Taxes and payrolls: the labour market in the Netherlands
Each labour market has some peculiarities. It may be tricky for foreigners to understand fully the payment methods, the taxes and other benefits related. In TalentUp we are starting a series of different blog articles, one for each country. This article analyses the labour market in the Netherlands.
General data about the Dutch labour market
| Minimum wage | 1,995€ |
| Payment basis | Monthly |
| Payment | Must be paid by the last day of the month |
| Maximum working hours a week | 40h |
| Maximum overtime hours a week | 5h |
Payroll taxes in the Netherlands
Social security contributions are made by the employer and the employee and are used for funding unemployment, pension, maternity/paternity leave, and sickness or injury.
| Contingencies | Employer % |
| WAO/WIA Aof : Invalidity Insurance Fund 5.49% (small employers %) to 7.11% (medium to large employers) | 5.49% to 7.11% |
| Unemployment Fund (lower: indefinite contracts, High: temporary contracts/on-call employees | 2.64% to 7.64% |
| ZVW : Healthcare Insurance Act (maximum contribution income EUR 66,956.00) | 6.68% |
| Whk: Work Resumption Fund | 0.21 % to 3.36% |
| Child Care Premium | 0.50% |
| Holiday allowance accrued on a monthly basis and paid to employees in May. The client can choose to include this in the salary or on top. | 8.00% |
| Total | 23.49% to 33.29% |
Once contributions are paid, employees need to pay an income tax that varies depending on their gross salaries.
| Gross salary | Income tax |
| Up to 38,703€ | 9.28% |
| From 38,703 to 73,031€ | 36.93% |
| Over 73,031€ | 49.50% |
Contingencies from self-employees
Just like other entrepreneurs, freelancers/self-employed professionals must register with the Dutch Tax and Customs Administration (Belastingdienst), which determines whether you are an entrepreneur for the purposes of turnover tax and income tax.
Example of net salary in the Netherlands
As a reference, we use the average salary of a software engineer. In the Netherlands, on average, software engineers earn annually 53,500€.
| Employer | Employer | Employee | |
| % | € | € | |
| Gross salary (annually) | 53,500 | ||
| WAO/WIA Aof : Invalidity Insurance Fund 5.49% (small employers %) to 7.11% (medium to large employers) | 5.49% to 7.11% | 2,937.15 to 3,803.85 | |
| Unemployment Fund (lower: indefinite contracts, High: temporary contracts/on-call employees | 2.64% to 7.64% | 1,412.4 to 4,087.4 | |
| ZVW : Healthcare Insurance Act (maximum contribution income EUR 66,956.00) | 6.68% | 3,573.8 | |
| Whk: Work Resumption Fund | 0.21 % to 3.36% | 112.35 to 1,797.6 | |
| Child Care Premium | 0.50% | 267.5 | |
| Holiday allowance accrued on a monthly basis and paid to employees in May. The client can choose to include this in the salary or on top. | 8.00% | 4280 | |
| Total | 23.49% to 33.29% | 12,567.15 to 17,810.15 | |
| Income tax | 2,494.81 to 2,998.74 | ||
| Net salary (annually) | 24,388.94 to 29,315.26 |
The employer contributes 12,567.15 to 17,810.15€ to social security.
After paying the income tax, the employee has a net salary of 24,388.94 to 29,315.26€ coming from a gross salary of 53,500€.
Unemployment regulation in the Netherlands
The statutory minimum notice period for termination in the Netherlands is one month, however, it is dependent on the employee’s length of service as below:
| Time worked | Notice period |
| Less than 5 years | 1 month |
| Between 5 to 10 years | 2 months |
| Between 10 to 15 years | 3 months |
| More than 15 years | 4 months |
The statutory transition payment is calculated based on years of service upon termination of the employment agreement. It consists of 1/3 of 1 month’s salary for each calendar year of employment, including various bonuses and allowances. For periods shorter or longer than a year, a proportional amount is calculated. In 2023, the maximum transition payment is EUR 89,000 gross, or one year’s salary for employees earning over EUR 89,000 annually.
Probation periods last for a maximum of:
- 2 months for indefinite contracts
- 1 month for temporary contracts from 6 months to 2 years
- No probation period for temporary contracts under 6 months
Different kinds of leaves in the Netherlands
The minimum paid annual leave is 20 working days. However, employers usually offer from 25 to 32 days. Any leave accrued from the previous year must be used by July.
They have 7 public holidays. If they fall on a weekend, they are lost.
Employers pay 70% of the employee’s salary for the first 2 years of sick leave. If 70% of the pay rate is lower than the minimum wage, the minimum wage must be paid for the first year. It is common practice to pay 100 % of the full salary during the first year of illness and 70 % of the full salary during the second year.
Workers are entitled to leave to take care of a sick relative:
- Emergency Leave of 1 day with payment is available for unexpected urgent reasons.
- Short-term Care Leave is available at up to 2 weeks to take care of a sick parent, child or partner if there is no one else but the worker able to provide this care. During this leave the employer continues to pay up to 70% salary.
- Long-term Care Leave is available at up to 6 weeks to take care of a seriously ill parent, child or partner. This leave is unpaid.
Paid parental leave
Paid maternity leave lasts for 16 weeks: 4 to 6 being before the expected due date and 10 to 12 after birth. It is paid at a 100% pay rate, capped at 256.54 Euros per day.
Paid paternity leave is 1 week within the first 4 weeks following the birth. Extended partner leave for 4 more weeks is paid at 70%.
There are an extra 17 weeks of unpaid parental leave.
Adoption leave lasts for 6 weeks.
Other common Dutch benefits
| Benefit | % of companies with this benefit |
| Casual Dress Code | 24.8 |
| Gym | 23.3 |
| Free Snacks | 23.2 |
| Professional Development | 4.3 |
| Work-Life Balance | 4 |
How to employ a Dutch worker
Before hiring employees, you need to establish a legal entity in the Netherlands. You can choose between several business structures, such as a Dutch subsidiary, branch office, or representative office. Consult with legal and financial experts to determine the best option for your company.
Some platforms (Papaya Global among them) offer the Employer of Record (EoR) service helping companies hire countries where they do not have any office.
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