Defining Earnings

This chapter provides overviews of earnings for the Netherlands, the minimum wage, delivered elements and discusses how to:

• Define earnings.

• Define allowances.

• Assign commuting allowances for employees.

Understanding Earnings for the Netherlands

This section discusses:

• General earnings calculation.

• Base salary.

• Hourly rates.

• Holiday allowances.

• 13th month allowances.

• Overtime.

• Bonuses.

• Commuting allowances.

• Disability allowances.

• Shift work allowances.

• Weekend allowances.

• Meal allowances.

• Mileage allowances.

• Golden handshake.

• Festivity allowances.

• Life cycle savings plans.

• Regular reimbursements.

• Reimbursement of expenses.

General Earnings Calculation

With Global Payroll for the Netherlands, you can set up many types of earnings.

The different types of earnings are paid to employees as a result of the employment relationship. Each earning has different rules and parameters, which are used to define how earnings are taxed, calculated, and adjusted.

A company can calculate an employee's earnings through a period rate or an hourly rate, which usually depends on the employee's professional category.

The salary of part-time employees must be calculated from a full-time salary. For an example of how this is calculated, refer to the “Base Salary” section in this chapter.

Base Salary

In the Netherlands, calculating an employee's base salary depends on the number of worked days and non-worked days per pay period. If an employee doesn't work for the entire pay period, the base salary is prorated. In the Netherlands, proration is based on working days (which is all days in the pay period minus weekends).

Here's an example of calculating base salary:

• Employee joins the company on January 7, 2002.

• The base salary is 3000 EUR.

• The pay period is Monthly.

• January 2002 has 23 working days.

To calculate this employee's base salary for January 2002, the system uses the following formula:

Actual days worked/Number of days in pay period * Base salary

19/23 * 3000 = 2.478,26 EUR

What if an employee works part-time? Here's an example of calculating the base salary for the same employee working part-time, at 50 percent time three days per week.

(3000 * .50) = 1.500,00 EUR

The delivered earning SALARIS (Salary) is calculated based on the amount that is retrieved from the compensation rate code that is included in the base pay of the employee's compensation record.

Hourly Rates

In the Netherlands, some employees, such as standby employees, get paid with an hourly rate. The general formula to calculate the monthly income for an employee paid with an hourly rate is:

Salary = Total Working Hours * Hourly Rate

The hourly rate = Base salary * Number of Pay Periods / Number of Social Security Days / Number of Working Hours per Day

Note. The calculation of the hourly rate from the base salary is only applicable for employees who receive base pay, but for whom you need to determine the hourly rate to pay for certain earnings, such as overtime, for example.

The delivered earning UURLOON (Hourly Salary) is derived from the compensation rate code that is included in the base pay of the employee's compensation record. You can enter the working hours at the payee level as a recurring earning if it is a fixed number of hours per period, or you can enter the actual hours worked as a one-time earning for each pay period.

Global Payroll for the Netherlands delivers the accumulator VER AC UURLOON to keep track of hourly rates.

Holiday Allowances

In the Netherlands, it is very common for companies to pay their employees with an annual holiday allowance. Typically, companies pay the holiday allowance in May or June of each year.

Most companies pay a holiday allowance that is equal to 8 percent of an employee's base pay. When an employee terminates or retires, the holiday allowance is paid in full during the employee's last pay period. How the holiday allowance is calculated can vary by company. Below are some ways in which the holiday allowance can be calculated:

• Periodically paid together with the base salary.

• Based on the real accumulated earnings of the past year.

  For example, the accumulator builds from June 1, 2001 to May 31, 2002 and the company pays the holiday allowance during the May pay period.

• Based on the base salary of the pay period in which the company pays the holiday allowance.

  If an employee has worked the whole year as a full-time employee, the holiday allowance is calculated as: Actual base salary (100%) * Number of months (12) * Holiday allowance percentage (.08).

  For example, an employee whose monthly base salary is 3000 EUR would receive a holiday allowance of 2880 EUR, based on the calculation below:

  3000 * 12 * .08 = 2880

Note. Global Payroll for the Netherlands supports each calculation method for the holiday allowance.

