woensdag 2 november 2011

Expats face lower net income due to higher income related contribution Health Care Insurance Act 2012

In 2012 the ceiling for the income-related contribution Health Care Insurance Act (ZVW) will increase.

Employers are hardly prepared for the increase of the contribution.

Employees who earn more than around € 36,500 per year will be faced with considerably higher health care costs next year, which can increase with € 500 per year. Also employers can be confronted with much higher costs. Particularly at companies where remunerations are high. They must take into account an additional claim for health care contributions of up to 35% compared to 2011.

Income-related contribution

Employees pay a flat-rate nominal premium every month. Besides that also an income-related contribution is owed, however this amount is reimbursed by the employer. Since the employer pays it for the employee it is treated as a taxable benefit and therefore wage tax is calculated on this contribution. The wage tax is taken from the gross salary the employee earns. The income-related contribution is based on what the employee earns, whereby an income ceiling applies of
€ 33,427. The cabinet has decided that this ceiling will be increased to € 50,056. Since 2006 the maximum income-related contribution per person has increased by 33% (the increase for next year included).

Companies where most of the employees earn more than € 33,427, can see the health care costs increase enormously. The higher ceiling has an irrevocable impact on the purchasing power of the employee and therefore also on the salary negotiations. Many companies have not yet considered this. Currently the contribution is 7.75% of the income. That percentage goes down next year to 7.10%, but due to the higher ceiling many employees will nevertheless feel this change in their pockets.

Example of the consequences for an employee

For an employee who earns € 70,000, the income-related contribution currently is 7.75% of € 33,427 which is € 2,590 on an annual basis. Based on a tax rate of 52% it will cost the employee
€ 1,347. Next year the contribution will become 7.1% of € 50,056 euro which is € 3,554 euro on an annual basis. Based on a tax rate of 52% this will cost the employee € 1.848. Although the percentage goes down, the net income of the employee will therefore be reduced with € 501. Only if the income is below € 36,500 the employee will benefit. However most expats will be earning more than this amount. 

Example of the consequences for an employer

For the employer the costs of an employee with a salary of € 70,000 will increase with almost € 1,000 per year. When a lot of employees earn more than € 50,056 this can lead to high additional costs. Especially if the involved employees want to see the reduction of their net salary covered by the employer. However if most of the employees earn less than € 36,500 the employer may benefit of the lower percentage.


Both employer and employee should be aware of the possible higher health care contribution in 2012.

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