The Netherlands’ laissez-faire attitude to benefits is quickly changing with mandatory health contributions and childcare provision affecting employers, says Vicki Taylor
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Until recently, there were few mandatory requirements around benefits for employers in the Netherlands.
Lately, however, this has changed with the introduction of compulsory healthcare contributions and incoming mandatory childcare contributions.
Pensions have also been the subject of change with penalties for early retirement and new eligibility ages coming into force.
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The Netherlands is well known for being a fairly liberal country partly due to its laid-back policy on certain narcotics. Until recently, its employment laws followed similar lines, with few mandatory requirements having been placed on employers.
One of the few long-established requirements has been to provide a holiday allowance of 8% of salary for employees earning up to €43,000 (£29,000) per year. Employers are free to negotiate what percentage, if any, they are prepared to pay for staff earning above this.
Philip Hartman, employment partner at international law firm Bird & Bird, explains: “It is a bit paternalistic. Employees are eligible [to receive] 8% of their salary paid out in the month of May. It is intended for employees to have some money to go on vacation in the summer.”
Of late, however, the list of perks employers must provide has been getting longer. Firstly, from the beginning of this year, employers have had to pay a mandatory 6% of salary (up to a maximum of €31,000 (£29,000) earnings) directly to the government for each employee, following changes in Dutch healthcare provision. Staff are then required to buy private medical insurance to cover the cost of any treatment they need, with providers having been subsidised by the government to reduce the cost of cover.
Renzo ter Haseborg, a lawyer at Allen & Overy, says some employers might choose to further subsidise their employees’ healthcare costs. “Each employer has to pay 6% of the employee’s total income and the employee has to pay the rest, unless of course the parties have agreed otherwise.”
From the beginning of 2007, it will also be mandatory for employers to pay a third of employees’ childcare costs, or a sixth if both parents work. “[This arrangement] has been voluntary for the past couple of years and it worked quite well, but not as good as the government wanted,” Hartman explains.
Under both the previous voluntary scheme and the new mandatory provisions, the Dutch government also pays a third of childcare costs, while employees cover the final third.
The Netherlands has also moved away from defined benefit (DB) pensions provision towards defined contribution (DC) schemes in recent years. The government, meanwhile, has introduced measures to make early retirement unattractive in a bid to keep people in work longer.
“The new developments are that any schemes that will provide benefits for any age below 65 [years], which is considered the standard retirement age in the Netherlands, are now being taxed at a higher rate and are now fiscally unattractive. This is a deliberate act by the government to act as a disincentive for early retirement schemes,” adds Hartman. Although employers are not legally obliged to provide an occupational pension, from 1 January 2007, they will be bound by new rules governing the age at which employees are eligible to join workplace schemes. “The age at which employees must have a pension [if the company offers one] is now 26 years old and it will become 21 years old [from the start of] next year,” explains Haseborg.
Other common benefits include company cars, which are widely offered to all employee groups rather than just being limited to senior managers and executives, and profit sharing which is becoming more widely used as a motivational tool.