Employers in the Netherlands are subject to strict obligations regarding employee sickness and long-term disability. To mitigate these risks, specific insurances are applied through Parakar.
The maximum annual salary basis cap for employee insurance contributions can be found on the official Netherlands' government tax site here.
1. Sick Pay Insurance (Mandatory – Paid by Client)
Purpose
Protects the employer against the financial risk of continued salary payments during employee sickness.
How It Works
Employer is legally required to pay salary during sickness for up to 2 years
Minimum required payment: 70% of gross salary
Insurance Coverage Structure
First 3 months: Salary is paid directly by the employer
From month 4 up to 2 years: Insurance covers up to 70% of the gross salary. This significantly reduces the employer cost after the initial period.
Premium
~1.50% of gross salary
Salary cap: EUR 125,000 annually
2. Disability Gap Insurance (Mandatory – Paid by Client)
Purpose
Protects the employee from a significant income drop in case of long-term disability.
Coverage
Prevents income falling to 70% of only the statutory minimum wage
Ensures additional income protection up to pensionable age
Premium
~0.26% of gross salary
Capped at applicable social security salary limit
3. Excedent Insurance (Optional – Paid by Client or Employee)
Purpose
Designed for higher earners whose salary exceeds the statutory social security cap.
Coverage
Covers income above the social wage cap
Provides up to 70% of excess income in case of long-term disability
Key Conditions
Can be paid by either employer OR employee (not both)
Choice must be consistent across employees
May be included in contracts even if current salary is below threshold
Premium
~2.29%
Applied to salary between:
Social security cap (~EUR 75,864)
Upper threshold (~EUR 285,914)
Key Takeaways
Sick pay insurance shifts cost from employer after first 3 months
Disability gap insurance protects employees from severe income drop
Excedent insurance is optional but important for higher earners
All structures are tied to Dutch statutory obligations
Source: Partner Case 00364537