Employers Cost in Netherlands 2009

Social Security

Residents and non-residents

• Working in The Netherlands is required to pay social security contributions

on their gross salary in The Netherlands or in the country of their employer
after an E101 has been issued.

The Netherlands has two types of social security:

• national social security contributions which form part of the lowest two
income tax rates under Box 1, and
• employer’s and employee’s social security contributions to be paid on the
salaries.

Social security rates for 2009:

• ca. 18.07% for employers on gross salaries, including:

• 6.90% health of up to a maximum of EUR 32’366.61 per year,
• 0.34% is for child care contribution,
• 5.70% general standard disability contribution of up to a maximum of
EUR 47’802.15 per year,
• 0.15% minimum variable risk related contribution for disability,
• 4.15% unemployment general contribution of up to a maximum of EUR
32’366.61 per year,
• variable pension contribution according to activity sector; for example for
business sector II it is 0.83%,
• 6.9% health insurance for employees on gross salaries up to a maximum
of EUR 32’366.61.

Unemployment contributions to be paid by employees have been abolished

as of 1 January 2009.

Wages

The Netherlands enforces a legal minimum wage. This is adjusted

twice each year (on 1 January and 1 July). Every worker between
the ages of 23 and 65 in employment enjoys at least the right to
this minimum wage. Minimum youth wages apply to employees
younger than 23. The minimum wage also applies to employees of a
foreign company or temporary employment agency working in the
Netherlands.

Payroll

As a legal requirement, any individual working in the Netherlands must be

employed by a Dutch payroll provider.

The individual is employed by Capital Consulting and income is paid in the form
of salary, allowances and expenses, the proportion of each part depending on
individual circumstances.

Salary, Tax & Social Security

Capital Consulting deducts tax and social security at source on a PAYE basis and
payments are made to the relevant authorities on the employee’s behalf. The
taxable amount may be reduced by obtaining a 30% allowance (effectively
a 30% tax break, which is granted to specialised expatriate workers, subject
to certain criteria). Expenses are largely covered under the umbrella of the 30%
allowance although some further small deductions may be possible.

Capital Consulting will discuss your personal circumstances with you and
help you to minimise your tax and social security liabilities, within the
bounds of Dutch legislation.

Tax Returns

Income is managed tax efficiently, not just in the Netherlands but also in any
other country where there may be a liability. A tax return is filed each year in the
Netherlands with advice and assistance from Capital Consulting, who will also
provide help with filing tax returns elsewhere, if required.

What is the 30% tax allowance?

Employees who come to work in the Netherlands from another country are
known asextraterritorial employees. If these employees meet certain
conditions, they are eligible for a special expense allowance scheme known as
the 30% ruling.

The conditions to achieve this are that you must have been recruited to the
Netherlands from overseas, must have the relevant level of earnings and a
University degree or sufficient experience within your field.
The 30% allowance is valid for a period of 10 years working time in the
Netherlands. Therefore if you come to the Netherlands for 2 years and leave for
2 years, on your return you will still have 8 years to run on the allowance.

How it operates: If your salary is 100 units then you would reduce that by 30% to
70, pay tax on the 70 and then at the point of paying the net salary add back in
(tax free) the original 30%.

Redundancy Payments

In the absence of mutual agreement or cause the employer may generally not
terminate the contract of employment without a permit, to be obtained from the
Dismissal Authority (see Hiring and Firing in the Netherlands). An alternative is to
ask the Court to dissolve the employment contract. The Court may order the
employer to pay a redundancy payment. The calculation as used by the court
form the basis of voluntary redundancy payment schemes.

Payments

Statute provides that it is up to the Court to determine the amount of a fair and
adequate redundancy payment. The judge will have to weigh all circumstances of
the case. In the past this has lead to various approaches by different judges,
which had negative effects, like surprise decisions and a tendency where clever
lawyers went forum shopping, for better results. To avoid that and to have better
guidance the joint Cantonnal Courts reated the so called Cantonal Court
Formula, which since then is frequently applied to determine the level of
compensation an employer must pay to an employee that is laid off. Although this
is non-binding quasi legislation, the Cantonal Court Formula is now broadly used
by all Courts, and also by employers and employees to negotiate a termination
agreement with severance payment.

