Why can there be less on your paycheck when your hourly wage has increased?

It probably won't have escaped your notice if you work in the Netherlands. The legal minimum wage has risen considerably. In the Netherlands, the minimum wage is regularly adjusted to keep pace with inflation and the rising cost of living. In 2024, the minimum wage increased from €12.12 to €13.27 per hour. This is a positive development, but it also has a downside. For example, while your hourly wage may have increased, you may still have less left over per month. What exactly is the situation?

 As the minimum wage has risen, wages above the minimum wage have also risen along with it, but in percentage terms they have not risen as much as the minimum wage. This affects the benefit an employee receives with the ET plan. This arrangement compensates for the double housing and living expenses a person pays when working in the Netherlands from abroad. This means that you can qualify for the scheme if you have housing costs in the Netherlands and in your mother country.

The amount of benefit from this allowance is based on the difference between your wage and the minimum wage. Due to the increase in the minimum wage, the gap between the wage you already earned and the minimum wage has narrowed and you will therefore receive less tax benefit.

 

Here's a sample calculation

Suppose a worker in 2023 worked 38 hours per week for €14.06 per hour.

The 2023 minimum wage is €12.12.

The difference is €14.06 -€12.12 = €1.94.

The ET is based on this amount x your hours worked. In this example, that's 73.72.

In 2024, this worker will earn €14.14 per hour for a 38-hour workweek.

The minimum wage has increased to €13.27

and therefore the gap between wages and legal minimum wage has narrowed.

The difference is now: €14.14 - €13.27 = €0.87.

When the formula of the ET regulation is now applied we arrive at a lower tax benefit.

In this example it is €33.06

The amount that comes out of this is "exchanged" on your paycheck. This means that part of your gross salary is exchanged in order to gain an extra tax advantage. Namely, you don't have to pay tax on the exchanged amount. In 2023, this tax benefit was higher than in 2024. This is the reason why some workers are left with less on their paychecks even though their hourly wages have increased.

 

NOTE: The ET rule is temporary
 

The purpose of the ET regulation is to compensate employees temporarily working in the Netherlands for double expenses. If you work for BAM Works, you are eligible for the following two items.

Living expenses: groceries are more expensive here than in the home country

Housing: paying room rent in the Netherlands, but also having to pay rent or mortgage in the home country.

 

For living expenses and double housing costs, BAM Works can use the ET regulation, but this can be done for a maximum of 5 years ( and in major exceptions up to 8 years).

This is because the Dutch tax authorities consider that someone who has been working here for many years can no longer be considered 'temporary'. This means that the ET-regulation and thus the tax advantage are no longer valid.

 

BAM Works is now going to check this more strictly and as a result there may now be less salary left on your payslip. Very annoying, but we have to comply with this legal provision.

 

If you would like more information, you can find it on the site of the tax authorities via the link below.

 Decision: validity and conditions tests (belastingdienst.nl)

 
You can translate via the settings in your browser.