Payroll & Employment Guide Netherlands

Although written contracts aren't always legally required in the Netherlands, they’re strongly recommended. Employers must still provide written confirmation of key employment terms within one month. Contracts can be fixed-term or permanent, but temporary contracts may only be renewed a limited number of times before automatically becoming permanent.

Notice periods: From 1 month (for less than 5 years of service) to 4 months (for more than 20 years of service).

Termination of employment: It can occur due to redundancy, long-term illness, underperformance, or a damaged working relationship. Termination payments are typically made on the final payroll date following an employee's termination. This includes outstanding salary, unused vacation days, and any severance or transition payments. Employees should receive a statement detailing these payments.

Additionally, they are entitled to cumulated holiday allowances of 8% of their gross salary and payment for any unused holidays. The deadline for paying terminated employees matches the termination payment date, ensuring timely settlement of all dues.

In the Netherlands, employee benefits are designed to make sure workers are well taken care of, with things like paid vacation, sick leave, and parental leave being standard. These benefits help create a good balance between work and personal life, giving employees peace of mind.

• Mandatory benefits: Social security contributions, healthcare
• Common perks: Wellness programmes and reimbursements beyond mandatory healthcare contributions
• Leave policies: Annual leave, public holidays, maternity and parental leave, and sick leave

The Netherlands has a progressive income tax system, meaning tax rates increase as income rises, with a top rate of 49.5% on higher earnings. Employers are responsible for withholding income tax and social security contributions directly from employees’ salaries and remitting these to the tax authorities as advance payments.

Income tax is based on the employee's earnings, which are deducted through the PAYE (Pay As You Earn) system. Employees contribute to social security schemes, which cover benefits like unemployment, disability, and healthcare.

Employees must have health insurance, which includes a mandatory basic package. Premiums may be deducted from their salaries. If applicable, employees may also contribute to a pension scheme, which can be mandatory or voluntary depending on the employer. They can also benefit from various tax deductions and credits, which may affect their overall tax liability.

Personal income tax rate:

• 35.82% tax on income up to €38,441
• 37.48% tax on income between €38,441 and €76,817
• 49.50% tax on income over €76,817

VAT: 3 VAT rates, which are 21%, 9%, and 0%

Tax allowances: General tax credit, labour tax credit, personal allowance

Additional tax reliefs: Mortgage interest expenses, charitable contributions, alimony payments, medical and disability expenses, life insurance premiums, home office deduction, and more

In the Netherlands, employers are required to pay salaries as specified in individual employment contracts or collective labour agreements, and these salaries must be at least the statutory minimum wage set by the government.

"Base salary" refers to the minimum amount an employee earns before any additional benefits, bonuses, or allowances are added. It serves as the foundation for calculating an employee's total compensation and is often determined by factors such as job role, industry, and experience level. The base salary must comply with the legal minimum wage set by the government, which can vary based on age and other factors.

As of 1 July 2025, the minimum wage in the Netherlands for employees aged 21 and older working full-time is €14.40 per hour, or approximately €2,437.07 gross per month. Minimum wages are adjusted every six months.

Minimum hourly rates for younger employees are:

20 years: €11.52

19 years: €8.64

18 years: €7.20

17 years: €5.69

16 years: €4.97

15 years: €4.32

In the Netherlands, the local currency is the Euro (EUR), and while contracted salary amounts can be stated in foreign currency, it is more common to express them in euros.

If a salary is specified in a foreign currency, the contract must clearly outline the conversion method and how it relates to taxes and deductions, although for compliance with Dutch tax laws, salaries must ultimately be reported and paid in euros.

In addition, contributions to the various employee insurance schemes will increase slightly. For employees earning at least the maximum assessable income, this increase means the employer will have to pay more contributions, calculated on the additional EUR 4,000 of the tax base.

Employees are typically paid on a monthly basis, with salaries disbursed on the last business day of the month.

Although the 13th and 14th salary payments are not mandatory, some employers offer them as part of their compensation packages, with the 13th month usually paid in December.

Monthly payroll declarations

Employers must submit monthly payroll tax returns, detailing gross wages, withheld taxes, and social security contributions. They are also responsible for remitting the withheld amounts to the tax authorities by the specified deadline.

Quarterly payroll declarations

Some employers may need to report specific social security contributions on a quarterly basis, ensuring compliance with regulatory requirements.

Annual payroll declarations

On an annual basis, employers must provide each employee with a summary of total earnings and withheld taxes by January 31. Additionally, they must reconcile payroll accounts and report total earnings to the tax authorities as part of their year-end reporting obligations. These structured reporting requirements help maintain transparency and compliance with Dutch labour laws.

Salary payment deadline: The last working day of the month

Taxes and contributions payments deadline: Monthly

Payroll declarations deadline: On a monthly, quarterly, and annual basis

Payroll currency: EUR

The Dutch Labour Code sets the main legal framework for employment, clearly defining the rights and responsibilities of both employers and employees. It emphasises strong worker protections, covering contracts, termination, working hours, and leave, whether for fixed-term or permanent roles.

Total employment cost: Total employment cost for employers includes base salary, mandatory contributions like social security, and legally mandated benefits

Minimum wage: €14.06 per hour

Probation period: Up to 2 months for open-ended or fixed-term contracts of 2+ years, and 1 month for shorter fixed-term contracts

Foreign citizens must obtain the appropriate work permits and visas to work in the Netherlands. The process, permit type, and costs vary based on the applicant’s nationality, job role, and length of stay.

Types of permits: EU Blue card

Process length: Three to four months

Process cost: 2200 EUR main candidate; 1200 EUR dependent

An Employer of Record (EOR) in the Netherlands lets you hire legally without setting up a local entity. The EOR becomes the legal employer and handles:

• Legal employment and contracts
• Payroll processing
• Tax withholding
• Benefits administration
• Onboarding/offboarding employees

With a Professional Employer Organisation (PEO) in the Netherlands, you remain the legal employer while the PEO provides HR and administrative support. This solution works best if you already have a legal entity and need help managing operations, including:

• HR support and workforce administration
• Payroll and benefits management
• Compliance and local labour law guidance
• Employment contracts assistance

Native Teams offers a payroll calculator tailored to the Netherlands' labour laws, helping you quickly estimate net and gross salaries, employer and employee contributions, and other mandatory deductions.