Overview of personnel costs

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When your company employs staff, you pay them a salary. This salary is made up from several costs, such as taxes, payroll tax, and holiday entitlement. Some of these costs are mandatory. Here is an overview.

The total wage costs vary per company and industry and per staff member. For example, if there is a collective labour agreement (Collectieve Arbeidsovereenkomst, CAO) you must take into account the wages in that agreement. Or do you pay pension premiums? Have you agreed a bonus for your top-sales person? Does she drive a company car? These all make up part of the salary you pay. In general, an employer’s wage costs are about 30% higher than the gross wage received by an employee. Personnel costs can be divided into four categories:

  • direct labour costs;
  • indirect labour costs;
  • payroll tax;
  • other costs

1. Direct labour costs

This is the actual salary your employee earns. It consists of:
  • Gross salary. This includes overtime, performance premiums, any commissions, supplements for working unsocial hours and payment in lieu of holiday days. You may not pay less than minimum wage. If there is a CAO, you need to pay the CAO salary.
  • Holiday entitlement. This is eight percent of the gross salary.
  • Bonuses, commissions and profit distributions. These can be part of the employment contract.
  • These costs all need to be specified in the employee’s payslip.

The work-related costs scheme (werkkostenregeling, WKR) enables you to spend part of your total taxable wage (the ‘discretionary scope’) on allowances, benefits in kind and provisions for your employees without tax liability.
Read more articles about wages.


2. Indirect labour costs

These costs vary per company and per employee. You determine them yourself, unless the costs are determined in a CAO. Indirect labour costs can consist of:
  • Pension through a pension fund or insurer. Sometimes this is mandatory according to the CAO.
  • Insurance. If a CAO is in place, some insurances may be mandatory. Several insurances are not mandatory, such as accident insurance, liability insurance, and expat insurance for employees living and working abroad.
  • Expenses such as meals, travel and accommodation.
  • Secondary benefits such as a company laptop, phone and company car.
  • Transport, like a company bicycle (fiets van de zaak) or a public transport card (OV jaarkaart).

3. Payroll tax and employee insurances

Employers withhold payroll tax from their employee’s wages. Payroll tax consists of the following premiums and social security contributions:

4. Other costs

Your employees need a physical place to work. As their employer, you must create good working conditions and make certain their workplace is safe and suitable. For some types of work, this means you need to provide a certain type of clothing, like coveralls, helmets and safety goggles. In other cases, you need to provide office furniture and equipment, like a desk, a chair and a computer. Does your staff work from home? That makes no difference. The Dutch Working Conditions Act (Arbeidsomstandighedenwet) always applies. You are responsible for providing a suitable, safe and healthy work environment. Other possible costs include:

-costs for education, training and courses for your employees

-personnel outings and other recreational activities

Questions relating to this article?

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This information is provided by

Business.gov.nl