You set up holiday allowance parameters for your company, including calculation method, on the Holiday Allowance page. The delivered earning VAKANTIETSLG is based on a calculation of Base * Percentage, both derived from the setup.

Global Payroll for the Netherlands delivers the accumulator VER AC VAKANTIEGLD to keep track of year-to-date balances of the holiday allowance.

See Also

Defining the Holiday Allowance

13th Month Allowances

In the Netherlands, it is very common for companies to pay their employees a 13th month allowance. Typically, the 13th month allowance is paid in November or December of each year. The percentage is the same for every employee in the company and is usually equal to 8.33 percent of an employee's base salary.

When an employee terminates or retires, the 13th month allowance is paid for the periods the base is accumulated during the employee's last pay period.

How the 13th month allowance is calculated can vary by company. Below are some ways in which the 13th month allowance can be calculated:

• Based on the real accumulated earnings of the current year.

  For example, the accumulator builds from January 1 to December 31 and the company pays the 13th month allowance in the December pay period.

• Based on actual salary times the number of pay periods for an employee divided by the number of pay periods.

  With this method, the system calculates the number of periods for an employee in an accumulator. Every pay period has a proration factor of 1, which is added to the accumulator. Exceptions are made for part-time employees and employees whose hire or termination dates do not match with the start date or end date of a pay period.

Note. Global Payroll for the Netherlands supports each calculation method for the 13th month allowance.

The following are some examples of how Global Payroll for the Netherlands calculates the 13th month allowance:

• Base salary = December salary.

• Proration factor = Number of actual days the employee worked / Total number of working days in the pay period.

• Part-time factor of 0,8 is used if an employee works at 80 percent of full-time.

1. Employee A joined the company on February 1, 2002, and the base salary as of June 1, 2002 is 3000 EUR per month. The 13th month pay of Employee A = (11/12) * 3000 = 2750 EUR.

2. Employee B leaves the company on October 31, 2002, and the base salary as of June 1, 2002, is 3000 EUR. The 13th month pay for Employee B = (10/12) * 3000 = 2500 EUR (paid in October).

3. Employee C leaves on October 16, 2002 and the base salary as of June 1, 2002, is 3000 EUR. The 13th month pay for Employee C = Period 1 – Period 9 gives a prorating factor of 9 and for October, the prorating factor should be (11/23 *1) = 0.47826. So, the calculation is 9.47826 / 12 * 3000 EUR = 2.369,57 EUR.

You set up 13th month allowance parameters for your company, including calculation method, on the 13th Month Allowance page. The delivered earning 13E MAAND is based on a calculation of Base * Percentage, both derived from the setup.

Global Payroll for the Netherlands delivers the accumulator VER AC 13E MAAND to keep track of 13th month allowances.

See Also

Defining the 13th Month Allowance

Overtime

If employees work more than their normal hours as stated in their contract, they receive overtime pay. In the Netherlands, overtime is paid per pay period and is part of the employee's taxable income.

Typically, overtime is calculated as:

An employee's hourly rate times the number of overtime hours times an additional percentage.

The most common percentages for overtime in the Netherlands are 100 percent, 125 percent, 150 percent, and 200 percent.

For each of these percentage rates, Global Payroll for the Netherlands delivers an earning called OVERWERK, which is based on a calculation rule of Unit * Rate * Percentage. The unit is entered at the payee level as the actual number of extra hours worked, the rate is a variable called VER VR V UUR TRF, which is the hourly rate derived from the base salary from the previous pay period, and the percentage is equal to 100, 125, 150, or 200, respectively.

Bonuses

For some employees, an additional allowance based on performance results in a bonus payment. Bonuses are common for employees working in sales. Several methods can be used to calculate bonuses. The amount of the bonus can be a percentage of the amount sold or a percentage of the employee's salary. The percentage of the bonus is entered through positive input on the Earnings component (GP_EARNING) in Global Payroll.

Global Payroll for the Netherlands delivers an earning called BONUS which is calculated based on the compensation rate from the previous period times the percentage entered at the payee level.

