How to run payroll in Netherlands

The Netherlands payroll cycle follows a monthly schedule. Most companies process payments on the 25th of each month or the last working day.

Dutch law requires employers to pay salaries at least once per month, though some companies opt for more frequent payments. The standard practice is monthly payment by the 25th, giving payroll teams time to process before month-end.

Payment must be made in euros through bank transfer to Dutch bank accounts. Cash payments are prohibited for regular salaries, and international wire transfers may incur additional costs for employees.

Holiday allowance (Vakantiegeld)

Dutch employees receive mandatory holiday allowance equal to 8% of their annual gross salary. This isn't a bonus—it's a legal requirement that significantly impacts payroll planning.

Most employers pay holiday allowance in May, though payment between April and June is acceptable. The allowance covers the previous 12 months of earnings, including overtime and bonuses.

Holiday allowance is subject to income tax and social contributions like regular salary. For employees starting mid-year, calculate the allowance proportionally based on months worked.

13th month payment

The Netherlands doesn't mandate 13th month payments. However, many collective bargaining agreements include year-end bonuses or profit-sharing arrangements.

When 13th month payments exist, they're typically paid in December and subject to standard income tax rates. These payments count toward the annual salary for holiday allowance calculations in the following year.

Payment methods and requirements

Bank transfer is the only acceptable payment method for regular salaries. Employees must provide Dutch IBAN account details, and employers can't charge transfer fees to employees.

For international employees without Dutch bank accounts, employers typically assist with account opening or use specialized payroll providers to manage currency conversion and transfers.

Payslip requirements

Dutch payslips must include detailed information about gross pay, deductions, and net pay. Employees have the legal right to receive payslips, and missing information can trigger labor inspections.

Required payslip elements:

• Gross salary breakdown (base, overtime, allowances)
• Income tax withheld
• Social security contributions (employee and employer portions)
• Net pay amount
• Year-to-date totals
• Employer details and employee identification

Electronic payslips are fully acceptable and widely used. Employers must ensure employees can access and print their payslips. Some companies provide payslip portals with multi-year access for mortgage and loan applications.

Payslips should be available on or before the payment date. Late payslips can indicate payroll processing issues and may trigger employee complaints to labor authorities.

Income tax in the Netherlands ranges from 36.93% to 49.5%, with the top rate kicking in at €75,518.

The Dutch tax system combines income tax with social security contributions into a single withholding calculation. Your employees will see one combined deduction on their payslips, but you'll need to understand both components for accurate processing.

Income tax brackets

The Netherlands uses a progressive tax system with two main brackets for 2026:

These rates include both income tax and employee social security contributions. There's no tax-free allowance in the Netherlands - taxation starts from the first euro earned.

Part-time workers use the same brackets based on their actual annual earnings. If someone earns €30,000 annually, they'll pay 36.93% on the entire amount.

Withholding requirements

You're responsible for withholding tax from every payroll and remitting it monthly to the Dutch Tax Authority (Belastingdienst).

Monthly filing deadlines fall on the 15th of the following month. January payroll taxes are due by February 15th. The Belastingdienst doesn't offer grace periods for these deadlines.

You'll file through the Aangifte loonheffingen system online. This monthly return includes both the tax calculation and payment instruction.

Annual reconciliation happens automatically when employees file their personal tax returns. You don't need to provide additional year-end documentation beyond the annual wage statement (jaaropgave).

Tax registration

Register for payroll tax (loonheffingen) before your first payroll run. This process typically takes 2-3 weeks.

You'll need your Chamber of Commerce registration number and details about your payroll setup. The Belastingdienst will assign you a payroll tax number (loonheffingennummer) that you'll use for all filings.

Required documentation includes your business registration, bank account details for tax payments, and estimated annual payroll amounts.

Foreign companies often need additional verification steps, so start this registration immediately after incorporating your Dutch entity.

Special tax considerations

Non-resident employees face the same withholding rates but may qualify for different treatment under tax treaties. Don't adjust withholding based on treaty provisions - let employees claim benefits on their annual returns.

30% ruling eligible employees receive 30% of their salary tax-free, but you still withhold tax on the remaining 70%. This requires separate approval from the Belastingdienst before implementation.

