Setting up payroll services in the Netherlands is essential before your employees start working there. Companies working in the Netherlands are under Dutch law and, therefore, must adhere to every aspect of local payroll regulations and taxes.
With payroll outsourcing, you can save time, reduce the chance of making costly errors, and be assisted in paying your employees accurately and in full legal compliance.
In this article, you’ll find a brief overview of Dutch payroll procedures. You’ll also find a step-by-step process for handling your global payroll and HR needs through partnering with a global employer of record (EOR).
Payroll in the Netherlands
All companies operating in the Netherlands are subject to Dutch labor law. Failure to remain compliant will result in penalties and fines. Before proceeding with payroll, you must set up an entity in the Netherlands through which you can legally hire workers. This entity can be a branch of your company or a subsidiary.
Another option is to partner with a third-party organization like an EOR or Professional Employer Organization (PEO) that will allow you to bring on new employees without a legal presence in the Dutch market.
Employers must register themes with the Dutch Tax and Customs Administration. After ensuring that employees are registered with the business payroll tax office, it can take two to three weeks after registration before you receive your Wage Tax Number. This number is necessary for paying payroll tax returns.
The Netherlands also has extensive social security programs, which require a higher percentage of taxes paid by the employer for their employees. Payroll taxes include national insurance, unemployment insurance, pension, health care, etc.
As of 2021, social security contributions withheld by the employer from the payroll are 27.5% of gross annual income. The expected health care contribution is 7%.
You are not required to pay payroll taxes for temporary workers; however, the Dutch government may hold you liable if the company or agency you hired them with fail to pay these taxes.
The Steps for Payroll Outsourcing
Once you’ve decided to branch into the Dutch market and hire workers in the Netherlands, you need to consider how to manage your payroll needs effectively. With payroll outsourcing, you can rely on the expertise and knowledge of those experienced in the field rather than attempting to handle it entirely on your own.
The first step to payroll outsourcing is to understand your needs. Determine whether your employees are full-time or temporary. Then, map out precisely what solutions you want a third-party company to offer. This reflection will keep you from paying for services you don’t need and makes communication between your payroll outsourcing partner smoother and more efficient.
Next, it’s essential decide on a realistic payroll schedule. This enables the outsourcing provider to meet your deadlines on time and reduces the chance of delays.
Third, make a final check of all relevant documents and payroll records that you provide to the outsourcer. Any errors made in payroll figures can result in having to pay expensive fines.
Finally, let your outsourcing provider take care of the details for you. As long as you have correctly registered yourself and have provided them with accurate data, they will be able to file all your payroll, taxes, and employee compensation on your behalf.
The Advantages of Payroll Outsourcing
Improved Security
Payroll and taxes deal with sensitive numbers, and there is always the concern for identity theft, embezzlement, and other types of fraud. By partnering with a payroll provider, you can guarantee that your funds are processed safely and correctly.
Pay Your Employees More Efficiently
Decrease the amount of time your employees spend preparing tax returns and payroll. Boost efficiency by hiring a provider who can complete all the tasks for you in less time by using industry-specific tools and software.
Remain Legally Compliant
Businesses of all types and sizes in the Netherlands pay penalties for late or incorrect payroll or payroll taxes. A payroll outsourcing provider has a team of legal experts to make sure your payments are made on time and in full legal compliance.
INS Global Can Help You Set Up Smart and Efficient Payroll Services
INS Global’s PEO and Employer of Record (EOR) in the Netherlands can handle all your payroll needs. We have over 15 years of experience aiding companies worldwide in more than 80 countries to hire and pay their staff safely and efficiently.
Our teams of HR experts and advisors can assist with organizing all your payroll and HR requirements while keeping you fully legally compliant.
Contact our team of INS Global advisors today to find out how you can benefit from our range of HR services.
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