See Also

Defining Earning and Deduction Elements

Commuting Allowances

In the Netherlands, it is common for companies to pay employees for a commuting allowance. Up to a certain amount, this allowance is free of tax and social security.

The type of transportation used (public or private) is important in determining commuting allowances. Other factors used in determining the allowance are the distance traveled, the number of days traveled per week, and the compensation per period.

If employees use public transportation, they can get a commuting allowance in one of two ways:

• The employer pays the real costs for the public transportation (net payment).

• The employer pays a net amount up to the legal maximum.

  All additional payments are eligible for tax and social security.

If an employee commutes with private transportation, the costs are tax-free up to a certain amount. The amount depends on the one-way distance from home to office and the number of days that the employee is commuting.

Global Payroll for the Netherlands delivers two earnings for commuting allowances:

• REISKOSTEN B

  This earning represents the taxable amount (Belast). The calculation rule is Unit * Rate.

• REISKOSTEN O

  This earning represents the tax-free amount (On-belast). It is a flat amount.

Before January 1, 2004, commuting ceilings were used in the calculation of commuting allowances. Global Payroll for the Netherlands delivers the commuting ceilings that applied before this date.

If you need to create your own commute ceilings, set up the commuting ceilings for each type of transportation on the Commuting Ceilings page. Then, you can calculate employees' commuting allowance by entering their information on the Commuting Data page. If an employee works in more than one location, you can enter the information for each location separately. This page includes fields for the total allowance, the tax-free portion, and the taxable portion of the commuting allowance.

Note. The Commuting Data page is discussed later in this chapter. If you want to use the Commuting Ceilings and the Commuting Data pages to generate earnings, you must modify the delivered rules. As of January 1, 2004 the delivered rules do not use these pages.

See Also

Assigning Commuting Allowances for Employees

Defining Commuting Ceilings

Disability Allowances

In the Netherlands, after 52 weeks of illness, an employee can go on disability (WAO). Disability pay depends on the percentage of the disability.

Companies can either make direct payments to the employee and get a reimbursement from Social Security or they can let Social Security pay the employee. If Social Security pays the employee, the company can also make an additional payment, if this is in the CLA (Collective Labor Agreement). For example, employees who are 80 – 100 percent disabled receive a maximum payment of 70 percent of their last known base salary with a certain maximum per day.

Global Payroll for the Netherlands delivers two earnings for disability allowances:

• WAO UITKERNG

• WAO SUPLETIE

Both of these earnings are assigned at the payee level, in order to be taken into consideration for the payroll. WAO UITKERNG retrieves the amount from the WAO Data page and WAO SUPLETIE requires the amount to be entered on the Earning/Deduction Assignment page.

See Also

Defining Absence Rules

Assigning and Disabling Earnings and Deductions by Payee

Shift Work Allowances

In the Netherlands, if an employee works a shift other than a daytime shift, certain allowances may apply.

The shift work allowance can be calculated in one of two ways:

• A fixed amount per shift.

• The hours worked in a shift times a certain rate.

Weekend Allowances

In the Netherlands, companies often pay a weekend allowance to employees who work during a weekend. This allowance is a net amount, which has to be calculated for net-to-gross for tax and social security purposes. This allowance is common in companies that have employees working in shifts. You can enter the weekend allowance through positive input.

Meal Allowances

In Global Payroll for the Netherlands, the meal allowance is entered at the payee level and is subject to tax and social security.

Mileage Allowances

In the Netherlands, employees who don't have a company car, but need to travel for business can get a mileage allowance. This allowance is tax-free up to a certain limit. If the company pays more than the limit, the additional amount becomes taxable. In Global Payroll for the Netherlands, you can enter this information, and distinguish between the tax-free amount and the taxable amount.

Global Payroll for the Netherlands delivers a formula, REI FM KM VERGOED, that checks the allowance with a pre-defined limit and assigns the allowance to the taxable earning, in case the limit has been reached.

Golden Handshake

The golden handshake allowance is a type of compensation for a former employee in the case of an industrial or labor dispute. The gross amount is eligible for income tax.

