Labour cost benefits

As this is a comprehensive memorandum, we recommend that you include it in pdf-format to download. This is the updated version 2 of this fact sheet.

With effect from 1 January 2017 is the low-income benefit introduced.

With effect from 1 January 2018 Premium discounts have been replaced by labour cost benefits (LKV).

Low-income benefit

The low-income benefit is paid to the employer and aims to boost labour participation at the bottom of the labour market.

The maximum benefit is per employee based on a 38-hour working week:

• € 2.000 For employees with an hourly wage between €10.05 and €11.07 (2018: €9.82 and €10.81), who have worked at least 1248 hours with the same employer in one year.
• € 1.000 For employees with an hourly wage between €11.08 and €12.58 (2018: €10.82 and €12.29), who have worked at least 1248 hours with the same employer in one year.

For employees who worked part-time, the employer receives the low-income benefit in proportion to number of hours worked.

There is no age limit, but entitlement to the low-income benefit does stop when the state pension age is reached.

Labour cost benefits

Labour cost benefits are granted to the employer on request and amount to a maximum of €2,000 to €6,000 per year.

There will be 4 types labour cost benefits:

• LKV older worker;
• LKV labour-impaired worker;
• LKV target group jobs agreement;
• LKV re-employment of labour-impaired worker.

A target group statement from the UWV is a requirement. This indicates that someone belongs to the target group of vulnerable people on the labour market and meets the conditions.

If the employee belongs to the target group, the employer can apply for relief from the start of employment for three years - or until the employment is terminated.

There is no entitlement to the labour cost benefit if the employee concerned has also worked for that employer in the previous six months. This so-called ‘revolving door provision’ should prevent employees from being dismissed and then re-employed purely because of the labour cost benefit.

Also for the labour cost benefits, the employee must not yet have reached the state pension age. In addition, the employee must not be employed under the Social Employment Act.

There are further specific conditions for each labour cost benefit.

LKV older worker

• The employee was entitled to WW, WAO, WIA, Wajong or WAZ benefits in the month prior to employment.
• The employee is 56 years or older at the start of employment.

LKV labour-impaired worker

• The employee has a work restriction.
• The employee belongs to the defined target group and was entitled to WIA benefits in the month prior to employment.

LKV target group employment agreement

• The employee has a work restriction.
• The employee belongs to the defined target group and was entitled to Wajong benefit in the month prior to employment.

LKV re-employment of disabled employee

• The employee who, after being entitled to and WIA benefit, resumes all or part of his own job or another job with his own employer.

Table overview of LIV and LKV levels

Payment of the allowance

The premium discounts were processed in the wage declaration. The LKVs and the LIV are paid afterwards by the Tax Administration.

The Tax and Customs Administration issues a decision before 1 August of the year following the year of pay, following a request for an LKV or LIV. Within 6 weeks of the date of the decision, the Tax and Customs Administration pays out.

Transitional law

For ongoing premium discounts (older and disabled employees) on 31 December 2017, these have been converted into an LKV for the remaining period. The period during which the employer applied a premium discount is deducted from the maximum duration of the LKV.

Concurrence of LIV and LKVs

If there is an entitlement to an LIV and an LKV for the same employee, the employer will receive the allowance that entitles him/her to the highest amount. So there is no entitlement to an allowance for both an LIV and an LKV.

This concurrence provision only applies from 1 January 2018. So from 1 January 2017, it may well be possible to receive a premium discount and an LIV allowance for the same employee.

Incidentally, for a concurrence of two LKVs, the employer also receives the allowance that entitles him to the highest amount.

The purpose of this note is to outline a scheme. For the sake of readability, matters have therefore been simplified. VWG is therefore not liable for the consequences of actions taken or not taken as a result of this memorandum.