Local taxes don't exist for payroll purposes. All income tax goes to the national government.

Common tax mistakes

Incorrect social security splits trip up many employers. You cannot separate income tax from employee social contributions - treat them as one combined rate.

Late filing penalties start at €1,362 for the first offense and increase rapidly. A second late filing within 12 months costs €2,724.

Miscalculating part-year employees often happens when someone starts mid-year. Use actual annual projected earnings, not annualized monthly amounts, for bracket calculations.

A €60,000 salary in Netherlands actually costs you €75,240. Here's the breakdown.

Dutch employer contributions add 25.4% to every salary, making them a major budget consideration. You'll pay into social security, pension schemes, and various insurance programs that protect your employees with solid coverage.

Contribution breakdown

Total employer cost example

For a €60,000 annual salary:

• Base salary: €60,000
• Social security: €4,290
• Pension: €4,500
• Unemployment insurance: €1,764
• Disability insurance: €3,360
• Sickness benefits: €3,534
• Work injury insurance: €120

Total employer cost: €77,568 Cost multiplier: 1.29 (employer pays 29% more than base salary)

Contribution caps and ceilings

Social security contributions cap at €142,814 annually for 2026. Once an employee's salary exceeds this threshold, you'll stop paying the 7.15% social security rate on the excess amount.

For high earners above the cap, your total contribution rate drops to about 18.2% instead of 25.4%. This creates real cost savings for senior executives and specialized roles.

Pension, disability, and sickness benefit contributions have no caps and apply to the full salary amount.

Registration requirements

You must register with several Dutch agencies before hiring:

Registration with UWV must happen within one week of your first employee starting work. The tax office requires registration before processing your first payroll, so plan accordingly.

You'll need your Chamber of Commerce registration number, business details, and estimated payroll amounts for all registrations.

Payment deadlines

Employer contributions are due monthly by the 15th of the following month. For January 2026 payroll, contributions must be paid by February 15th.

Submit your monthly payroll tax return (Loonaangifte) digitally through the Belastingdienst portal by the same deadline. Late filing carries separate penalties of €1,362 for the first offense.

Employees in Netherlands get 20 days minimum vacation. That's 4 weeks of paid leave to calculate.

But here's what makes Netherlands payroll interesting - vacation pay gets complicated fast. You'll pay vacation allowance (vakantietoeslag) at 8% of annual salary, plus handle complex sick leave rules where you're on the hook for two years of payments.

Annual leave

Every employee gets 20 days minimum annual leave for a full-time position. Part-time workers get pro-rated days based on their working schedule.

Vacation allowance is where it gets tricky. You'll pay 8% of the employee's annual gross salary as vakantietoeslag. Most employers pay this in May or June, but you can spread it across the year. This isn't optional - it's legally required.

Carryover rules let employees keep unused days for 6 months into the next year. After that, they lose them unless there's a valid reason (like long-term illness).

Termination payouts require you to pay for unused vacation days plus any unpaid vacation allowance. Calculate this at the employee's final daily rate.

Sick leave

You're responsible for sick pay from day one. Employees get 70% of their salary for up to 104 weeks (2 years). Yes, that's your cost, not social insurance.

First year: Pay minimum 70% of salary, maximum €70 per day in 2026. Second year: Still 70%, but you can reduce to 70% of minimum wage in some cases.

Doctor's certification is required after 2 days of illness. Employees must visit a company doctor (arbodienst) if you request it.

Your payroll system needs to track these payments separately - they count as taxable income but affect social security calculations differently.

Parental leave

Maternity leave runs 16 weeks total. The first 6 weeks before birth are optional, but the 10 weeks after birth are mandatory.

Pay works like this: You pay 100% salary, then claim reimbursement from UWV (social insurance). The reimbursement covers up to €230 per day in 2026.

Paternity leave gives partners 6 weeks at 70% pay, capped at €230 daily. Same deal - you pay first, then claim back from UWV.

Parental leave adds 26 weeks unpaid leave per parent (can be part-time). No direct payroll impact, but affects pension and other benefit calculations.

Public holidays 2026

Work on public holidays? Pay at least 150% of regular rate, though many collective agreements require 200%.

Mandatory benefits affecting payroll

13th month bonus isn't legally required, but 90% of employers pay it. Usually paid in December at one month's salary.

