If you want to employ highly skilled workers in the Netherlands, you need to stay compliant with local payroll laws. These regulations cover everything from how and when you need to pay your employees to how much income tax you need to withhold on their behalf.

Learning how to pay employees in the Netherlands becomes simpler when you work with Payoneer Workforce Management, a unified solution that helps you streamline the process. 

Read on to learn all about payroll in the Netherlands.

Payroll in the Netherlands: Wages and other payments

Workers in the Netherlands are entitled to various benefits and are protected by strict legislation that dictates payroll.

Payroll cycle

Most payroll cycles in the Netherlands are 1 month long, meaning employers must pay employees after they have delivered 1 month of work, typically on the last day of the month.

Salary payments are generally made via bank transfer for compliance.

13th-month salary payments

13th-month payments or year-end bonuses are common in the Netherlands. They’re not mandatory, but many companies offer them as an attractive employee benefit to stay competitive.

A 13th-month payment is an extra month’s wages usually paid in May. CAOs can make 13th-month or year-end bonuses mandatory.

Minimum wage

The Netherlands has a statutory minimum wage, which dictates the minimum amount you can pay your employees per hour.

As of July 2025, the hourly minimum wage for adults aged 21 years and older is EUR 13.27. For younger people, the minimum wage may vary by age.

Dutch law dictates how much overtime employees can work, but it doesn’t state how much extra pay employees should receive. Overtime pay rates are usually agreed on in employment contracts or dictated by CAOs.

Sick pay

Employees are entitled to sick pay in the Netherlands. Employers pay at least 70% of a sick employee’s wages for a maximum of 2 years. In many cases, CAOs will require employers to pay 100% for a set amount of time (e.g., 1 year).

In practice, this means employees may receive 100% of their wages when they take a short amount of time off sick.

In the following cases, you can apply for 100% reimbursement of sick pay from the Employee Insurance Agency (UWV):

• Your employee is ill due to pregnancy or childbirth
• Your employee is ill due to organ donation
• Your employee is covered by the no-risk policy
• Your employee works flexibly
• Your employee falls under the compensation scheme for older employees
• Your employee has reached state pension age

Maternity pay

In the Netherlands, pregnant employees are entitled to a total of at least 16 weeks of pregnancy leave and maternity leave. 6 weeks of this are taken before the birth, and can be extended due to late births or complications. Immediately after childbirth, your employee receives a further 6 weeks of leave. Employees can spread the remaining 4 weeks over the next 30 weeks.

Throughout maternity leave, employers must continue paying 100% of an employee’s salary, and can apply to receive reimbursement from the UWV.

Parental leave policy in the Netherlands also gives partners and fathers the right to 6 weeks of leave after childbirth.

Severance packages

Severance packages are called “transition payments” in the Netherlands. The severance payable is typically 1/3^rd  of the gross monthly salary for every year worked, capped at 89000 Euros.

Employers must pay a transition payment in the following circumstances:

• You dismiss an employee on valid grounds.
• You do not renew or extend your employee’s permanent or fixed-term contract.
• Your employee resigns due to negligence on the company’s part.

As suggested by the name, this payment is intended to assist employees as they transition to new work. In some cases, employers can apply for reimbursement from the UWV.

Payroll tax in the Netherlands

When you pay employees in the Netherlands, you also need to comply with local tax regulations. In the Netherlands, employer payroll taxes​ include income taxes, national insurance contributions, and employee insurance contributions.

Income tax

Employers in the Netherlands must withhold payroll tax from their employees’ salaries and pay it to the Dutch tax authorities. The Netherlands has a progressive income tax ranging from 0% to 49.5%.

Payroll tax includes:

• Wage tax
• National insurance contributions
• Social security contributions
• Health care insurance contributions

National insurance contributions

National insurance contributions pay for social security schemes such as state pensions (AOW) and surviving dependents (ANW). Employers must calculate and withhold national insurance contributions from their employees’ salaries.

Employee insurance contributions

Employee insurance contributions pay for insurance schemes such as unemployment and disability benefits. Employers do not withhold these contributions from their employees’ salaries, but instead pay them themselves. Employee insurance contribution levels are set by the government twice a year.

Netherlands payroll compliance best practices

To run a compliant payroll in the Netherlands, employers should:

• Stay up to date with law changes, labor laws, and statutory requirements
• Monitor tax rates, tax brackets, minimum wages, and insurance contribution rates for any changes
• Perform payroll audits to identify any errors with your results or processes
• Provide ongoing payroll training to staff

Alternatively, you can partner with a global payroll provider to help manage your responsibilities as per local laws.

Your options for payroll services in the Netherlands

There are three ways to pay your employees in the Netherlands:

• Set up a local entity: This is a good option for larger businesses or companies that want to employ large numbers of workers in the Netherlands. However, it can be a time-consuming process.
• Pay as a contractor: This option is simple, but the workers you employ won’t be official employees or receive any benefits. This will affect your ability to stay competitive amongst top talent.
• Partner with a workforce management platform: This option blends simplicity with compliance, allowing you to hire full-time employees in the Netherlands and manage payroll without setting up a local entity.

Payoneer Workforce Management can assist you with managing payroll in 160+ countries, making it easy to onboard talent globally. We offer guidance for onboarding, employment contracts, and employee benefits to keep your business competitive.

Book a demo today.

FAQs

1) How does payroll work in the Netherlands?

Most employees in the Netherlands are paid every month via bank transfer, and employers withhold income tax and national insurance contributions.

2) How much is payroll tax in the Netherlands?

Employees pay income tax, which ranges from 0% to 49.5%, and national insurance contributions (which the employer withholds from their monthly pay), while employers pay employee insurance contributions.

3) How is salary paid in the Netherlands?

Salary in the Netherlands is usually paid on the last day of the month, every month, via bank transfer.