Employer Cost In Netherlands 2009

Employers Cost in Netherlands 2009

Social Security Residents and non-residents •

Working in The Netherlands is required to pay social security contributions on their gross salary in The Netherlands or in the country of their employer after an E101 has been issued.

The Netherlands has two types of social security: • •

national social security contributions which form part of the lowest two income tax rates under Box 1, and employer’s and employee’s social security contributions to be paid on the salaries.

Social security rates for 2009: • • • • • • • •

ca. 18.07% for employers on gross salaries, including: 6.90% health of up to a maximum of EUR 32’366.61 per year, 0.34% is for child care contribution, 5.70% general standard disability contribution of up to a maximum of EUR 47’802.15 per year, 0.15% minimum variable risk related contribution for disability, 4.15% unemployment general contribution of up to a maximum of EUR 32’366.61 per year, variable pension contribution according to activity sector; for example for business sector II it is 0.83%, 6.9% health insurance for employees on gross salaries up to a maximum of EUR 32’366.61.

Unemployment contributions to be paid by employees have been abolished as of 1 January 2009.

Wages The Netherlands enforces a legal minimum wage. This is adjusted twice each year (on 1 January and 1 July). Every worker between

the ages of 23 and 65 in employment enjoys at least the right to this minimum wage. Minimum youth wages apply to employees younger than 23. The minimum wage also applies to employees of a foreign company or temporary employment agency working in the Netherlands. Payroll As a legal requirement, any individual working in the Netherlands must be employed by a Dutch payroll provider. The individual is employed by Capital Consulting and income is paid in the form of salary, allowances and expenses, the proportion of each part depending on individual circumstances. Salary, Tax & Social Security Capital Consulting deducts tax and social security at source on a PAYE basis and payments are made to the relevant authorities on the employee’s behalf. The taxable amount may be reduced by obtaining a 30% allowance (effectively a 30% tax break, which is granted to specialised expatriate workers, subject to certain criteria). Expenses are largely covered under the umbrella of the 30% allowance although some further small deductions may be possible. Capital Consulting will discuss your personal circumstances with you and help you to minimise your tax and social security liabilities, within the bounds of Dutch legislation. Tax Returns Income is managed tax efficiently, not just in the Netherlands but also in any other country where there may be a liability. A tax return is filed each year in the Netherlands with advice and assistance from Capital Consulting, who will also provide help with filing tax returns elsewhere, if required.

What is the 30% tax allowance? Employees who come to work in the Netherlands from another country are known asextraterritorial employees. If these employees meet certain conditions, they are eligible for a special expense allowance scheme known as the 30% ruling. The conditions to achieve this are that you must have been recruited to the Netherlands from overseas, must have the relevant level of earnings and a University degree or sufficient experience within your field.

The 30% allowance is valid for a period of 10 years working time in the Netherlands. Therefore if you come to the Netherlands for 2 years and leave for 2 years, on your return you will still have 8 years to run on the allowance. How it operates: If your salary is 100 units then you would reduce that by 30% to 70, pay tax on the 70 and then at the point of paying the net salary add back in (tax free) the original 30%.

Redundancy Payments In the absence of mutual agreement or cause the employer may generally not terminate the contract of employment without a permit, to be obtained from the Dismissal Authority (see Hiring and Firing in the Netherlands). An alternative is to ask the Court to dissolve the employment contract. The Court may order the employer to pay a redundancy payment. The calculation as used by the court form the basis of voluntary redundancy payment schemes. Payments Statute provides that it is up to the Court to determine the amount of a fair and adequate redundancy payment. The judge will have to weigh all circumstances of the case. In the past this has lead to various approaches by different judges, which had negative effects, like surprise decisions and a tendency where clever lawyers went forum shopping, for better results. To avoid that and to have better guidance the joint Cantonnal Courts reated the so called Cantonal Court Formula, which since then is frequently applied to determine the level of compensation an employer must pay to an employee that is laid off. Although this is non-binding quasi legislation, the Cantonal Court Formula is now broadly used by all Courts, and also by employers and employees to negotiate a termination agreement with severance payment. THE DUTCH CANTONAL COURT FORMULA The Cantonal Court Formula fixes the redundancy payment at a number of months salary. The exact severance payment is determined by multiplying three factors: A,B and C, where: •

The A-factor is the adjusted number of years of service. The years of service up to age 35 will count as 0.5, the years of service between 35

and 45 years of age will count as 1, the years of service between ages 45 and 55 will count as 1.5 and the years of service above age 55 will count as 2. •

The B-factor is the corrected monthly salary, inclusive of fixed components like holiday allowance.

