Expanding into the Netherlands to hire skilled employees is an exciting opportunity, but setting up and managing payroll according to Dutch regulations can be complex for businesses without local expertise.
This guide walks you through every essential step—from legal registration and payroll setup to tax deductions and contributions so that you can pay employees accurately and compliantly. I’ll also explain how partnering with a Dutch Employer of Record (EOR) provides a simple, compliant alternative when you don’t have your entity in the country.
Legal requirements for setting up payroll in the Netherlands
To get started, you must become a registered employer under Dutch law. The first step is incorporating with the Kamer van Koophandel (KvK)—the Dutch Chamber of Commerce. Once registered, you’ll be assigned a KvK-nummer. Next, you must register with the Belastingdienst, the Dutch Tax Authority, to obtain a loonheffingennummer (wage tax number).
This enables you to withhold payroll tax from salaries and remit it every month. This process applies whether you’re a local business or an international company hiring remotely in the Netherlands.
Dutch labour law, as outlined in the Civil Code (Burgerlijk Wetboek), also requires employers to maintain fair terms and to have written agreements. Failing to comply with these legal requirements can result in fines, compliance audits, and even legal disputes, making accurate registration essential.
Mandatory employee information and documentation
Before issuing the first payslip, you’ll need key documentation from each employee:
- BSN (Burgerservicenummer): The Dutch citizen service number is essential for tax and social security.
- Personal data: Full name, date of birth, Dutch bank account number, and a copy of their ID.
- Tax status declaration (formulier): Employees declare their tax credits, including the general tax credit (algemene heffingskorting).
- Work permit (if non‑EU/EEA): Ensure proper immigration compliance for any non‑EU worker.
Employment contracts in writing must detail salary, working hours, job title, statutory holidays, notice periods, pension provisions, and any collective labour agreement (CAO) reference. These contracts must comply with Dutch legal standards to avoid future compliance issues.
Payroll taxes and employer contributions
Dutch payroll deductions fall under loonheffing, which comprises several components:
- Wage tax/Employee National Insurance (loonbelasting/premie volksverzekeringen), deducted from gross salary.
- Employee insurance premiums (werknemersverzekeringen), covering unemployment (WW), disability (WIA), and sickness (ZW).
- Health insurance contributions (ZVW) funding the public health insurance system.
- Employer social contributions that cover employee insurance premiums and employer social charges.
- Pension contributions, where required by law or CAO.
Each month, you must calculate gross-to-net salary, withhold the correct taxes and social contributions, and remit them along with employer contributions. Keeping up with the Belastingdienst’s frequent rate updates is critical to ensure compliance.
Payslips and payroll frequency
In the Netherlands, salaries are typically paid on a monthly basis. Employers must provide payslips that detail:
- Gross salary and taxable components
- Itemised payroll deductions: wage tax, social premiums, and pension
- Net salary
- Holiday allowance (vakantiegeld) accrual
The holiday allowance, typically 8% of the annual salary, is paid once a year, usually in May or June. Payslips should clearly show their accrual and disbursement schedule. Best practice is to standardise payslip templates and issue them consistently on or before the actual pay date each month.
Social security and reporting obligations
Employers are responsible for remitting contributions for AOW (state pension), WW (unemployment insurance), WIA (disability insurance), and the health insurance scheme. These are calculated as part of loonheffing and reported monthly to the Belastingdienst. A failure to accurately file by the deadlines can result in penalties, interest charges, and audits. Good payroll software or a dedicated payroll provider can help avoid costly mistakes.
Tools and payroll software in the Netherlands
If you’re running payroll in-house, you’ll need robust software that handles Dutch-specific needs such as multi-component payroll deductions, payslip creation, and direct integration with Belastingdienst filings. Standard solutions include: Loket.nl, Nmbrs, AFAS, and Unit4.
These tools automate tax calculations and statutory holiday accruals, but still require oversight to ensure the configuration remains accurate and up-to-date. Some international players, such as ADP and Rippling, offer Dutch compliance modules but may not fully support CAO integrations or local holiday regulations.
Outsourcing to a Dutch payroll bureau or working with an EOR can eliminate the burden of software management, especially useful when your in-house team lacks Dutch payroll expertise.
How a Dutch Employer of Record can simplify payroll for your business
If you’re managing payroll remotely or lack a Dutch legal entity, partnering with a Dutch Employer of Record (EOR) is often the most efficient and compliant route. Here’s how a Dutch EOR operates on your behalf:
- Contract management: The EOR drafts, signs, and stores compliant employment contracts in accordance with Dutch law.
- Onboarding workflow: They collect necessary documentation (e.g., BSN, bank details, tax forms) and handle registrations with KvK and Belastingdienst.
- Payroll processing: They accurately calculate gross-to-net salaries, deduct taxes and social contributions, and transmit payments.
- Reporting and filing: The EOR submits monthly payroll tax returns, files reports, and remits employer contributions as required.
- Payslips and support: Payslips are issued, and employees receive support for payroll or benefits questions.
- Employment termination: The EOR manages final settlements, severance, and legal exit formalities if needed.
Because the EOR becomes the legal employer, you can hire one employee, a remote worker, or even a small team without forming a Dutch BV. It grants full compliance with Dutch labour law and payroll obligations, without the administrative overhead of entity formation.
Let’s say you’re a tech startup in the UK hiring an engineer in Amsterdam. You don’t want a Dutch entity yet, but need to get them onboarded fast. By partnering with a Dutch EOR, you can have an employment contract signed, payroll and social security filings processed, and salary paid — all within a few weeks. You retain day-to-day management of the engineer, while your EOR handles compliance entirely.
Alternatively, if you’re planning to build a larger team or offer local employee benefits, having payroll run through the EOR allows you to evaluate staffing needs before deciding whether to form a BV and internalize payroll administration.
Easily set up payroll in Netherlands
Running payroll in the Netherlands correctly involves several legal steps: registering with KvK and Belastingdienst, gathering employee documentation, setting up compliant contracts, calculating loonheffing deductions, processing pensions and contributions, issuing payslips, and ensuring accurate monthly filings. Meanwhile, holiday allowance and social contributions add layers of complexity for international employers.
If you don’t have a Dutch entity or don’t want to build a payroll function from scratch, working with a Dutch Employer of Record can streamline the process. With an EOR, you gain compliant payroll, reliable filing, and risk-free onboarding without entity setup.
If you’re ready to hire in the Netherlands quickly and compliantly, talk to our team about how our Dutch Employer of Record can manage your payroll, payroll compliance, and employment obligations, while you stay focused on growing your business.