The Low-Income Benefit (LIV) is designed to encourage companies to take on staff in the lower pay scales.
FNV
But now employers would reap the benefits of this by filling these jobs mainly with workers from abroad. The combination of the Low-Income Allowance and the scheme for tax-free reimbursement of extraterritorial expenses (better known as the 30% scheme) is said to be the cause of this.
The FNV highlighted this potential problem in December 2017. It is said to occur mainly in the temporary employment sector. In a letter to Parliament, Minister Koolmees of Social Affairs states that there is little chance of this happening on a large scale. He estimates that only 7% of the Low-Income Benefit ends up in the temporary employment sector.
Low-Income Discount
We described the Low-Income Benefit early last year in an article. The employer receives the LIV for employees who, in a calendar year:
- have an average hourly wage of no more than 125% of the minimum wage;
- have at least 1,248 paid hours;
- have not yet reached state pension age.
The LIV is paid out automatically. The UWV determines entitlement to the allowance on the basis of the payroll records. However, as an employer, you must ensure that all the conditions are met throughout the entire calendar year.
The concept of paid hours is key. We explain this concept in our article Hours paid clarified. The brochure published by Statistics Netherlands (CBS), the Employee Insurance Agency (UWV) and the Tax and Customs Administration, from which our explanation is taken, has recently been updated in a memo.
30% control
Foreign workers who come to work in the Netherlands incur additional costs. These extraterritorial costs may be reimbursed tax-free. It is important for the Dutch knowledge-based economy to be attractive to foreign workers with specific knowledge and/or skills. The 30% scheme was introduced for this purpose.
Foreign workers are entitled to receive 30% of their remuneration tax-free. This is deemed to be the tax-free allowance for their extraterritorial expenses. This expense allowance is no longer taken into account when assessing whether the average hourly wage exceeds 125% of the minimum wage. This means that employers are more likely to qualify for the LIV in respect of foreign workers to whom the 30% scheme applies.
The conditions that a foreign worker must meet in order to be eligible for the 30% scheme can be found in our factsheet on this subject.