Dear Weekender,
As the year comes to an end, so does the fiscal year. The latter means extra attention to tax matters such as the last salary slip for the year, the wage tax card 2024, and, not to forget, the filing of the wage tax summary sheet 2024 (In Dutch: ‘Verzamelloonstaat’) by the end of January 2025, with the tax inspector, to avoid penalties of NAf. 5,000.
In addition to the above, this is also an ideal moment to explore some of the key responsibilities employers have regarding the payment of salaries. My colleague, Ms. Caroline van Hees (attorney at law) – specialized in litigation and labour law – and I would like to shed light on some essential employer obligations and practical insights into employee compensation and taxation.
Timely payment and late penalties
One of the most important obligations of employers is to ensure that the salaries (and payroll taxes) are paid on time, according to the schedule agreed upon in the employment agreement. While adjustments to the payment schedule are permissible, payments must not exceed a one-month interval. Please note that employees are entitled to claim a penalty in case of noncompliance with this obligation starting at 5% per day, with a maximum of up to 50% of the outstanding amount.
Pay slips
Another important obligation for employers is that they must provide employees with a salary slip for each salary payment. This document, which can be delivered in writing or electronically, must clearly outline the total amount earned and must include a breakdown of all components, such as base salary and bonuses, deductions and taxes. Additionally, the salary slip should, amongst other things, also include the relevant (personal) information, such as date of birth and address, but also the employment start date, and the pay period covered.
Deductions and employee protections
Employers may deduct payments from salaries under specific circumstances. For example, if an employee intentionally damages company property, such as a laptop, the employer may hold the employee liable for the damages incurred and deduct the cost from the employee’s salary. However, deductions may never reduce an employee’s salary below the legally protected minimum. Also, once an employment agreement ends, the employer has more flexibility to make deductions from the final salary, such as withholding outstanding amounts owed by the employee.
Alternative forms of payment
Although salary is typically paid in monetary form, employees may be remunerated through non-monetary means, such as housing, meals, or utility payments. These alternative forms of payment must represent the actual value of the goods or services provided. Examples include tuition fees, medical costs or company-provided transportation. Employers must, however, ensure that the value of such benefits is reasonable and aligns with their actual cost. In this respect, it should be noted that medical and nursing costs of both the employee and the employee’s family members, paid by the employer are not considered taxable wages.
Suspension of salary
Employers sometimes are allowed to suspend an employee’s salary if the employee does not comply with the requirements that allow the employer to check whether an employee is incapacitated for work. This situation could for instance occur if the employee fails to attend a scheduled appointment with a company doctor. However, employers are not allowed to assess an employee’s inability to work independently; they must rely on a company doctor to make such a determination. However, the decision to suspend an employee’s salary should not be taken lightly because of the consequences.
Cessation of salary
Salary cessation on the other hand is a definitive measure and may only be applied under very specific circumstances, for example, if the employee deliberately caused their own illness or provided false information during a pre-employment medical examination. Another exception is if the employee’s actions hinder or delay their recovery or if the employee refuses, without a valid reason, to perform suitable work assigned by the employer.
The key distinction between suspension and cessation lies in back pay. For suspension, as soon as the employee complies with the control requirements, they regain their right to salaries, including for the suspension period. On the contrary, cessation of salaries has no retroactive effect – employees cannot claim salary for the period of non-compliance, even after meeting their obligations. However, if the salary cessation by employer is deemed unjustified, employees may claim back pay along with statutory interest and the penalty for late payment of up to 50% (as mentioned above). Most importantly, employers must promptly notify employees about salary suspension or cessation. This ensures transparency and gives employees an opportunity to address the issue.
As can be deduced, employers have various legal and tax obligations to adhere to, in order to ensure the prompt and accurate payment of salaries. However, employees must also be mindful of their rights and responsibilities to prevent disputes. Both parties should always act fairly and in good faith toward each other, often good communication is key. Therefore, we would like to emphasize that by following these principles, employers and employees can establish a transparent and equitable working relationship, which is essential for a productive workplace.
Given the complexity of employment law, it is advisable to consult a lawyer before implementing any changes affecting salary payments. #knowyourtaxes #knowyourrights #employment
Yours sincerely,
Nicole Echobardo & Caroline van Hees | HBN Law & Tax
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