As an employer, you are responsible for various administrative and tax obligations. One of the most important tasks is managing payroll tax for your employees. But how exactly does payroll tax work, and what should you pay attention to as an employer? In this article, we explain how to correctly apply payroll tax and what obligations you have.
Payroll tax, also known as wage with holding tax, is the tax that you, as an employer, deduct from your employees' wages. It is essentially an advance payment on the employee’s income tax. You pay the taxon behalf of your employees by withholding it from their salaries and remitting it to the tax authorities. As an employer, you are responsible for the correct calculation and timely payment of payroll tax.
Each month, you are required to withhold a certain percentage of payroll tax from your employees' salaries. The percentage depends on the employee’s wage and age.
Starting in 2025, payroll tax will be calculated using a tiered system with three tax brackets based on income:
- First bracket: Salaries up to €38,441 (36.93%)
- Second bracket: Salaries from €38,441 to €76,817 (49.50%)
- Third bracket: Salaries above €76,817 (49.50%)
It is important to note that payroll tax varies per employee depending on the tax bracket their salary falls into. The exact tax rates are determined annually and may change. To calculate payroll tax, you can consult the latest payroll tax tables available on the tax authority’s website.
As an employer, you are responsible for correctly and promptly remitting payroll tax. Compliance with tax regulations is crucial because failing to pay payroll tax on time or correctly may result in fines from the tax authorities. These fines can be substantial, so it is essential to follow the rules carefully.
Additionally, you must ensure that you have the correct employee details, such as salary, deductions, and age, as these factors influence the payroll tax amount.
In addition to payroll tax, you are also responsible for employer contributions. These are costs on top of your employees’ gross salaries, such as social security premiums (for healthcare, unemployment, and disability), pension contributions, and contributions for sickness benefits. These costs typically range between 20% and 30% of the gross salary, depending on the salary level and industry. It is crucial to account for these costs properly, as they form a significant part of total labor expenses.
Managing payroll tax can be a complex and time-consuming task. That’s why we offer support to ensure you always comply with legal requirements. Whether you need help calculating payroll tax, maintaining payroll records, or adhering to tax regulations, we are here to make this process as efficient as possible.
With the right support, you can focus on growing your business while we handle the administrative and tax obligations related to payroll tax.
