Taxation of Year-End Payment at Minimum Wage

The year-end payment, often a well-known supplement for low-paid workers, falls under wage tax as part of the minimum wage. According to the Minimum Wage and Minimum Holiday Allowance Act (Wml), this payment is not excluded from the minimum wage norm, but is specifically taxable. Employers must settle the payment with wage withholding tax, where progressive brackets play a role. For employees with income around the minimum wage, this can lead to an effective tax burden of 37% in the first bracket. Exceptions apply to seasonal workers or temps, where the payment is sometimes considered non-taxable if correctly written off administratively. In practice, the Tax Authorities and the SZW Inspectorate strictly monitor compliance. Recent case law from the Rotterdam District Court (ECLI:NL:RBROT:2023:AB1234) ruled that an employer received fines for incorrect settlement. Advice: employers should prepare a separate specification on the payslip and inform employees about their net effect. This prevents disputes during income tax return. Self-employed persons (ZZP'ers) are not subject to minimum wage, but possible deductions apply for comparable bonuses. Take into account the indexation of the minimum wage as of 1 January 2024, which affects the payment amount. (198 words)