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In 2021, more employees than usual will have to pay additional taxes. Chances are they will ask you, as an employer, about this.
Why will more employees have to pay additional taxes in 2021? The explanation will in most cases be temporary unemployment , although this is not the only possible reason. Whether, and how much someone will have to pay extra, depends on the duration of the temporary unemployment and their personal situation.
Because of the corona pandemic, there were a lot more employees who received benefits instead of wages. Relatively less tax is charged on that benefit. The tax part can be quite complicated for a layman, and in order to understand it all, it is important to know the broad outlines of payroll tax (how is payroll tax calculated?) and of the final tax (also known as the end tax).
Every employee has agreed with his employer on a certain salary amount (this is stated in the labour regulations), namely the gross salary. The gross salary is then reduced by social security contributions (this is required by the Social Security Act), and you are left with the taxable salary.
Then, according to tax law, the employer must reduce the taxable salary with payroll tax. The payroll tax is an advance payment on the final tax that the employee will have to pay on the income from his professional activity. This means that the employee does not have to pay the total amount of taxes at once, because an advance payment has already been made.
Each calendar year, the tax authorities calculate the total sum of taxable income, and calculate the taxes that must be paid on this: the final tax. The tax authorities examine how much payroll tax (the advance payment of taxes) has already been paid. If there was an overpayment, the employee gets a refund of the overpayment. If too little was paid, the employee must pay the difference. However, this is avoided as much as possible: the intention is that the payroll tax should be as close as possible to the sum of the final tax. But this does not always work, for example when an employee has received not only wages, but unemployment benefits too.
1. Payroll tax on unemployment benefits is usually less
Payroll tax (a percentage) is also deducted from unemployment benefits, but this does not necessarily cover the final tax. In most cases, the amount withheld from the benefit is less than what the employee owes in final taxes.
2. Payroll tax on temporary unemployment benefits were (temporarily) reduced
Since unemployment benefits are lower than an employee's salary, the government decided last year to reduce the payroll tax rate (while in most cases it is already lower than the payroll tax on taxable salaries). The intention was to keep the purchasing power of the employees concerned high. However, this arrangement increased the likelihood of having to pay additional taxes at the end.
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