Penalties for underpaying staff
If you employ staff in the Netherlands, you must pay your employees sufficiently. This means you may not pay less than the statutory minimum wage.
Do you fail to pay the proper minimum wage or holiday allowance rate? Your employee may lodge a complaint with the Netherlands Labour Authority (Nederlandse Arbeidsinspectie, NLA). They may also apply to the subdistrict court.
Netherlands Labour Authority (NLA) competences
The Netherlands Labour Authority monitors if you keep to the Minimum wage and minimum holiday allowance Act (Wet minimumloon en minimumvakantiebijslag, WML). If they suspect underpayment, they may decide to:
- check if you pay the proper minimum hourly wage or minimum youth hourly wage
- check your accounts
Pay out outstanding wages and holiday allowance
Did you receive notice from the NLA that you pay 1 of your employees too little? You must pay this underpaid employee their outstanding wages and holiday allowance within 4 weeks. Your employee may claim back payments of wages and/or holiday allowance for up to 5 years. For example, if your employee only finds out later. Then you pay from the day your employee was entitled to the statutory minimum wage and holiday allowance.
Consequences of underpayment
If you fail to comply with the Minimum wage and minimum holiday allowance Act (WML), the NLA may decide to impose fines, penalty payments, and other sanctions, such as:
- You get a fine of up to €12.000 per employee if you are not able to prove the sum total of paid wages and holiday allowances, as well as the total number of hours worked.
- You get a fine of up to €10.000 per underpaid employee if you do not pay the proper minimum wage rate.
- You get a fine up to €2.000 per employee if you do not pay the holiday allowance, or if you pay too little holiday allowance.
- You get a non-compliance penalty if you fail to pay what you owe within 4 weeks after the payment became due. You pay a fine up to €500 per employee for every day that you do not pay the outstanding wages, and a maximum of €40.000 in total per employee. You pay the penalty on top of the outstanding wages and holiday allowance which your employee was entitled.
How much penalty you have to pay depends on how much you underpaid your employee and for how long.
Note that you can also get a fine if you fail to provide your employee with a correct payslip (up to €12.000 per employee) and if you pay the minimum wage in cash (up to €1.250 per employee).
Consequences for repeat offenders and serious violations
If an employer violates the minimum wage rules 2 or 3 times within a 5 year period, the fine will be 2 or 3 times higher as well. In case of serious violations or after a 3rd (similar) violation, you may also have to suspend (part of) your activities (temporary closure)(in Dutch). You get a warning first.
Serious violations are:
- You do not provide the documents and records claimed by the NLA or you do not provide them on time.
- You underpay more than 20 employees by 25 per cent or more of the proper minimum wage rate or the minimum holiday allowance rate.
- You underpay your employees by 50 per cent or more of the proper minimum wage rate or the minimum holiday allowance rate.