Overview of 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. In general, an employer’s wage costs are about 30% higher than the gross wage received by an employee. You may also incur costs for fringe benefits, workstations and equipment for your staff. All these costs together are your personnel cost.

Wage 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.

Indirect wage costs

Besides gross pay and holiday pay, you sometimes pay additional wage 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).

Read more about terms and conditions 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 income-dependent employer's healthcare insurance contribution and
• the mandatory social security contributions.

The mandatory social security contributions consist of:

• National insurance contributions:

  • Anw Survivor Benefit (Algemene nabestaandenwet, Anw)
  • AOW Pension (Algemene Ouderdomswet, AOW)
  • Wlz under the Long-term Care Act (Wet langdurige zorg, Wlz):
• Employee insurances:

  • unemployment benefit under the Unemployment Insurance Act (Werkloosheidswet, WW)
  • invalidity benefit under the Work and Income according to Capacity for Labour Act (Wet werk en inkomen naar arbeidsvermogen, WIA)
  • sickness benefit under the Sickness Benefits Act (Ziektewet, ZW)
  • 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

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

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.

Subsidies and allowances for wage costs

You can get allowances or subsidies for some employees that will reduce your wage costs. This applies, for example, to taking on an unemployed person aged 56 or over. Or for an employee with an occupational disability Read more about Reduce your wage costs with subsidies and allowances.

Reduce the cost of allowances with the work-related costs scheme

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.