Festivity Allowances

A company can give its employees a certain allowance tax-free for certain festivities, such as public holidays, employee birthdays, employee anniversaries, or other private occasions for an employee. In 2006, the limit for the festivity allowance is 35 EUR.

Life Cycle Savings Plans

These earnings are delivered for life cycle savings plan payments:

• LEVENSL BIJD

  Use this earning to track the employer contribution to employees' life cycle savings plans.

• LEVENS OPN

  Use this earning to track the amount paid to employees from their life cycle savings.

For more information about life cycle savings plans, refer to the Understanding Deductions chapter

See Also

Understanding Deductions

Company Cars

From January 1, 2006 the private use of a company car is a taxable benefit. For employees whose private use of a company car exceeds 500 kilometers a year, an amount is added to the bases used to calculate tax and social security deductions.

The earning element LEASE BEDRAG is delivered to track the amount added to employees' earnings for private use of a company car. Assign this earning to employees using positive input. The LEASE BEDRAG earning is a member of these accumulators that are used to calculate the base for tax and social security:

• BEL AC BSREG STHB

• SOC AC LOON TAB

Use the Travel Data field on the Employee Tax Data page to indicate that an employee has a company car.

See Also

Withholding and Reporting Taxes

Regular Reimbursements

This is a fixed amount given to every employee for normal expenses related to their job. For example, employees who travel for business will have some miscellaneous expenses, such as parking, coffee, and the like. These expenses are covered by the fixed amount, so that an employee does not have to declare small expenses. Usually, this is paid as a net amount up to a certain limit. Every company has its own arrangements with the tax authorities regarding the non-taxable amount.

Reimbursement of Expenses

A taxable or net amount of income provided to the employee as compensation of non-regular expenses can be reimbursed. Examples include expenses such as car rentals and airplane tickets.

Understanding the Minimum Wage

In the Netherlands, all employees are eligible to earn at least the minimum wage. The minimum wage is determined twice a year, on January 1 and July 1.

The minimum wage varies, depending on an employee's age. Employees between the ages of 23 and 65 are eligible for one rate, and employees between the ages of 15 and 22 are eligible for another rate (the minimum youth wage).

Employees between the ages of 23 and 65 are eligible for the minimum gross wage, based on a full-time workweek (a maximum of 40 hours). The current minimum wage, effective January 1, 2006, is:

• 1.272,60 EUR per month.

• 293,70 EUR per week.

For employees between the ages of 15 and 22, the minimum youth wage is calculated as a factor based on age, seniority, and full-time employment. The factor for calculating the amount per age is shown in this table:

Note. It is also common for companies to define minimum and maximum wages per job level, so the wage that an employee earns may be related more to the company's wage levels, rather than the minimum wages.

The amount of minimum wage per age, as shown in the table above, is used for printing purposes on the payslip. For example, if an employee is 19 years old and is paid on a monthly basis, the amount that has to be printed on the payslip is 668,10 EUR, regardless of the employee's FTE factor.

In Global Payroll for the Netherlands, the minimum wage is entered as a variable with a monthly amount and a weekly amount. This amount is valid for employees 23 years or older. The variable SST VR MN LOON M or W is PeopleSoft-delivered and maintained. For employees who are less than 23 years old, the system creates a bracket with percentages to correct the minimum wage. This bracket (SST BR MN LOON) is PeopleSoft-delivered and maintained.

Understanding Delivered Elements

This section discusses:

• Delivered earnings.

• Delivered earnings accumulators.

• Process lists and sections.

• Viewing delivered elements.

Delivered Earnings

This table lists the delivered general earnings for Global Payroll for the Netherlands:

Note. The earning ZKV BIJDRAGE is delivered only for earnings before January 1, 2006. From January 1, 2006, employees contribute to the same combined health insurance and the earning ZKV BIJDRAGE is no longer required. This is explained in the chapter Tracking and Reporting Employee Social Security Contributions.

See Also

Understanding Earnings for the Netherlands

Tracking and Reporting Employee Social Security Contributions

Delivered Earnings Accumulators

When you create your own earning element, you should be aware of the delivered accumulators to which an earning element may contribute.

