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Employment and wages

There are many different types of work relationships. work relationships that can be considered employment are governed by the rules on loonheffing. Usually, you will need to withhold and pay loonheffing/social security premiums, and the employee share of the health insurance costs, hereinafter called payroll levies. You will also often owe health care insurance premiums, accident insurance premiums, cessantia, and the employer share of the health insurance costs, hereinafter called employer premiums.

Employment

Employment is a work relationship based on an agreement between an employer an and employee concerning the manner in which the employee performs remunerated work. This agreement is usually set out in writing, but can also be concluded verbally or tacitly.

It is does not matter whether someone has a fixed employment contract for the existence of an employment relationship. Nor is the scope of the work relevant. Individual supporting staff or holiday workers can also have an employment relationship, for example.

An employment relationship can exist for all forms of domestic work. You, as a private client, will need to withhold and pay payroll levies. You must also pay employer premiums.

An official appointment is also an employment relationship.

Types of work relationships

There are various types of work relationships:

  • real employment
  • fictitious employment
  • previous employment

Real employment

Real employment has the following characteristics:

  • The employee has undertaken to perform work for a period of time.
  • The employer is required to pay wages to the employee for the work performed.
  • There is a relationship of authority between the employee and the employer.

There is a relationship of authority if you have the right to give orders and instructions about the work that must be performed. The employee must comply with your orders and instructions. You can also delegate this right to another person, for example, to the person where the employee actually performs work (for example, in case of secondment).

There may also be a relationship of authority if you give hardly any orders and instructions. This may be the case, for example, if the nature and the scope of the work and/or the specific capacities of the employee do not qualify for orders and/or instructions.

Fictitious employment

If no real employment exists, the work relationship between a client and the executing party (including auxiliary persons) can still be considered an employment relationship for a number of groups. These are cases of so-called fictitious employment. This generally means that you must observe the same rules on withholding funds from wages as for real employment relationships.

The following work relationships are considered fictitious employment with respect to payroll levies and employer premiums:

  • contractors and their auxiliary persons
    • certain athletes
    • certain artists
  • persons appointed to a position
  • persons working only based on commissions

The following work relationships are also considered fictitious employment for payroll levies/social security premiums:

  • directors of legal entities
  • supervisory directors of legal entities
  • children performing work

Previous employment

Besides real and fictitious employment relationships, there may also be a case of previous employment. In this case, the employment relationship may have ended, but the former employee will still receive income based on his previous employment relationship. Examples are pension benefits or severance payments.

Wages

You must pay payroll levies and employer premiums on the wages. This is why it is important to determine what the wages consist of precisely. Essentially, wages are all amounts received by an employee based on his employment relationship.

You must consider the following when determining whether a certain form of remuneration belongs to the wages:
It is not relevant whether the employee is entitled to the wages. A voluntary bonus and a profit share right to which the employee is entitled based on his employment conditions are both forms of wages;

  • It is not relevant whether the employee has performed work for the wages. Wages for absent hours must be included;
  • It is not relevant whether the employee receives the wages in cash or in another form. Remuneration in kind and claims can also be wages.
  • It is not relevant from whom the employee receives the wages. Benefits from a fund associated with the employment relationship can also be wages, for example, those paid by an education fund associated with the company. Tips can also be part of the wages.

As a rule, the wages that apply for payroll levies also apply for employee insurances.

Types of wages

The following types of wages exist:

  • wages in cash;
  • wages in kind;
  • (free) allowances and gifts;
  • benefits for special events;
  • claims and benefits based on claims.