Overview of personnel costs
When your company employs staff, you must deal with various costs as well as their salaries. For example, payroll tax, holiday entitlement, and fringe benefits. Some of these costs are mandatory. Read what costs you need to consider and how to save on personnel costs.
What are personnel costs?
You pay more than just your employees' gross wages. You also have mandatory costs as an employer such as holiday pay and payroll taxes. You may also incur costs for fringe benefits, workstations and equipment for your staff. All these costs together are your personnel costs.
What are my personnel costs?
The infographic shows 4 categories of personnel costs.
- Mandatory wage costs:
- the gross (minimum) monthly wage
- holiday pay of 8%
- costs arising from collective labour agreements (CAO)
- Wage costs that you agree upon (secondary employment conditions), for example:
- a company car or bicycle
- travel allowance
- pension contributions (sometimes mandatory under the CAO)
- Mandatory payroll taxes for the employer:
- national insurance contributions
- employee insurance contributions
- income-related contribution under the Healthcare Insurance Act
- Extra personnel costs, for example:
- the costs of work clothing
- telephone or computer
- work equipment
Wage costs
Your employees’ wages account for a significant proportion of your staff costs. You must pay employees aged 21 and over at least the statutory minimum hourly wage. For younger employees aged 15 to 20, the minimum youth hourly wage applies. Your employees are also entitled to holiday allowance.
Read more about wages and payslips.
Alongside the gross salary and holiday allowance you sometimes also pay extra wage costs. For example, for a pension scheme, expenses, travel allowance, or year-end bonus. This depends on the fringe benefits you have agreed with your employee. Or on the Collective Labour Agreement (CAO) that applies to your company.
Read more about terms of employment.
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:
- wage tax (loonbelasting),
- the mandatory social security contributions.
The mandatory social security contributions consist of:
- National insurance contributions:
- Employee insurances:
- invalidity benefit under the Work and Income according to Capacity for Labour Act (Wet werk en inkomen naar arbeidsvermogen, WIA)
- invalidity benefit under the Invalidity Insurance Act (Wet op de arbeidsongeschiktheidsverzekering, WAO): this applies only to employees who received WAO since before 1 January 2006.
The employer pays these contributions and premiums to the Netherlands Tax Administration (Belastingdienst)on behalf of the employees. You do not owe payroll taxes for temporary workers. The temporary employment agency will pay these. The government determines the amount of the premiums each January and July. You can find information about calculating wage tax and social security contributions here (in Dutch).
Other costs
To ensure that employees can do their jobs properly, you are likely to incur other costs as well. These include the costs of (home) workstations and equipment. You will also incur costs for retraining and further training, gifts, and recruitment and selection.
As an employer, you must provide a safe and healthy working environment. So you should ensure good working conditions by having a clear health and safety policy.
Saving on personnel costs
There are several schemes that allow you to save on your personnel costs, allowing you to pay less in wage costs, for example. Or to give more advantageous allowances.
You can get allowances or subsidies for some employees that will reduce your wage costs. This applies, for example, to taking on an employee with an occupational disability
Read more about reducing your wage costs with subsidies and allowances.
The work-related costs scheme (werkkostenregeling, WKR) allows you to give untaxed allowances to your staff. There is a maximum amount, the so-called discretionary scope (vrije ruimte). You do not pay any wage tax on this. You can use the WKR for benefits such as tools, telephones, computers, or gym membership for your employees.
There are also untaxed allowances and facilities that are not deducted from the discretionary scope. These fall under the targeted exemptions and zero valuations. Allowances with a targeted exemption are, for example, a public transport pass, Certificate of Good Conduct application, or meals when working overtime. Allowances with a zero valuation are, for example, work clothes and coffee at work.
Read more about the work-related costs scheme, exemptions and zero valuations.
You can use the unused budget from the work-related costs scheme for gifts and other extras for your staff. For example, for a Christmas gift box or an end-of-year gift.
You can also deduct the VAT on gifts. To do so, you must not spend more than €227 (excl. VAT) per employee on gifts and extras in a year. Learn how to calculate the expenditure per employee on the Tax Administration website (in Dutch).