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Effective 1 January 2006 various changes have been introduced that have an impact on salary levels. This relates to the way in which the new healthcare financing system, introduction of the Work and Income According to Labour Capacity Act (Werk en Inkomen naar Arbeidsvermogen, WIA) following on from the Occupational Disability Insurance Act (Wet op de Arbeidsongeschiktheidsverzekering, WAO), changes in early retirement, salary savings and life-cycle leave schemes, and new unemployment premiums affect income levels. It also relates to lowering certain tax rates and, if possible, introducing a new collective agreement effective 1 January. This makes it practically impossible to draw an objective comparison between salaries in December 2005 and January 2006. It is however already quite clear that civil servants and teaching staff will lose ground as a result of the new healthcare system.
A number of changes have been introduced with effect from 1 January 2006 that have an impact on salary levels. The new healthcare system obligates employers to compensate income-related employee contributions. While healthcare premiums are refunded, they are now also considered taxable income. The new financing system differs for people insured under national or private health insurance. Those previously insured under national insurance always had a premium deducted from their earnings. While this component will now be compensated by the employer, it is subject to taxation. Privately insured individuals paid for their insurance directly and received a certain contribution towards this from their employer. It remains to be seen whether employers will continue to do this since they now also have to pay income-related premiums for privately insured individuals. It is already clear that civil servants and teaching staff will lose ground in terms of financing the new healthcare system, even if this effect is dependent on household composition.
The Occupational Disability Insurance Act (Wet op de Arbeidsongeschiktheid, WAO) has been replaced by the Work and Income According to Labour Capacity Act (Werk en Inkomen naar Arbeidsvermogen, WIA). This will also have an impact on monthly income levels. Previously, an income gap emerged when occupational disability benefits switched to a lower benefit after two years of illness; insurance could be taken out to cover this income shortfall. Such insurance could be closed on an individual or collective basis. It is currently unclear what employers intend to do in terms of collective insurance. Some will use the insurance to create a new supplement for partially disabled individuals.
Premiums for the Unemployment Insurance Act (Werkloosheidswet, WW) have been lowered by 0.65% with effect from 1 January 2006. By contrast, company cars will be adjusted on the basis of wage withholding tax as opposed to income tax as was the case previously.
An end has also been made to tax incentives related to saving for early retirement schemes with effect from 1 January 2006; this arrangement will be scrapped completely for employees under the age of 55. Cabinet has left it to the social partners to decide what should be done with the premiums released as a result of this. These decisions may take place at a sector or company level, with obvious consequences for the outcome. For example, while it may be possible for the funds to be redirected towards regular old-age pensions, the released resources may also be used for the life-cycle leave arrangement. If a decision is reached to refrain from using the funds for a specific goal, employees will see this on their salary slips.
The new life-cycle leave arrangement was introduced with effect from 1 January 2006. Existing salary savings schemes will be reduced gradually on the basis of less-favourable schemes. Even though employees still have a choice at the moment - even to choose not to save - the new life-cycle leave arrangement is more favourable because the maximum deposit (12% of salary) is higher and will be made from gross earnings.
Taxation too changed with effect from 1 January. For example, rates for the first and second brackets have been lowered: 0.25 and 0.50 respectively. The increased tax credit and employment discount may have a positive impact. This also applies to the tax credit for single parents. Changes are often made to collective agreements with effect from 1 January. New agreements that take effect from that date often have a direct impact on basic salaries. Because so many of the new measures mentioned took effect from the same date as new collective agreements came into force, the results may not be particularly visible on employees’ salary slips.
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