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Why do the tax people in the Netherlands get money out of my employment?

Categories: Career Advice,Finance,Legal

There is a whole list of premiums listed on my payslip. What do they all mean?

In case of sickness, unemployment, or pregnancy, you will still receive income in the Netherlands. How does that work? Does your employer pay it? Do you pay it? And why can’t you elect to get this extra amount in addition to your salary even when you are not sick or whatever?

The Netherlands – a welfare state or a so-called participation state?

After World War II, the Dutch government created an extended system of benefits, education support, and public health care that was funded by higher taxation. But in the 1970s the unemployment rate in the Netherlands began climbing, which led to a national budget deficit.

In response, the government wanted to boost employment and adopted a policy to decrease these social premiums so that employing personnel became cheaper.

The biggest change, though, was in how the social premiums were collected. In the twenty-first century, the system became one in which employees together bear the responsibility for social security in the Netherlands.

This is how we in the Netherlands provide income for those who are not able to work temporarily or ever (for instance, if disabled).

What does this mean for your employer?

There are two parts to the social security system: Volksverzekeringen (National Social Security) and Werknemersverzekeringen (Employee Social Insurance schemes).

Your employer pays an amount to the tax authority every month based on your gross salary. The tax authority publishes new percentages, thresholds, and maximum bases every year. Those figures will be implemented in the payroll systems that calculate the deductions and generate a correct payslip for you.

Guide to the categories of social insurance in the Netherlands

  • Basic State Pension (AOW) – Basic state pension for people over sixty-five. In 2018 the eligibility age was raised to sixty-six and to sixty-seven in 2021.
  • Unemployment Insurance (WW) – If you should be involuntarily unemployed, you can get a partial benefit from the UWV. How long you qualify for it depends on your employment history in the Netherlands.
  • Work Capacity Act (WIA) – You receive this benefit should you no longer be able to work after two years of sickness.
  • Ziektewet, ZW (the Sickness Benefits Act) – It depends on the sector you work in, but in case of sickness you receive a minimum of seventy percent of your salary for two years. You can also receive a sickness benefit for pregnancy and childbirth.
  • ZVW – (Health insurance Act) – This law obliges everyone working in the Netherlands to have health insurance. This is made up of a basic policy offered by all insurers. Under these policies, you are insured for standard medical costs like doctor visits, hospitalization, and many prescription medicines. A mandatory deductible of €385 applies to everyone. There are many options for extra coverage available.
  • Whk (Return to Work Fund) – This premium is paid by the employer to cover the costs of enabling the government to secure income for employees who are sick or disabled. The employer pays the differentiated premium for the Return to Work Fund (Whk), but may claim a part of this premium from the employee. This means that he may deduct part of the amount that he pays from your net salary. If your employer does this, you can see it on your payslip.
  • ANW (National Survivor Benefits Act) – This premium will ensure a secure life for people whose partner has passed away and who are responsible for a child under eighteen or who have at least a forty-five percent disability that prevents them from working.

How does this affect my salary?

Except for the Whk premium, all premiums are costs to your employer, so on top of your gross salary. The total (your gross salary + the premiums) is the total employer cost. So, if you have agreed on a gross salary, the premiums mentioned above will have no effect on what you take home every month.

Only the Whk can be deducted from the employee’s salary. It’s usually about €10-€20 per month.

Do I have to calculate or check all these amounts?

No, you don’t. We do it. The tax authority audits our system to ensure we are calculating the amounts correctly. If you are interested, you can see an indication of the costs for yourself.

Use the handy dandy calculator on our website to get a breakdown of your gross-to-net amounts.

By Payingit International, a leading payroll company in the Netherland that assists companies and employees with their planning, invoicing and salary administration.