The Netherlands is an excellent choice for an overseas branch—but setting up your business, hiring employees, and running payroll will be challenging.
This comprehensive guide to running payroll for employees in the Netherlands will walk you through the process of registering your business, hiring employees, and putting them on the payroll to ensure your expansion goes smoothly.
Table of Contents
- Step #1: Register as an employer or select an EOR
- Step #2: Pick a global payroll software solution
- Step #3: Determine your workers’ employment status
- Step #4: Collect information from your employees for payroll
- Step #5: Set the employee’s salary in euros
- Step #6: Run payroll
- Step #7: File your monthly and annual taxes
- Frequently asked questions about running payroll in the Netherlands
Step #1: Register as an employer or select an EOR
If you decide to set up your own entity in the Netherlands rather than using an EOR—which we’ll discuss below—here are the steps you’ll need to take.
- Select the right business structure for your company, pick a name that’s available (the Benelux Office for Intellectual Property will have this information), and get a business address that’s in the Netherlands
- Register your company with the Netherlands Chamber of Commerce (KVK) and the Dutch Tax and Customs Administration
Make sure you also open a Dutch bank account and that your company is listed on the Handelsregister, which is done through the KVK.
Can I use an EOR instead?
Yes, it’s perfectly okay to use an Employer of Record (EOR) instead of trying to expand an independent branch of your company to the Netherlands yourself. Many companies who decide to operate in the Netherlands utilize EORs to complete the multiple registrations required of new entities, run payroll, issue benefits, and navigate international compliance issues. Setting up a business in the Netherlands requires a significant time investment, and most smaller companies don’t have the resources to spare.
Step #2: Choose a global payroll software solution
First, it’s vital to understand the two kinds of international payroll solutions: global payroll processors and global payroll aggregators. You can learn about both in our guide.
- Global payroll processors actually process your payroll, transmit funds, and calculate and file taxes in every country through their own software. Put simply: global payroll processors allow you to pay your international employees just as easily as your local employees: together in a single pay run.
- Global payroll aggregators aggregate local payroll providers in every country and manually transmit your payroll files to them.
Step #3: Determine your workers’ employment status
Before you onboard new workers and start running payroll, you need to classify the workers you hire as either employees or independent contractors. Classifying team members correctly is crucial to staying compliant with Dutch laws.
There are specific criteria for employers to use when they’re classifying a worker. These include:
- Mutuality of obligation: Whether there is a binding commitment on the company to offer work and on the consultant to provide work.
- Personal service: An employee is required to provide their services personally, and if there is a right to appoint a substitute, this will typically be qualified as such at the employer’s discretion.
- Control: The degree of control which the employing entity has over a worker’s hours and place of work.
- Other activities: Whether the worker can undertake other work outside of the employing entity and if so, to what extent.
- Pay and benefits: An employee will be paid a fixed amount on a regular payment date according to their hours worked, and irrespective of performance targets or project completion.
- Integration: How involved a worker is in the company and its management and how they are perceived by third parties.
- Facilities and equipment: An independent contractor will usually provide their own equipment and materials in order to perform the services while an employee will rely on the employer to provide the same.
- Financial risk: Which party has liability for any losses arising from the agreement. An employee will be paid even where there is insufficient work to keep them occupied and will assume no financial risk in working for the employer.
- Taxation: Which party bears the liability for tax arising from the engagement. A self-employed independent contractor will be responsible for the payment of their own income tax and social security contributions whereas the employer will account for these in the case of employees.
Step #4: Collect information from your employees for payroll
To put employees on the payroll in the Netherlands, you’ll need to collect the following information from them:
- Their name, initials, DOB, and full address
- Their Citizen Service Number (BSN)
Then, fill out the official form and send it to the Dutch Customs and Tax Administration.
Step #5: Set the employee’s salary in euros
Because the Netherlands is a member of the Eurozone, if your company hires Dutch employees, regardless of where you are headquartered, you must pay them in euros.
Step #6: Run payroll
You have an entity (either your own or via an EOR), you’ve set up your global payroll system, and you’ve ensured your employees are correctly classified under Dutch law.
Time to run payroll!
Here’s a preview of how Rippling’s global payroll system works:
Step #7: File your taxes
Wages are paid once a month in the Netherlands, and although the official deadline isn’t until the end of the month, most companies issue paychecks around the 25th of the month due to payroll tax deadlines. Employers in the Netherlands must pay the appropriate payroll taxes and file payroll tax returns by the end of the following month.
Frequently asked questions about running payroll in the Netherlands
What are payroll taxes in the Netherlands?
Employers are responsible for paying the correct amount of payroll tax and insurance contributions to the Dutch government once a month.
Payroll taxes consist of the following:
- Wage tax
- National insurance contributions
- Employed person's insurance contributions
- Income-dependent contribution pursuant to the Health Care Insurance Act (Zvw)
What are the late tax filing penalties in the Netherlands?
If you miss a deadline for paying your payroll taxes in the Netherlands, you’ll be charged a 3% administrative fine on the outstanding balance. Should you fail to file your tax return or miss the filing deadline, you’ll be charged €68.
What is the average monthly salary for employees in the Netherlands?
The average monthly wage salary for employees in the Netherlands is €3,333 in 2023.
What is the minimum wage in the Netherlands?
The minimum wage in the Netherlands is indexed twice per year: every January 1 and every July 1. As of July 1, 2023 the minimum wage for employees 21 and older is: €1,995 per month or €460 per week or €92.08 per day.
How much does it cost to run payroll in the Netherlands?
The exact amount it will cost your company to run payroll depends on a variety of factors, including the number of employees you have and which features you want your software to include.
Can I manually run payroll for employees in the Netherlands?
Some small business owners decide they’d rather run payroll themselves in an attempt to cut down their overhead costs. However, running payroll is a time-consuming process, and the complexity of paying taxes, and calculating and deducting social insurances in the Netherlands will require a serious investment of your resources. If you go it alone, there are potential risks to keep in mind, such as:
- Compliance: Running payroll manually in the Netherlands, without using native global payroll software, puts you at risk of manual errors and omissions, which can result in hefty penalties. Rippling handles your compliance work for you, including calculating and deducting the correct amounts of each type of payroll tax.
- Security: Processing payroll manually can pose security risks, especially if you are using spreadsheets or paper records. This increases the risk of sensitive employee information being lost, stolen, or misused.
How do you pay independent contractors in the Netherlands?
- First, ensure you’re correctly classifying this individual as an independent contractor (you can use Rippling’s free Worker Classification Analyzer).
- Next, agree on the payment terms with the contractor: the hourly or project rate, the payment cadence, and the method of payment (direct deposit, virtual wallet, etc.).
- Collect their payroll information, including their name, DOB, contact information, and bank account information.
- Use your chosen payroll software to pay contractors in euros. With Rippling, you can pay your Dutch contractors in euros, in a single pay run, without waiting on transfers or conversion.
Rippling and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any related activities or transactions.