All employees in the Netherlands will receive noticeably more in January 2023 than in December 2022. Someone will think: “How good!”, And will not delve into the details. However, we recommend that you always look at your payroll and understand it.
Gross and net salary
On the payroll you can see:
- gross salary, that is, the so-called "dirty" salary, before taxes and fees are deducted from it,
- net salary, that is, the so-called "net" salary, the amount that comes to your card.
According to Joke van der Velpen of Visma-Raet, a payroll software company, people often ask why so much is deducted from gross pay. The answer is: “Your employer pays taxes for you so that you don’t owe the state anything else.”
Special fare - bijzonder tarief
Kim Heinen, payroll manager at Van Oers Accountancy & Advice, notes that people often struggle with the so-called bijzonder tarief of the payroll tax. This rate is subject to taxes on overtime bonuses and holiday pay, and is much higher than on a regular salary.
The fact is that tax credits are applied to working people in the Netherlands, the amount of which depends on annual income. The higher the income, the lower the discount. All payments accrued to an employee in excess of the usual salary are taxed at a special rate, since it is not known in advance how much they will increase annual income. If taxes have been overpaid and you are entitled to more tax credits, then you can file a tax return and get a refund of overpaid taxes.
Historic rise in the minimum wage
Like us wrote, From January 1, 2023, the minimum wage (minimumloon) will increase by more than 10%. Since 1969, all workers over the age of 21 have been entitled to the statutory minimum wage in the Netherlands. Van der Velpen notes: "The government's approach is to provide compensation to people whose actual incomes have become smaller due to high inflation". The minimum wage is EUR 12,40 gross per hour for a 36-hour workweek and EUR 1934,40 per month.
Kim Heinen comments on the situation: “In order to make the approach to payroll more fair, from January 1, 2024, the minimum hourly wage will be established by law. Then you can earn more in 40 hours than in 36 hours.”
Income tax cut
As an employee, you pay income tax (inkomstenbelasting) on your annual earnings. However, you are entitled to tax deductions and rebates (more on this in webinar "Income Tax in the Netherlands").
Like us wrote, from January 1, 2023, for employees with an income of up to 73 euros per year, income tax will be reduced to 031% (was 36,93%). This means that your employer withholds less tax from your gross salary, resulting in you as an employee receiving up to 37,07 euros more per year.
Increasing the tax credit for employees
In the summer we hope discussed prospects for increasing the tax credit for employees - arbeidskorting. Fortunately, the expectations came true.
- general tax credit (algemene heffingskorting),
- discount for employees (arbeidskorting).
If arbeidskorting is applied, the employer withholds a smaller amount of tax from the employee's wages. Lower fees mean higher "net" wages. The discount for employees will increase annually. From January 1, 2023, employees and entrepreneurs with an annual income of up to 115 euros will pay less income tax. This way they save more income. Van der Velpen gives an example: “If you earned €2000 gross in December 2022 and in January 2023, then you will see that you get more net in January.”
Increase in wages under a collective labor agreement
You can read about what constitutes a collective labor agreement (collectieve arbeidsovereenkomst - CAO). here. Many employers must comply with such an agreement in addition to legislative norms. In particular, the salary specified in the CAO may be higher than the minimum wage established by law.
According to Heinen, from January 1, wages will increase under many collective bargaining agreements: “Many industries raise salaries significantly. Especially where there is a large shortage of personnel, such as in the construction and security sectors. Builders will receive a 5% increase, security wages increased by 14,5%. This is really unprecedented, because in the earlier collective agreement it was stipulated that wages should correspond to rising inflation.”
Conclusions
Who will benefit less from the minimum wage increase? As Heinen noted: "People who earn twice the average salary win proportionately less". The net monthly salary of an employee with an average income (3086,42 euros gross) in 2023 will increase by 3,7% (by 91 euros). Employees who earn twice the average (6172,84 euros gross per month) receive an additional 97 euros, which is 2,42%. “The government sought to increase the earnings of low-income people, and it succeeded”.
Publication Date: 01.02.2023
