ADP Europe

Many Dutch employees are still unclear about the consequences of the new legislation and regulations to be introduced in January 2006. These include the Work and Income Act (WIA), the Social Insurance Act (the so-called WALVIS Act), the Life Course Savings Scheme, the Health and Social Care Insurance Act and changes to taxation of company cars. In 2006, employees expect to see a fall in their take-home pay. These are the key findings of research conducted by ADP Nederland BV, a leader in payroll processing and staff information. In fact though, a comparison of earnings in 2005 and 2006 by ADP shows that, on average, there will be no decline for the majority of employees. They would, however, be well advised to take account of the impact of the new Health and Social Care Insurance Act and other government measures on compensation on their overall income. The ADP research investigated how much employees knew about the new legislation and regulations to be introduced in 2006, including the Work and Income Act (WIA), the WALVIS Act, the Life Course Savings Scheme, the Health and Social Care Insurance Act and changes to taxation of company cars. In addition, employees were asked if they were aware of the impact these laws will have on their take-home pay and whether they expect it to be lower, higher or the same in January 2006. The survey revealed that no less than 56% expect a reduction in their take-home pay, with 79% stating that they are not sufficiently informed about the consequences of the new legislation and regulations. “The survey clearly shows that employees are still in the dark, feeling uncertain about the level of take-home pay in 2006,” says Hein Brockhoff, CEO, ADP Nederland BV. “Our calculations of 2006 earnings show that, on average, most people will see no decline. However, take-home pay depends on various factors, which can differ widely according to personal or family situation, for example the level of health and social care insurance premiums or private use of a company car. Various ministries and authorities are providing a complex flow of information, but for the employee it all boils down to just one thing: how will it impact my payslip? ADP is calling on the government, employers and payroll processors to end the uncertainty over the consequences of these new laws and regulations.” Comparison of 2005/2006 payslips ADP has carried out many different gross/net calculations to compare 2005 payslips with the new 2006 version. In doing so, it considered only those effects which will be visible in employees’ earnings in 2006. To ensure an accurate comparison, ADP also took into account health and social care insurance premiums and allowances, and the impact of company cars. The new Health and Social Care Insurance Act has the biggest impact on the 2006 payslips. The effects of additional measures announced by the government, but not visible in the payslip, do not form part of the calculations. These measures include, for example, family allowances and subsidies for extraordinary expenditure. Health and social care insurance premiums In 2006, employees will become fully responsible for taking out their own health and social care insurance. If the employer purchases collective cover from a health and social care insurer, the nominal premium will often be processed directly on the payslip. In this case, this premium naturally has an impact on take-home pay. This will not apply to all employees, because not all employers will have purchased a collective contract from a health and social care insurer. The take-home pay of this group of employees may in fact be considerably higher in 2006 than 2005. However, they will have to pay the premium themselves out of their higher earnings. The total cost of the premium depends to a large extent on what type of health and social care insurance the employees decide to purchase. The Ministry of Public Health, Welfare and Sport website www.denieuwezorgverzekering.nl provides examples of calculations involving typical situations to give an insight into the financial consequences. Company cars From 2006 on, the tax paid on company cars is calculated within income tax on a monthly basis. Until 2006, this was done at the end of the year via the Tax Declaration. Company cars are now regarded as remuneration in kind and are therefore a component of the gross salary, on which tax must be paid. In practice, therefore, the net monthly salary will be lower. On the other hand, employees using company cars will not have to pay the adjustment amount in their income tax. Insight into Income In the weeks ahead, ADP will be preparing its clients intensively for all of these changes. In order to do so, we have developed a series of tools for employees, such as an information booklet and accompanying CD-ROM ‘Insight into Income’. The booklet explains the relevant changes in legislation and regulations, clearly outlining what these mean to employees, and offering practical commentary, concrete examples and useful tips. The CD-ROM allows employees to see what will change in 2006, by means of a sample payslip. The simulation program allows them to see the impact on their take-home pay for themselves, and provides direct answers to the question How does it affect me? About ADP ADP (Automatic Data Processing, listed on the NYSE), is the global leader in human resources outsourcing. For more than 50 years, we have been managing the entire payroll and human resources administration processes of companies, local or multinational, large and small, from diverse business sectors. With a presence in 29 countries around the world, 13 of which are in Europe, ADP is the best-placed to serve the needs of multinational companies.Our flexible range of outsourcing options are tailored to fit every client's needs and strategy. ADP services are compliant with languages, currencies, social regulations, and adapt seamlessly to companies' changing structural and business needs.