contribute 18 to 20 percent of gross salary toward social security, covering unemployment (WW), disability (WIA), healthcare (ZVW), and sickness benefits (ZW). Employees contribute through loonheffing, combining wage tax with social premiums for old-age pension (AOW), survivor benefits (ANW), and long-term care (WLZ).

3. Is the holiday allowance (vakantiegeld) mandatory in the Netherlands?

Holiday allowance (vakantiegeld) is a statutory entitlement under Dutch law, not a discretionary bonus. Employers must pay at least 8 percent of gross annual salary, typically as a lump sum in May. Some collective labour agreements (CAOs) set higher rates. Accrued but unpaid vakantiegeld must be settled on termination.

4. What is loonheffing and how does it work?

Loonheffing is the Netherlands' combined payroll deduction that bundles wage tax (loonbelasting) and social insurance contributions into a single withholding. The employer deducts it from gross salary each pay period and remits it to the Belastingdienst. Rates depend on the employee's income, applicable tax credits (heffingskorting), and social insurance premiums.

5. Can a foreign company run payroll in the Netherlands without a local entity?

Foreign companies can typically hire in the Netherlands through an employer of record (EOR) without registering a local entity, since the EOR holds the legal employment relationship and manages loonheffing, social contributions, and Belastingdienst filings. Registering an entity requires a KvK number and Belastingdienst registration before the first payroll run.

6. What must a Dutch payslip include?

Dutch employers must issue a payslip (loonstrook) with each salary payment, showing gross salary, loonheffing deductions, employer and employee social insurance contributions, pension deductions, holiday allowance accrual, net salary, and the pay period covered. Payroll records must be retained for at least seven years under Dutch tax law.