THE DUTCH CANTONAL COURT FORMULA

The Cantonal Court Formula fixes the redundancy payment at a number of

months salary. The exact severance payment is determined by multiplying three
factors: A,B and C, where:

• The A-factor is the adjusted number of years of service. The years of

service up to age 35 will count as 0.5, the years of service between 35
 and 45 years of age will count as 1, the years of service between ages 45
and 55 will count as 1.5 and the years of service above age 55 will count
as 2.
• The B-factor is the corrected monthly salary, inclusive of fixed
components like holiday allowance.
• The C-factor is a correction factor that is usually 1.0, but may be fixed
higher or lower by the Court in order to come to a fair and adequate
severance payment. Behaviour of employer and eployee, the job market
position of the employee and the financial position of the employer may
play a role, which makes the C-factor the less certain factor of the formula.

FIRING

In The Netherlands it is not always easy to dismiss employees. The use of a mix
of fixed and indefinite term contracts and the hiring of employees via temp
agencies is therefore a good way to avail over a flexible work force. This will
enable the employer to up size and down size the company in an effective
manner.

The dismissal of employees with a contract for an indefinite term is generally not
impossible, but this will most always cost time, effort and money. In the absence
of mutual agreement or cause the employer may generally not terminate the
contract of employment without a permit, to be obtained from the Dismissal
Authority. This will take several months and it is not always predictable whether
one will obtain the required permit or not. Another option is to ask the Court to
dissolve the employment contract. In general, these proceedings are less time
consuming. The Court may award compensation to the employee. This is
dependent on various factors, like the circumstances of the case, the length of
the contract of employment and the age of the employee. For more details see
the explanation of the Dutch Cantonal Court Formula in our article
on Redundancy Payment in The Netherlands.
Holiday Entitlements

ANNUAL LE AVE

All employees in the Netherlands are entitled to paid holiday. The holiday
entitlement of an employee is usually regulated in the employment contract or
collective agreement. The statutory minimum applies in all cases.

The statutory annual minimum is four times the number of agreed working hours
each week. Someone who works 40 hours a week is therefore entitled to 20
days' holiday of eight hours. Obviously, part-timers are entitled to fewer holidays.
However, they also need fewer holidays. On balance, they can take four weeks
off. For example, an employee who works four hours each day is entitled to 20
days' paid holiday of four hours each.

Most collective agreements provide for holiday entitlement that differs from the
statutory figure. The number varies from 20 to 30 days for full-time employees.
The age of the employee and the length of service also often play a role in the
case of both young employees and older employees. Both groups may be
allocated extra days' holiday.

Holiday entitlement is acquired proportionately over the course of the year. For
example, an employee who is entitled to 24 days' holiday a year will have
accumulated six days' entitlement after three months. Holidays may be taken in
advance in consultation with the employer. Regardless of the amount of their
wage, employees can claim a minimum holiday allowance of eight percent.

SICKNESS, M ATERNITY

The Work and Care Act came into force on 1 December 2001. The law aims to
make it easier to combine work and care, making it more attractive for both men
and women to (stay at) work. The Work and Care Act contains a combination of
new and existing leave schemes. The new schemes confer entitlement to a
maximum of 10 days' paid care leave, the right to adoption leave for both
adoptive parents, the right to two working days' maternity leave for the partner
and greater flexibility for parental leave.

In addition, a number of existing leave schemes, such as the provisions for

parental leave and emergency leave, have been transferred to the new law.
Maternity leave

Female employees are entitled to a total of 16 weeks' maternity leave. During this
leave, they are entitled to benefit which is equal to their daily sickness benefit, or
100 percent of their salary (up to the maximum daily pay). As a rule, the benefit is
applied for through the employer, within two weeks of the starting date of the
leave. A so called pregnancy certificate must be filed with the application. The
benefit can be paid either through the employer or directly by the body
implementing the scheme (the UWV).

Duration of the leave

Female employees can stop work between six and four weeks before the
expected delivery date. They must stop working within four weeks of the delivery
date.
Employees are entitled to at least 16 weeks' leave, of which at least 10 weeks
are taken after the delivery. If, for example, they stopped working six weeks
before the delivery, and the baby is born two weeks late, then two weeks will be
added to the 10 remaining leave weeks.

Sickness

If the employee falls ill prior to the pre-delivery leave or after the maternity leave
on account of her pregnancy or the delivery, she is entitled to sickness benefit.
This benefit is 100 percent of the daily pay (up to the maximum daily pay).