A reform of the way in which tax and insurance is deducted from employees’ salaries in the Netherlands has prompted the Dutch pension fund Pensioenfonds Horeca & Catering (PH&C) to introduce procedural and technological changes for calculating and collecting employer contributions. This project has earned the fund this year’s themed award for innovation.
The Dutch Tax Department and the Employees’ Insurance Institute (UWV) have recently combined in a joint initiative to deduct income tax and employee insurance premiums simultaneously from employee salaries. This uniform wage concept, Loonaangifte 2006 (Wage Return 2006), will be introduced next year.
Under the new arrangements, the Tax Department and UWV will set up a central administration system (Polisadministratie) to process employment data. Meanwhile, employers will submit a combined wage return for income tax and employee insurance, which will reduce their administrative costs.
PH&C is an industry-wide fund for employees in hotels, restaurants and cafes (Horeca) and catering. To prepare for the introduction of the Wage Return 2006 and of the Polisadministratie, the fund investigated ways to improve cost efficiency and reduce the administrative burden on employers. As a result, it took the decision to drop its existing advance payment system.
At present, employers pay contributions to the fund in advance. The invoiced amount is based on employment data from the previous year. Payments are then corrected and settled, depending on the actual salaries paid. This increases the administrative burden on employers and the fund.
In September 2004, PH&C launched its project to streamline procedures for calculating and collecting pension premiums under the Wage Return 2006, and using Polisadministratie data. The scope of the project is vast (40,000 employers and over 200,000 contributing members), so the target implementation date has been set as January 2007.
The goals were to bring the calculation and payment of premiums into line with Wage Return 2006, as well as to make employers’ administration of PH&C as accurate and easy as possible. It is also hoped to improve efficiency and services to pension fund members, while cutting costs.
A key feature of the Wage Return 2006 is to make employers responsible for the calculation and inward payment of payroll tax and social insurance premiums, based on actual payroll figures per declaration period (four weeks or one calendar month), using the progressive cumulative calculation method. Employers will also file a return containing collective and individual data, and deposit the premiums without waiting for invoices.
The new PH&C procedure ties in with this process. Employers will calculate pension premiums along with tax and social insurance premiums, based on the same calculation method and data. Every four weeks or calendar month, depending on the declaration period,they will send the money for the premiums of their own accord to PH&C. The fund will periodically verify the incoming payments against individual data from the central administration.
The new procedures will be supported by state-of-the-art technology for processing payments, debt collection and credit control. In addition, technology is to be used for providing administration and employment data to all employers, storing digital images of documents, which will be accessible via a high-speed access interface (paperless organisation), and supplying statistical data and integrated management information.

The new procedures and technology require major changes in business processes and workflow management. Employees will be trained to work with the newly-developed standard operating procedures and the new technology. An extensive awareness campaign has been launched to instruct employers and their accountants about the new procedures and the calculation method, and the impact of these on their payroll administration.
The pension fund says that the project will achieve the following results.
There will be a reduction in costs and improved efficiency for both PH&C and employers. Employers in the Dutch hotel, restaurant, bar and catering industries will be the first to benefit from the convenience of a single standard for the calculation and payment of payroll tax, social security contributions and pension premiums. They will also benefit from a single central administration (Tax Department) where employers can submit all collective and individual data, without the need to send data to PH&C.
The employers’ administration of PH&C will be as accurate, efficient and easy as possible by using more up-to-date data based on actual payroll figures, rather than estimates. This will result in faster and better services to employers and scheme members; faster availability of more accurate and comprehensive management information; better insight into coverage ratio and overall financial position; and improved risk control and cash flow management. The employers’ administration should also be made easier by the automatic settlement of payroll corrections over previous declaration periods.

In changing its own systems to bring them into line with the new Dutch system of tax collection, PH&C says it is the first and only Dutch pension fund to introduce several innovations.
First, it is streamlining premium calculations and payments to fit the public administrative system and Wage Return 2006. It is making it easier for employers to directly use the calculations from their own payroll administration for the payment of premiums. The fund will collect premiums without sending invoices to employers, which will instead send the money to PH&C of their own accord.
The fund will also introduce a progressive cumulative calculation to automatically settle wage corrections in previous declaration periods.
Furthermore, the fund will base its entire administration on the actual salaries paid and authentic public domain data (Polisadministratie).
All this should result in making the employers’ administration of PH&C as accurate, efficient and easy as possible, which will also give faster and better services to scheme members. In addition, the faster availability of more accurate and comprehensive management information to employers should lead to improved risk control and cash flow management.