March 02, 2022
It may have taken a global pandemic, but the migration to remote-first work is finally in full force. Employers are taking note of the upsides to the work in any way movement—likehigher productivity, reduced absenteeism, and a much broader talent pool.
For global employers, it means that the Netherlands could be your source foruntapped growth potential.
It turns out that the Dutch might be hiding some of the best talent available.Workers in the Netherlands are considered:
While you might be seeing dollar signs right now, there are a few logisticalhoops to jump through before you can begin employing workers in thethe Netherlands.
One of the biggest sticking points is payroll tax. Let’s take a look at whatyou need to know to keep your global payroll compliant.
Payroll tax, or the amount of money withheld from an employee’s wages fortaxation liabilities, can be broken down into three categories:
Wage tax, or income tax, is a progressive system in the Netherlands. In 2022,the low-income tax rate starts at 2.3% and goes up to 52% for high earners. Incometax in the Netherlands is the highest in the world. But because it funds somany beneficial social programs, the Dutch don’t seem to mind.
In the Netherlands, the social security system covers income payments for temporary unemployment, as well aspermanent incapacity to work from age-related retirement, illness or injury.
These funds are broken down into two different types of social insurance poolsfor temporary or permanent benefits. The rates vary and are reviewed and settwice per calendar year by the Dutch Tax and Customs Administration.
Currently (first half of 2022), the social security withholding for EUresidents permanently working in the Netherlands is 27.65 % .It covers contributions for old-age social security, survivor benefits andlong-term disability.
Europeans are pretty mobile between EU member states. It’s not uncommon toencounter workers that are employed in more than one state or who travelbetween states for temporary employment. This makes assigning responsibilityfor social insurance a little tricky.
In this case, social insurance coverage defaults to the home country for EU residents temporarily working inthe Netherlands. And if that arrangement becomes permanent, or the employeeworks in two or more member states, there are a few conditions that have to bemet to keep this arrangement in place:
If these conditions aren’t met, the social insurance burden can change to theNetherlands. This means a temporary worker, who previously only paid employeeinsurance, would now have to fork over a little more for participation innational insurance.
Staying on the right side of national insurance withholdings can easily getcomplicated, depending on employment status, residency status and frequentrate changes.
In addition to the taxes withheld from an employee's pay, your business willalso be responsible for matching contributions to the social insurance fund inthe Netherlands. While that’s not on the employees’ tab for payroll taxes, thetwo go hand-in-hand .
Here’s a quick look at what you can expect:
These contribution ratescan change, and there are some small differences for high-risk industries.Employer contributions are capped at an employee salary limit of € 57,232.This means that you will only payout to the capped limit for high earners onyour payroll.
The Netherlands uses a mandatory private healthcare insurance system. This allows residents some freedom in choice for their healthcareproviders but creates additional administrative work for employers.
You’ll need to withhold monthly premiums from your payroll and distributepayments to the appropriate insurers. You’ll also be working with the DutchCentral Administration Office (CAK) to comply with enforcement activitieslike:
The Dutch healthcare system doesn’t accept foreign insurance so allemployees in the Netherlands will need to buck up for at least a basic carepackage. There is typically a grace period of four months for new arrivals toget on board with the Dutch health insurance requirement. After that, the CAKwill become a thorn in your side until the employee gets coverage.
It doesn’t really matter what country we’re talking about—taxes are taxes.Regardless of where you’re withholding, it can be a little headache-inducingto hammer out who pays what.
Luckily, payroll taxes in the Netherlands follow a familiar structure.
Employers are tasked with calculating and withholding tax payments andinsurance premiums through the payroll process. These withholdings include payments for income tax, social security tax and mandatory private healthcare insurance.
Figuring out who counts as a permanent resident and how much to withhold canbe complex—but it just may be worth it to gain access to some of the mosttalented and productive employees in the global talent pool.
Thinking about expanding into the Netherlands? Don’t miss this ebook :International salary benchmarking: A how-to guide