Netherlands Employee Compensation & Benefits

Mandatory compensation and benefits in the Netherlands

Social security

In the Netherlands, social security is broken up into two types:

• National insurance, which covers social benefits and comes from the Social Insurance Bank, and

• Employee insurance, which takes care of benefits pertaining to work and is handled by the Employee Insurance Agency

To partake in unemployment, maternity/paternity leave, and sick leave, employees must make social security contributions, which are automatically deducted from their salary.

Paid leave

Each full-time employee is entitled to 20 days of paid leave, also known as paid time off (PTO) or vacation days, but many employers will offer 24 to 32 days of paid time off. Both full-time and part-time employees qualify for PTO, and the Netherlands also recognizes 11 official public holidays, resulting in additional paid time off.

Maternity/paternity leave

Women employees are entitled to at least 16 weeks of paid maternity leave, which begins 4 to 6 weeks before their due date and continues for 10 to 12 weeks postpartum. Maternity leave is financially covered by the maternity allowance. 

Women on maternity leave are also legally entitled to 100% of their average wage to a certain point. If their wage exceeds the limit, the employer may supplement her wages, but they are not obligated to do so.

Conversely, fathers or partners are entitled to one week of paid paternity leave, with an optional five additional weeks of leave. Depending on the employer, this extra time off may or may not be paid. Sometimes there is a partial payment.

Parental leave

Additional employee benefits in the Netherlands include parental leave, which allows parents to legally take up to 26 times their working hours off for full-time employees. This time off must be used by the time the child turns eight. Parents may use all parental leave at one time or break it up. The first nine weeks of parental leave are paid time off due to a benefit from the Employment Insurance Agency, which provides up to 70% of their maximum daily wage. The remaining weeks are considered unpaid leave, but an employer may provide a partial amount of the individual’s salary. There is no legal responsibility on the employer’s part to pay an employee’s salary during this time unless that is part of their employment contract.

Sick days

If you become sick, you must inform your manager or HR department so that you can take advantage of a paid sick day. All Dutch employees qualify for sick days and sick leave; there is no limit to how many sick days an employee can claim per year. Employees may claim sick leave for up to two years.

On sick leave, you are paid a minimum of 70% of your normal wage, or you will receive minimum wage. However, many Dutch employers will pay more than the mandated 70%, which should be outlined in your employee contract.

Other leave 

Contingent upon the COA or employment contracts, employees may also take other types of leave from work.

Short-term compassionate leave entitles employees to take leave to care for a parent, sick child, or partner. Employees receive 70% of their salary or minimum wage during short-term compassionate leave.

Long-term compassionate leave allows an employee to care for a parent, child, or partner experiencing a life-threatening illness. Long-term compassionate care amounts to 12 weeks yearly, but employees do not receive wages for hours spent on leave.

Adoption leave enables both parents to take up to six weeks of leave. Employers can apply on behalf of their employee with the Employee Insurance Agency to cover their wages during that time.

Emergency leave may be for a few hours or up to a few days depending on the situation–home maintenance emergency or an unexpectedly ill child–and does not impact your salary or wages.

Extraordinary leave is not included in the Netherlands labor laws but may be addressed by a COA, employee contract, or a company’s policies. Examples of this type of leave include marriage, specific wedding anniversaries (25th, 40th, 50th, and 60th), and moving. 

In-depth tax brackets

Employers and employees both pay taxes in the form of payroll contributions, and employees also pay income tax.

The employer contributes to the Invalidity Insurance Fund, Unemployment Fund, Healthcare Insurance Act, Work Resumption Fund, Sickness Benefits Act, and Child Care Premium. In comparison, the employee contributes to the Old Age Pension Fund, Orphans and Widow/Widower Pension, Long Term Care, and General Unemployment Fund. 

Employees must also pay income tax on what they earn each year. Depending on one’s annual income, the income tax percentage may range between 37% and 49.5%. 

Overtime pay

Employee contracts or their COA determine the maximum number of hours they work each week and how many overtime hours they can work. Employees typically work 36 to 40 hours per week, but some employers allow flexible working hours. All hours that exceed the agreed-upon work hours must be compensated with overtime pay. Overtime pay is not legally regulated and is determined by the employment contract or COA.

Nighttime pay

There is no legal rate for nighttime pay, but some employers may decide to pay nighttime employees a higher rate per their employment contract or COA.

Premium pay

Holiday pay or holiday allowance is 8% of an employee’s annual salary paid out in May or June as a lump sum. 

When it comes to Sundays, employees are not required to work unless it has been agreed upon between them and their employer. Employees who work on Sundays must be paid 100% of their typical wage.

Allowances, reimbursements, and per diems

Certain allowances and reimbursements fall under the heading of the work-related costs scheme (WHR) that pertains to employers and employees. The WHR enables employers to reimburse employees for home office expenses, meals and overnight accommodations, public transport fees, educational courses, and work clothing. Employers may also provide employee provisions without tax liability.

The current per diem rate in the Netherlands is 236 euros.

Expenses

An employer’s typical expenses include building rent and utilities, office supplies and equipment, software, insurance and pension scheme premiums, employee wages and benefits, promotion, payroll taxes, corporate taxes, and Value Added Tax (VAT) returns. If a business is delinquent in submitting its VAT returns, it will incur penalties and fees. An employer may also be responsible for providing a company car.