Have you ever wondered why your net wages are always lower than your gross wages? Your net wages are the amount that is effectively paid into your bank account. In other words, it’s the amount that really matters! But how are your net wages calculated? In this blog, we’ll explain the difference between your gross wages and net wages.
Your gross wages are the amount you’ve agreed with your employer in your contract, or that has been agreed under your collective labour agreement. As there’s tax and contributions to be paid on this amount, some money will be deducted. The remaining net wages are what your employer pays you every month.
The amount in your contract or at the top of your wage slip is your gross wages. Everyone who works here is obliged to pay income tax and contributions on that amount. The payroll administration team of your employer — AB Werkt, for example — will handle these deductions.
Aside from income tax, certain contributions will also be deducted from your gross wages. These contributions are necessary to ensure that you continue to receive wages if you become unemployed, ill or incapable of work. The contributions in question are as follows:
Your employer will ensure that your income tax is paid to the Dutch Tax and Customs Administration. Your contributions will be transferred to the Employee Insurance Agency and your pension fund. If you prefer not to wait for your employer to complete these transactions and you’d like to calculate your net wages yourself, online tools are available for that purpose. This Loonwijzer calculation module is a good place to start, for example. In the end, your net wages will be paid into your personal account, and you can spend them on whatever you like! (LINK to staying in financial good health).
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