Social employee premiums and sector code, you might have come across that if you employ a staff. What is a sector code?
Social employee premiumes and sector code
The moment a company informs the Dutch tax office that they employ an employee, the Dutch tax office issues a wage tax number. At the same time the Dutch tax office indicates in what type of sector code the company is in. In the event it is not clear by the tax office what are the company activities. The tax office will contact the employer to get more information.
The sector code
The employer runs a payroll for the employee. The employee is than in normal situations also socially insured in the Netherlands. You might agree that a desk job is less hazardous than working on a construction site.
The level of job hazard determines the percentage the employer need to contribute to the social premiums. The saver the job, the lower the percentage.
Indefinite period of time employment contract
The sector code set the base percentage applicable as social employee premiums. The type of employment contract also influences the premiums. As the Dutch Government is supporting employers to provide security to employees in the sense of an employment contract for an indefinite period of time. These contracts result in lower social premiums as well. Under condition the indefinite period is mentioned in a signed contract.
Increase of employee social premiums
The moment an employer terminates the employment of an ill employee, this has an impact. As the Dutch Government is keen on healthy working environments, an employment terminated while the employee was ill, will result in higher employee social premiums for the employer two years later.
In such a situation it is very important to have both an Arbo service at your side that can navigate the employer through the obligations. Plus a labour lawyer to avoid more employers costs than is justified. Both can help preventing an employment being terminated while the employee is ill.
Social employee premiums
The social employee premiums vary every year, hence the January payroll is always slightly later than normal months. These social employee premiums are not shown on the salary specification, it is part of the employer costs. Paid towards the Dutch tax office. The Dutch tax office is in this case also social premium collector.
In the event the employee is socially insured in another country, the other country can provide an A1 or E101 statement. That is an EU form.
Regardless if the form is true or false, the employer can apply the provided A1 form. If it turns out to be false, the employer will not receive a penalty.
How can an A1 form be false? That can be caused in the application of the A1 statement. If an employee is an entrepreneur in his home country and based on that an A1 statement is issued. If that same person is employed in the Netherlands, the issued entrepreneur A1 statement cannot be applied for employment.
As we have experienced a lot of non-useable A1 statements are in circulation, we recommend the employers to connect to the SVB. SVB stands for Sociale Verzekeringsbank. Not to be mistaken with the Silicon Valley Bank. That is the social security Government organization. To verdict if the A1 statement is usable or not.
Tax is exciting
We think tax is exciting. So far we have not met one employer that is excited about paying social premiums for the employee. Still, the social system is one of the backbones of the Dutch system. Very important and you will notice the moment a benefit needs to be called in, like unemployment, disability, health care, it is very much appreciated.