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Beep…beep…Here’s your payroll slip

Written by Martijn Boeser on . Posted in Exact Globe, Exact Online, Exact Synergy

Last week the tax department let us know that your payroll slip will be so compact and simple in the future that it can be sent by SMS or as tweet.  This news relates to the new law that will come into effect from 2013 and make it possible to simplify the payroll slip. In previous blogs I already mentioned the need for this and finally a number of steps are being taken towards it.

The new law intends to make the payroll calculation simpler and improve the readability of the payroll slip. Also it will reduce the handling costs of employers. So let’s have a look at how this new future simple payroll slip will look and if it really fits on a text message.

The Dutch government wants to reach the simplification goal by firstly introducing one base for both payroll tax and the insurances. In the current situation there are three bases: wage for employee insurances (Loon voor sociale verzekeringen), wage for health insurance (Bijdrageloon voor Zorgverzekeringswet) and wage for payroll tax (Loon voor loonheffing). All these wages will be merged in one base covering all the payroll taxes and insurances. A number of measures are necessary to reach this goal and the law to handle this has now been passed and will come into effect as of 2013. The payroll slip that you receive then could be as follows:

The next step will be for the government to work towards one tax percentage over the total wage of the company. This will mean that the employee will not be charged individually anymore but the employer will be charged for all employees over the total wage. Further details about how this will work in practice are not known yet, but in this was the case, the payroll slip could look as follows and indeed be sent via a text message.

The above examples are really simple payroll slips without any components other than the salary. As such, more lines would probably be printed. That said, it is still simpler than the current situation. And concerning the simplicity: there are still a lot of collective labor agreements and pension funds that will complicate things. So to reach the ultimate goal, something must also change in the minds of the pension funds and the branch organizations.

The last thing I would like to mention is that the tax department speaks of the payroll slip as a tweet. I think they didn’t realize that twitter is a public medium so that each salary in that case would also become public. In the Netherlands it is not common to talk about your salary with others. Maybe the tax department finally wants to break with this taboo…..

Just give me my money!

Written by Martijn Boeser on . Posted in Exact Online

In my previous blog I gave a short introduction on the simplicity of the payroll process. I also looked at the simplicities themselves – the processes that are involved in completing a payroll calculation. I also pointed out that most people do not read their payroll specification and only check their bank statement. As an employee, you just want your money. That’s a pity because the document is the key to checking you were paid the right amount – to seeing that no mistakes were made with your expenses or travel allowance.

To try and give you a bit more insight into exactly what you can learn from the specification, let’s zoom into it and see what we find there.

The piece of paper the employee receives from their employer supplies information on your salary, contributions and taxes that are withheld and, finally, what should be paid into your bank account. As the document carries an official status in The Netherlands, it can also be used to apply for a loan or for a governmental allowance.

The payroll specification is divided up into several areas.  Please refer to the example payroll specification attached.

  1. Personal information
    You’ll first notice some personal information at the top of your document – your name, social security number, date of birth and your address. This is also related to some tax related data.
  2. Contract information
    You’ll also notice some information regarding the employment contract you have with your employer. This includes start date and end date of the employment, how many hours you work in a week and the base salary. The employer is also obligated to print the minimum wage that applies, enabling you to check that your employer pays you the correct amount.
  3. Period information
    This section shows all information related to the period and the wage that is paid for that period.

    1. The involved period
    2. This information reveals how the gross wage is composed – your base salary including allowance for overtime, personal target
    3. The amounts that are withheld on your salary like contributions for health care, pension and, of course, payroll tax.
    4. The net amount that is paid to the nominated bank account – for most people the most important bit!
  4. Totals
    This section displays all totals up to the current period. Besides base values for contributions and payroll tax you’ll also find information of your holiday allowance balance. Sometimes the balance for vacation days is also shown here.

 

 

The example we see here shows the layout that we use in Exact Online Payroll. We are always curious to hear what you think about it – especially if you’re an employee who receives it.  If you have any thoughts, please do share them with us. It could become part of an important improvement and help more people gain important insight from their payroll specifications.

Happy payroll year 2011!

Written by Martijn Boeser on . Posted in Exact Globe, Exact Online, Exact Synergy

Just like every other year, the laws and regulations concerning payroll administration are undergoing changes. 2011 also sees some important changes alongside the more regular adjustments in amounts and percentages. In this blog I will give you a brief overview of the most important changes for the payroll year 2011 in the Netherlands.

