In today’s increasingly global business environment, it is fairly common for companies to have their headquarters in one country with multiple locations across other countries and continents. The Netherlands is often a prime destination for the multi-national company looking to expand its footprint to new markets.
Home to major entrance hubs to Europe, such as Schiphol Airport and the port of Rotterdam, the country is a strategic location for any company looking to grow globally. The Netherlands welcomes foreign investment, but a company that sets up operations in the country for the first time will face a number of challenges, particularly when it comes to payroll.
It is crucial that the company has a firm understanding of the various regulations governing payroll in the Netherlands, from understanding the employer’s requirements when compensating employees, to ensuring compliance with numerous laws designed to protect Dutch employees
What employers should know
• Major components of Dutch employment law
The first step towards successful payroll in the Netherlands is to understand the nuances of the country’s employment laws. Among the most important factors to understand is that collective labour agreements take precedence over statute law if they are more favourable to the employee.
In addition, the minimum conditions outlined by the collective agreement can only be improved upon, not worsened, in an individual contract of employment. The employment laws also dictate the working hours (typically between 36 and 40 hours per week with overtime pay required up to the legal maximum of 48 hours) as well as the country’s minimum wage.
Moreover, employees have a statutory right to paid holidays with a minimum of 20 days of annual leave and an additional bonus of eight per cent of their annual earnings each year.
• Taxation considerations
As soon as the company starts employing staff, it will need to register with the local tax office and receive the necessary forms and tables needed for tax reporting. Salaries are paid net of tax and social security contributions, which are deducted by the employer on a pay-as-you-earn (PAYE) basis. Employee income taxes are levied on total gross income minus personal allowances and are collected through payroll.
It is important to note that foreign employees with specialised skills may be eligible for a 30 per cent reduction on their taxes. In any case, the tax payments must be submitted to the belastingdienst, or tax office, by the last working day of the month following payroll processing.
In addition to taxes, employers in the Netherlands must also deduct social security contributions from their employee’s pay cheques. It is important to note that the Dutch social security system is a complex one, consisting of two parts.
The first is the national insurance scheme, which covers all Dutch citizens, while the second social security scheme applies to all employed persons in the country. Both schemes cover old age, survivor’s pension, healthcare, disability and child benefits.
All social contributions are based on total earnings up to a set ceiling and the employer is responsible for making the contributions, along with taxes on a monthly basis.
• Employee payments
In order to compensate employees in the Netherlands, the company can set up a local bank account compatible with Equens, the payment service provider used throughout the country. Alternatively, payments can be made from a foreign bank account, which will be facilitated in August 2014 when the Netherlands will be fully SEPA compliant.
Upon each payroll period (one payment per month is standard), the employer must enter the payment data and sign each form and send them to the bank. On receipt of the payment forms, the bank will verify the transfers with Equens and the payments will be sent to the employees’ bank accounts.
Ensuring payroll success in the Netherlands
Any company that hires employees in the Netherlands will likely face a number of challenges in setting up payroll in the country. The key to success is gaining a full understanding of the various rules and regulations governing Dutch payroll and ensuring the company has the resources in place to meet compliance and provide employees with accurate and on-time compensation.
However, rather than trying to navigate the complex environment themselves, the expanding multinational organisation can benefit from leveraging the help of a payroll provider well versed with the complex legislation of the Netherlands and anywhere else they hire employees.
Contributed by Cloudpay
In today’s increasingly global business environment, it is fairly common for companies to have their headquarters in one country with multiple locations across other countries and continents. The Netherlands is often a prime destination for the multi-national company looking to expand its footprint to new markets.
Home to major entrance hubs to Europe, such as Schiphol Airport and the port of Rotterdam, the country is a strategic location for any company looking to grow globally. The Netherlands welcomes foreign investment, but a company that sets up operations in the country for the first time will face a number of challenges, particularly when it comes to payroll.
It is crucial that the company has a firm understanding of the various regulations governing payroll in the Netherlands, from understanding the employer’s requirements when compensating employees, to ensuring compliance with numerous laws designed to protect Dutch employees
What employers should know
• Major components of Dutch employment law
The first step towards successful payroll in the Netherlands is to understand the nuances of the country’s employment laws. Among the most important factors to understand is that collective labour agreements take precedence over statute law if they are more favourable to the employee.
In addition, the minimum conditions outlined by the collective agreement can only be improved upon, not worsened, in an individual contract of employment. The employment laws also dictate the working hours (typically between 36 and 40 hours per week with overtime pay required up to the legal maximum of 48 hours) as well as the country’s minimum wage.
Moreover, employees have a statutory right to paid holidays with a minimum of 20 days of annual leave and an additional bonus of eight per cent of their annual earnings each year.
• Taxation considerations
As soon as the company starts employing staff, it will need to register with the local tax office and receive the necessary forms and tables needed for tax reporting. Salaries are paid net of tax and social security contributions, which are deducted by the employer on a pay-as-you-earn (PAYE) basis. Employee income taxes are levied on total gross income minus personal allowances and are collected through payroll.
It is important to note that foreign employees with specialised skills may be eligible for a 30 per cent reduction on their taxes. In any case, the tax payments must be submitted to the belastingdienst, or tax office, by the last working day of the month following payroll processing.
In addition to taxes, employers in the Netherlands must also deduct social security contributions from their employee’s pay cheques. It is important to note that the Dutch social security system is a complex one, consisting of two parts.
The first is the national insurance scheme, which covers all Dutch citizens, while the second social security scheme applies to all employed persons in the country. Both schemes cover old age, survivor’s pension, healthcare, disability and child benefits.
All social contributions are based on total earnings up to a set ceiling and the employer is responsible for making the contributions, along with taxes on a monthly basis.
• Employee payments
In order to compensate employees in the Netherlands, the company can set up a local bank account compatible with Equens, the payment service provider used throughout the country. Alternatively, payments can be made from a foreign bank account, which will be facilitated in August 2014 when the Netherlands will be fully SEPA compliant.
Upon each payroll period (one payment per month is standard), the employer must enter the payment data and sign each form and send them to the bank. On receipt of the payment forms, the bank will verify the transfers with Equens and the payments will be sent to the employees’ bank accounts.
Ensuring payroll success in the Netherlands
Any company that hires employees in the Netherlands will likely face a number of challenges in setting up payroll in the country. The key to success is gaining a full understanding of the various rules and regulations governing Dutch payroll and ensuring the company has the resources in place to meet compliance and provide employees with accurate and on-time compensation.
However, rather than trying to navigate the complex environment themselves, the expanding multinational organisation can benefit from leveraging the help of a payroll provider well versed with the complex legislation of the Netherlands and anywhere else they hire employees.
Contributed by Cloudpay
