The Netherlands holds a score of 79.5 in the economic freedom score, and therefore, the country holds the rank of 8th most free country in the 2022 Index. The major contributions to the GDP of the country are agriculture, industrialization, and the service sector. The Netherlands also holds the 5th rank in the European region out of 45 countries, in terms of GDP per capita.

Major Economic Hubs:

Amsterdam, Groningen, Eindhoven And Utrecht

Skills in Demand:

Engineers, ICT Specialists, Healthcare Specialists

Resident Tax Information

All resident employees are taxed on their worldwide income in the Netherlands. However, worldwide income is taxed per three categories, also known as ‘boxes.’ Each box has certain tax rates that vary from each other.

Box 1 includes taxes on

• Employment income
• Benefits from income provisions
• Rental income from homeownership
• Periodic payments and receipts

The National Insurance tax is levied at 27.65%.

Social Security

ll employers must enroll their employees in the social security system of the Netherlands.  

The social security covers the following areas —

1. Invalidity insurance
2. Work resumption
3. Orphans and widowers pensions
4. Unemployment insurance
5. Sickness benefits
6. Long term care benefits
7. Healthcare insurance
8. Old age pensions

The social security system contributions include —

Statutory Benefits

All employers must provide certain statutory benefits as a part of an employee’s  compensation package. The statutory benefits in the Netherlands include —

Old-age Pension

All employees are entitled to old-age pension benefits after the legal retirement age. The retirement benefits depend on the criteria that involve the number of years of individual  

life before the state retirement age (the age laid out is 50 years). The pensions in the  Netherlands include —

• Retired couples: €11,101 per partner per month
• Single individuals: €16,331

Surviving Dependents’ Pension (ANW)

The gross insured amount as a part of surviving dependents’ pension is €16,201 (as of 2022). The amount is provided on an annual basis. However, the surviving dependents’  pension is provided on certain criteria that include -  

• They have a dependent child under the age of 18 or  
• They have a disability of at least 45% certified by a doctor.

Social Security

All employers must enroll their employees in the social security system. Social security contributions must be deducted from the employee’s salary as a part of the payroll process. The areas covered by social security in the Netherlands are discussed in the section.

Statutory leaves

All employers must provide a certain number of statutory leaves as laid out by the labor laws of the Netherlands. The statutory leaves are discussed extensively in the section above

13th-Month Pay (alternatively known as Holiday  Allowance)

Employers must offer 13th-month pay to the employees. The 13th-month pay is typically  provided at 8% additionally in the month of July each year of every year in addition to their  gross salary.

Fringe Benefits

Fringe benefits are provided by the employers in addition to monetary compensation,  voluntary contributions, and statutory benefits. Commonly provided fringe benefits in the Netherlands include —

• Transportation  allowance
• Flexible leave  allowance
• Flexible working  hours
• House rent allowances
• Telephone expenses

Exempt Benefits

Certain exempt benefits in the Netherlands include —

• Business expenses such as
• Telephone expenses
• Moving expenses
• Business travel and commuter expenses  
• School and tuition fees
• Extra- territorial costs
• Language courses
• Double housing
• Home leave
• Education expenses
• Disability and medical expenses
• Mortgage interest expenses
• Life insurance premiums

Long-term Incentives

Long-term incentives are provided to the key employees as a part of the employer’s retention strategy. Such benefits are provided to employees for a time horizon of more than 12 months. Commonly provided long-term incentives are —

• Employee stock options
• Performance-based incentives
• Supplementary retirement benefits and pensions
• Dependant’s pensions
• Disability, accident, and/or health insurance

Termination Process

‍Dismissal by mutual consent is only valid if it is recorded in a written termination agreement (settlement agreement).

The employee has 14 days to reconsider the dismissal by mutual consent. If he fails to do so, the reconsideration period will be automatically extended to 21 days.

On the other hand, terminating an employee on reasonable grounds will have to be consented to and agreed upon by the employee. Employers will then be required to pay a transition payment.

Notice Period

Dutch employees that are still under their probationary period are given a notice period of up to 30 days. For employees outside probation, they are given up to 4 months of notice period.

Severance Pay

1/3 of the gross monthly wage per year from the first day of employment.

The maximum amount is €83,000.