Employment cost regulation

A new regulation is introduced for 2011 regarding cost allowances and provisions. The idea is that every employer has a tax-free budget of 1.4% of the total fiscal wage. This budget can be used to give cost allowances to employees without paying the payroll tax for it. In case the employer pays more than the tax-free budget, the company has to pay a payroll tax of 80% over the amount that exceeds this budget. More information can be found on the site of the Dutch tax department.

Uniform calculation contributions

A next step has been made towards more uniformity within the calculation of social contributions. As of 2011, all contributions for employee insurances and health care will be calculated in the same way. The next important step will be probably made in 2012. The government has plans that as of 2012 all contributions will be calculated over the same base value and become for the account of the employer. At this moment the health care insurance (Zvw) is calculated on a different base value from the other contributions. This contribution is also still withheld from the wage of the employee. The plan is that as from 2012 the payroll specification will be more clear and simpler for the employee and that the administrative burden of the employer will decrease.

Extra tax table

As a result of the increasing costs for pensions, in 2008 it was decided that people older than 65 should pay more tax to keep our current governmental pension (AOW). This will become effective from 2011, an extra table being introduced for people that were born after 1946. They will pay a very slightly higher amount of payroll tax than the people born in or before 1946.

Net wage

And last but not least you will wonder: what will happen with my net wage? Overall the net wage will be a bit higher than 2010 for every employee. For the lower incomes the increase of net wage will be a bit higher than the higher incomes.

I wish all payroll administrators a happy and an accurate 2011!!

Keep it simple Payroll

Written by Martijn Boeser on . Posted in Exact Online

Many people in the Netherlands experience payroll as difficult to understand. Most only check their salary via their bank statement, paying little attention to their payroll specification explaining the calculations. It’s certainly a complicated document, any problems with it usually referred to the company ‘wizard’ – an expert payroll administrator or professional accountant.

Within Exact, the payroll development team is also seen as a distinct group with specialist knowledge. They seem to speak a secret language of payroll taxes, contributions and life course savings schemes, carefully guarding the secret formula of gross to net salary.

Of course I’m kidding, but perhaps it is time we cast off the mystical aura surrounding all things round ‘Payroll’…

Is doing the payroll administration easy then?

The answer is yes and no. The process itself is quite simple if compared, for example, to logistics. You need a record for each employee with master data like a social security number and, of course, salary amount. Together with variables like overtime or travel allowances, you calculate the payroll tax, insurance contributions, and most importantly, the net wage which then has to be paid. Calculated taxes and contributions must also be declared and paid to the tax department. Finance also like to know the payroll costs, reported via a journal entry with the balance and costs.

That’s about it. No magic and no secret formulas. The payroll specification is also not impossible to understand, but we’ll save that for my next blog.

So, what’s all the fuss about?

If you use up-to-date payroll software to support you, learning this relatively simple payroll process is certainly not impossible. However, the legislation surrounding payroll is complicated and dynamic. In the Netherlands, every payroll component needs to be examined – is it a base amount for a calculation and if so, for what contribution? Does it apply to payroll tax? With the rules changing regularly, the administrator needs expert knowledge beside robust software.

Collective labor agreements are also important – documents describing employee earnings and allowances that often run to over 100 pages. The huge amount of information makes life difficult for a payroll administrator, particularly if they work for an accountancy firm that do the payroll for several different companies.

Can it be made simpler?

The Dutch government has been trying to make payroll simpler without much success for many years; the political process is slow and extensive. Collective labor agreements and pension contribution calculations also remain difficult to understand and execute.  The result of long negations between employers and employees, they are unlikely to be simplified any time soon.

What Exact can do is make the payroll administration easier by supporting relevant Dutch laws and regulations through smart implementation in our software.  We can then go even further. At Exact Online Payroll we have the ambition to support and maintain more than 150 of the most commonly used collective labor agreements in the Netherlands. We already support around 50, more being added on daily basis. These inclusions mean that a payroll administrator no longer needs to study, for example, how a particular clothing allowance needs to be included. The correct payroll component is there ready to be selected. 

With so much time saved, the payroll administrator has more time for giving advice and service to his customers and their employees. Like explaining the payroll specification to employees for example…but let’s do that next time!