•

The C-factor is a correction factor that is usually 1.0, but may be fixed higher or lower by the Court in order to come to a fair and adequate severance payment. Behaviour of employer and eployee, the job market position of the employee and the financial position of the employer may play a role, which makes the C-factor the less certain factor of the formula.

FIRING In The Netherlands it is not always easy to dismiss employees. The use of a mix of fixed and indefinite term contracts and the hiring of employees via temp agencies is therefore a good way to avail over a flexible work force. This will enable the employer to up size and down size the company in an effective manner. The dismissal of employees with a contract for an indefinite term is generally not impossible, but this will most always cost time, effort and money. In the absence of mutual agreement or cause the employer may generally not terminate the contract of employment without a permit, to be obtained from the Dismissal Authority. This will take several months and it is not always predictable whether one will obtain the required permit or not. Another option is to ask the Court to dissolve the employment contract. In general, these proceedings are less time consuming. The Court may award compensation to the employee. This is dependent on various factors, like the circumstances of the case, the length of the contract of employment and the age of the employee. For more details see the explanation of the Dutch Cantonal Court Formula in our article on Redundancy Payment in The Netherlands.

Holiday Entitlements ANNUAL LE AVE All employees in the Netherlands are entitled to paid holiday. The holiday entitlement of an employee is usually regulated in the employment contract or collective agreement. The statutory minimum applies in all cases. The statutory annual minimum is four times the number of agreed working hours each week. Someone who works 40 hours a week is therefore entitled to 20 days' holiday of eight hours. Obviously, part-timers are entitled to fewer holidays. However, they also need fewer holidays. On balance, they can take four weeks off. For example, an employee who works four hours each day is entitled to 20 days' paid holiday of four hours each. Most collective agreements provide for holiday entitlement that differs from the statutory figure. The number varies from 20 to 30 days for full-time employees. The age of the employee and the length of service also often play a role in the case of both young employees and older employees. Both groups may be allocated extra days' holiday. Holiday entitlement is acquired proportionately over the course of the year. For example, an employee who is entitled to 24 days' holiday a year will have accumulated six days' entitlement after three months. Holidays may be taken in advance in consultation with the employer. Regardless of the amount of their wage, employees can claim a minimum holiday allowance of eight percent.

SICKNESS, M ATERNITY The Work and Care Act came into force on 1 December 2001. The law aims to make it easier to combine work and care, making it more attractive for both men and women to (stay at) work. The Work and Care Act contains a combination of new and existing leave schemes. The new schemes confer entitlement to a maximum of 10 days' paid care leave, the right to adoption leave for both adoptive parents, the right to two working days' maternity leave for the partner and greater flexibility for parental leave. In addition, a number of existing leave schemes, such as the provisions for parental leave and emergency leave, have been transferred to the new law.

Maternity leave Female employees are entitled to a total of 16 weeks' maternity leave. During this leave, they are entitled to benefit which is equal to their daily sickness benefit, or 100 percent of their salary (up to the maximum daily pay). As a rule, the benefit is applied for through the employer, within two weeks of the starting date of the leave. A so called pregnancy certificate must be filed with the application. The benefit can be paid either through the employer or directly by the body implementing the scheme (the UWV).

Duration of the leave Female employees can stop work between six and four weeks before the expected delivery date. They must stop working within four weeks of the delivery date. Employees are entitled to at least 16 weeks' leave, of which at least 10 weeks are taken after the delivery. If, for example, they stopped working six weeks before the delivery, and the baby is born two weeks late, then two weeks will be added to the 10 remaining leave weeks.

Sickness If the employee falls ill prior to the pre-delivery leave or after the maternity leave on account of her pregnancy or the delivery, she is entitled to sickness benefit. This benefit is 100 percent of the daily pay (up to the maximum daily pay).