Hiring your first employee: tax checklist
Written by Ilias Aarrass7 min read · Published on · Last reviewed on 
In short
Before day one you register as an employer, draw up a written employment contract and verify identity with the original document; the payroll tax number usually follows within a week.
- The statutory minimum hourly wage in 2026 is € 14.71 from 1 January and € 14.99 from 1 July for ages 21 and over.
- Count on 25 to 35 per cent above gross pay for employer contributions, holiday pay and possibly pension premium.
- During illness you keep paying for two years, at least 70 per cent of pay; in the first year the minimum wage is the floor.
- Check whether a mandatory collective agreement or sector pension scheme applies in your industry.
Your business is growing and you want to hire your first employee. A great step, but it comes with obligations you must arrange in advance, and costs that run higher than the gross salary you agree. This article covers what must be arranged before day one, what an employee really costs and which monthly obligations follow.
What must you arrange before hiring someone?
A number of things must be arranged before the first working day, not after. The identity check in particular is strict: you do it before the work starts, using the original document.
- Register as an employer with the tax authorities. You receive a payroll tax number; without it you cannot file payroll returns, not even for an intern who receives an allowance.
- Draw up a written employment contract, with role, hours, pay, probation period and whether it is fixed-term or permanent.
- Verify identity with the original ID document and keep a copy in your records. A driving licence is not sufficient here.
- Ask for the payroll tax credit statement: does your employee apply the credit with you or with another employer?
- Check whether a mandatory collective agreement or sector pension scheme applies in your industry. On top of that the statutory minimum hourly wage always applies: € 14.71 from 1 January 2026 and € 14.99 from 1 July 2026 for ages 21 and over.
- Arrange sickness insurance or reserve for continued pay during illness. As a small employer you keep paying for two years.
What is payroll tax?
As an employer you withhold payroll tax from your employee's salary and remit it to the tax authorities. Payroll tax consists of wage tax, national insurance contributions and contributions for employee insurances. You file periodic payroll returns for this.
What costs come with it?
Besides the gross salary you as employer pay extra charges: employer contributions, holiday pay and often a pension premium. So never budget with the gross salary alone. As a rule of thumb the real cost is 25 to 35 per cent higher.
Worked example: an employee at € 3,000 gross per month
- Gross salary per year
- € 36,000
- Holiday pay at 8%
- € 2,880
- Employer contributions, around 20% of pay
- € 7,776
Result: Around € 46,700 a year, excluding pension premium, sickness insurance and the cost of your payroll administration
Do not forget the free space
As soon as you have staff, the work-related costs scheme applies. In 2026 you may reimburse or provide 2 per cent of the first 400,000 euros of your payroll tax-free, and 1.18 per cent above that. That lets you give, say, a Christmas hamper or a bicycle tax-free. See work-related costs scheme and free space.
Hire a freelancer first?
Many entrepreneurs try to postpone the step by hiring someone as a freelancer. That is possible, but only if that person is genuinely independent. If you set the hours and the way of working, it is employment and you risk an assessment for payroll taxes. Read hiring a freelancer or employing someone and false self-employment before taking that route.
How do you arrange the payroll administration?
Correct payroll administration is mandatory and precise. You calculate net pay, deductions and remittances, issue a payslip each period and file payroll returns. Those returns run per period, usually monthly or four-weekly, and must be filed even when there is nothing to report. See how payroll taxes work.
Most entrepreneurs outsource this. Not out of laziness: the rules change annually, an error in one payroll return carries into the following ones, and an employee who receives a wrong payslip notices immediately.
Frequently asked questions
What must I arrange before my first employee starts?
Register as an employer with the tax authorities for a payroll tax number, a written employment contract, an identity check with the original document before the work starts, and the payroll tax credit statement.
What does an employee cost beyond gross pay?
Count on 25 to 35 per cent extra: employer contributions, holiday pay and often a pension premium. At 3,000 euros gross a month you quickly reach around 46,700 euros a year, excluding sickness insurance.
How long must I continue paying during illness?
Two years, at least 70 per cent of pay; in the first year the minimum wage is the floor. For a small employer that is a big risk, so sickness insurance is worth considering.
Is hiring a freelancer better than employing someone?
Only if that person is genuinely independent: own clients, own methods, own risk. If you set the hours and the way of working, it is employment and you risk an assessment for payroll taxes.
Must I file a payroll return in a month with no activity?
Yes. As long as you have a payroll tax number you file every period, even at zero. Forgetting leads to a penalty, just as with VAT.
What is the free space and do I need it?
The room to reimburse or provide things to staff tax-free: in 2026, 2 per cent of the first 400,000 euros of payroll. Handy for a Christmas hamper or a bicycle. Exceed it and you pay 80 per cent final levy on the excess.
Sources
- Hiring staff and registering as an employerBelastingdienst · belastingdienst.nl
- Step-by-step plan for hiring your first employeeOverheid.nl · ondernemersplein.overheid.nl
- Minimum wage amounts 2026Rijksoverheid · rijksoverheid.nl
Sources checked on
This article provides general information based on the rules known for 2026 and does not replace personal tax advice. For your specific situation, we're happy to take a look with you.
