Labor discount, what is that?

All kinds of things are calculated on your pay slip. One term it contains is labor discount, but what does this actually mean? Labor tax credit is part of the payroll tax credits. These are discounts on your payroll tax. The labor tax credit is therefore not a deductible item but actually a discount! The amount depends on your income and your age.

What is the labor discount?

You pay income tax on your income. On your pay slip you can see that your employer already withholds levies (tax) from your wages: payroll tax. The payroll tax consists of payroll tax and national insurance contributions. You can receive a discount on this payroll tax, also known as a payroll tax credit. One of these is the employment tax credit. So it is not a deduction but a discount. Labor tax credit is a discount on your payroll tax and national insurance contributions.

What is the labor tax credit calculated on?

Labor discount is calculated on the wages and income from current employment(s). In other words, about the salary or other income for which you are currently working. Income from current employment includes:

  • Wages from work
  • Wages due to temporary disability
  • Profit from business or result from other activities
  • Benefit to finance career breaks (Work and Care Act) and any supplements to this from your employer.

What is not covered by this are:

  • One-off or annual rewards (holiday pay, 13th month, bonuses, gratuities, etc.)
  • unemployment benefits
  • WAO/WIA benefit
  • Waz benefit (except for benefits related to childbirth)
  • Wajong benefit
  • Benefits from foreign disability insurance policies (which are fairly similar to Dutch disability insurance policies such as WAO/WIA, WAZ or Wajong benefits.)

Changes in 2012

In previous years, people between the ages of 57 and 65 received an increased labor tax credit. This changes and becomes the same as for people under the age of 57. This only makes a difference between people under the age of 65 and those aged 65 and over. From 2013, the employment discount will form the work bonus together with the continued work bonus.

Amount of employment tax credit in 2011 and 2012

The employment discount is calculated on the total income from current employment in the year in question. The amount is a percentage of this income, depending on your age and the amount of this income. If your income is higher than 43,385, you must phase out (reduce) the employment tax credit. In addition, there is a maximum on the total amount of the employment tax credit. Below you will see an overview of the amount of the employment tax credit. It is important that the percentages shown are not calculated over the entire wage, but over the relevant part of the wage or income.

Labor tax credit 2012

Age as of January 1, 2012

Total maximum employment tax credit

Wage part from 0 to 9,295

Wage part from 9,295 to 45,178

Wage part from 45,178 to 51,418

Wage portion Higher than 51,418

65 years or younger

1,611

1.733%

12.32%

1.25% reduction

0

66 years and older

740

0.796%

5.658%

1.25% reduction

0

Labor tax credit 2011

Age as of January 1, 2011

Total maximum employment tax credit

Wage part from 0 to 9,209

Wage part from 9,209 to 44,126

Wage part from 44,126 to 50,285

Wage portion Higher than 50,286

56 years or younger

1,574

1.716%

12.152%

1.25% reduction

0

57, 58 or 59 years old

1,838

1.716%

14.418%

1.25% reduction

0

60 or 61 years old

2,100

1.716%

16.667%

1.25% reduction

0

62, 63 or 64 years

2,362

1.716%

18.915%

1.25% reduction

0

65 years and older

1,081

0.785%

7.921%

0.571% reduction

0

Labor tax credit 2010

Age as of January 1, 2010

Total maximum employment tax credit

Wage part from 0 to 9,041

Wage part from 9,041 to 43,385

Wage part from 43,385 to 47,865

Wage portion higher than 47,865

56 years or younger

1,489

1.737%

11.888%

1.25% reduction

0

57, 58 or 59 years old

1,752

1.737%

14.235%

1.25% reduction

0

60 or 61 years old

2012

1.737%

16.555%

1.25% reduction

0

62, 63 or 64 years

2,273

1.737%

18.884%

1.25% reduction

0

65 years and older

1,057

0.807%

8.779%

0.581% reduction

0

Example employment discount

For example, are you younger than 65 in 2011 with an income of 10,000. Then the labor discount is 1.716% on the wage up to 9,209, which is 158. The wage from 9,209 is then still 791 (10,000-9,209). Here you get a 12.152% discount on 791, which is 96. The total employment discount is then 254 (158 + 96). This can amount to the total maximum employment tax credit. This means that the employment tax credit is deducted from your payroll tax. The amount of payroll tax depends on which tax bracket your income falls into.

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