Earnings are categorized by the accumulators to which they contribute. Some earnings contribute to the base of the tax rules and/or the social security contribution. A subset of those earnings might also contribute to the base for pension, vacation, or the 13th month allowance. For each of the different bases, Global Payroll for the Netherlands delivers accumulators to which earnings can contribute.

This table lists the accumulators used with earnings elements in Global Payroll for the Netherlands:

Process Lists and Sections

This table lists the main process lists used to calculate earnings elements in Global Payroll for the Netherlands:

This table lists the main sections used to calculate earnings elements in Global Payroll for the Netherlands:

See Also

Viewing Delivered Elements

Viewing Delivered Elements

The PeopleSoft system delivers a query that you can run to view the names of all delivered elements that are designed for the Netherlands. Instructions for running the query are provided in PeopleSoft Enterprise Global Payroll 9.0 PeopleBook.

See Also

Understanding How to View Delivered Elements

Defining Earnings

Earnings, such as base salary, are defined on the Earnings component (GP_EARNING) in Global Payroll. Setting up the Earnings component is discussed in PeopleSoft Enterprise Global Payroll 9.0 PeopleBook.

See Also

Defining Earning and Deduction Elements

Defining Allowances

To define the holiday and 13th month allowances, use the Special Pays NLD component (GPNL_SPECIAL_PAYS). To define commuting ceilings, use the Commuting Ceilings NLD component (GPNL_COMM_CLNG). This section discusses how to:

• Define the holiday allowance.

• Define the 13th month allowance.

• Define commuting ceilings.

Pages Used to Define Allowances

Defining the Holiday Allowance

Access the Holiday Allowance page.

Calculation Method	Select the method for calculating the holiday allowance. Values are: Current Earnings: Select if you use actual earnings from the current period to calculate the holiday allowance. Real Accumulated Earnings: Select if you use real accumulated earnings from the start and end date of the accumulator.
Accumulator	Select the accumulator for the holiday allowance. Based on the calculation method selected, the system prompts you with either period/segment accumulators for the current earnings or year-to-date accumulators for the real accumulated earnings. These accumulators need to be set up with the category equal to SPEC “Special Payments.”
Percent	Enter the percentage of base pay that the holiday allowance is.
Separate Pay Run	Select this check box if you want to calculate the holiday allowance in a separate pay run.
Include in Termination	Select this check box if you want to calculate the holiday allowance at the time of an employee's termination.
Compensation Frequency	Select each compensation frequency that applies to any employee receiving the holiday allowance. Values are Every Four Weeks, Monthly, Quarterly, and Weekly. The system uses the compensation frequency to calculate the holiday allowance. You select a compensation frequency in order to specify the periods, because for each frequency, the periods have a different value. For example, if you select a compensation frequency of Monthly, the period basis is 12. If you select Weekly, the period basis is 52.
Start Period for Accumulator	Enter the period in which the holiday allowance begins accumulating.
Period to Pay	Enter the period in which the holiday allowance is paid.

See Also

Holiday Allowances

Defining the 13th Month Allowance

Access the 13th Month Allowance page.

Note. The fields on the 13th Month Allowance page are similar to the fields on the Holiday Allowance page. For more information on the 13th Month Allowance page, refer to the Holiday Allowance page description.

See Also

Defining the Holiday Allowance

13th Month Allowances

Defining Commuting Ceilings

Access the Commuting Ceilings page.

Important! Due to statutory changes the commuting ceilings do not apply as of January 1, 2004. These values only apply to rules before this date.

This table shows how the commute allowance is determined for both private and public transportation. These limits are for the year 2002 and can change from year to year:

Note. After you've defined commuting ceilings, you can enter commuting allowance data for an employee on the Commuting Data page.

See Also

Assigning Commuting Allowances for Employees

Assigning Commuting Allowances for Employees

This section discusses how to define commuting allowances.

Page Used to Assign Commuting Allowances

Defining Commuting Data

Access the Commuting Data page.

Note. This page is only used for calculating commuting allowances before January 1, 2004. From January 1, 2004 assign the earnings REISKOSTEN B and REISKOSTEN O to payees directly.

See Commuting Allowances.