Travel allowance gets tax benefits up to €0.23 per kilometer in 2026. Many employers provide this for commuting costs.

Pension contributions are mandatory if your company has more than 2 employees. Rates vary by industry, typically 15-25% of salary split between employer and employee.

Health insurance premiums aren't deducted from payroll - employees handle this directly. But you might provide a contribution as a benefit.

Netherlands tax authorities audit 15% of employers annually. Here's what they check.

Your payroll records, wage tax calculations, and social security contributions top their list. They'll want to see accurate administration, timely filings, and proper employee documentation going back five years.

Monthly filing requirements

You must file wage tax returns by the 15th of each month through the Belastingdienst online portal. This covers income tax, social security contributions, and any applicable premiums withheld from employee wages.

Late filing triggers automatic penalties starting at €83 per month, escalating to €830 for repeated violations. The system doesn't accept excuses - technical issues or staff holidays won't waive penalties.

Submit your UWV quarterly report for unemployment insurance by the last day of each quarter. This reconciles your monthly contributions with actual payroll data.

Annual reporting

Year-end reconciliation must be completed by January 31, 2026. You'll file Form 941 summarizing total wages, tax withheld, and contributions paid throughout 2025.

Employees receive their annual income statements (jaaropgave) by January 31. These replace monthly payslips for tax filing purposes and must include all taxable benefits, reimbursements, and deductions.

The WNT report for executive compensation is due by July 1 for organizations subject to the Standards for Remuneration Act. This applies to most public sector and subsidized private sector employers.

Employee documentation

Employment contracts must be in Dutch or include certified translations. They need specific salary details, working hours, holiday entitlement, and pension arrangements. Generic templates often miss mandatory clauses.

Monthly payslips require 15 specific elements including gross salary, tax withholdings, social contributions, and net pay. Missing elements trigger €250 fines per occurrence during inspections.

Keep all payroll records for seven years minimum. This includes contracts, payslips, time sheets, and correspondence about salary changes or benefits.

Penalties and enforcement

The Inspectorate SZW handles labor law compliance while Belastingdienst manages tax obligations. Both agencies share information and coordinate enforcement actions.

Regulatory oversight

Belastingdienst (Tax Authority) oversees all payroll tax matters. Access their business portal at ondernemersplein.kvk.nl for filings and correspondence.

UWV manages unemployment insurance and work permits. Their employer portal handles quarterly reporting and benefit claims.

Inspectorate SZW enforces labor standards including minimum wage, working time, and employment contracts. They conduct unannounced workplace inspections with immediate penalty authority.

Contact the Belastingdienst business line at 0800-0543 for urgent compliance questions. They provide same-day responses for filing deadline issues.

Minimum wage in Netherlands increased 3.4% in 2026, from €13.68 to €14.15 per hour. This affects all employees aged 21 and over, with proportional increases for younger workers.

The change took effect January 1, 2026, meaning your first payroll of the year needed the new rates. Youth minimum wages also increased proportionally - workers aged 20 now earn €12.03 per hour (up from €11.64), and 19-year-olds earn €10.91 per hour.

Tax bracket adjustments - Effective January 1, 2026

The Dutch government adjusted tax brackets for inflation, raising thresholds by 2.8%. The first bracket now covers income up to €38,441 (previously €37,495), taxed at 36.97%. Income above this threshold faces the top rate of 49.5%.

This change reduces tax burden for middle-income earners. Update your payroll system immediately - using 2025 brackets means you're over-withholding tax.

AOW pension contribution cap increase - Effective January 1, 2026

The AOW contribution income cap rose to €40,765 (up from €39,675). This means higher earners pay AOW contributions on more of their income, increasing their total contribution by roughly €75 annually.

Upcoming WGA disability insurance changes - Effective July 1, 2026

WGA contribution rates will increase from 0.73% to 0.81% mid-year. This affects all employers and requires a payroll system update in July. The change applies to the entire salary, not just amounts up to a cap.

Holiday allowance calculation update - Effective May 2026

Holiday allowance calculations now include overtime pay from the previous 12 months, not just base salary. This change affects your May holiday allowance payments and requires reviewing overtime records from the prior year.