Change in minimum wage & waive deducting wage tax

Minimum wage change

As of July 1, 2024, the Ministry of Social Affairs and Employment has increased the statutory minimum wage on Bonaire, St. Eustatius and Saba by 11.4 percent, 12.6 percent and 5.8 percent respectively. The minimum wage on all three islands is therefore USD 1,750.00 gross per month for a 40-hour working week.

The statutory minimum hourly wage for an employee aged 21 and above is therefore USD 10.10 gross per hour as of July 1, 2024. Where previously there were differences per island, the minimum hourly wage has been equalized on all three islands as of the date mentioned.

For employees under the age of 21, the statutory minimum hourly wage depends on age and amounts respectively (gross per hour):
20 years – USD 9.09
19 years – USD 8.58
18 years – USD 7.57 and
16/17 years – USD 6.56.

Waive deducting wage tax

The tax-free allowance and the minimum wage are linked, and the aim is to ensure that the increase in the minimum wage implemented in 2024 will not be partially skimmed off from a fiscal perspective.

Based on the LB BES Act, the wage tax to be deducted is determined by means of wage tax tables. In these wage tax tables, the annual tax-free sum is divided proportionally over the periods. For an employee who earns the minimum wage throughout the year (and therefore the increased minimum wage as of July 1, 2024), the application of the wage tax tables means that part of the tax-free sum remains unused in the first half of the year, while in the second half of the year, wage tax must be deducted from the minimum wage. This deduction concerns a few dollars per month.

In the attached article no. 24267 of the Government Gazette you can read that under special conditions employers can choose not to deduct wage tax or to refund it in such cases. Below are some parts in italics from the accompanying article.

1. Approval

Under the following conditions, I approve that employers may waive the deduction of wage tax with regard to certain employees.

2. Conditions

The following 3 conditions apply to this approval:

10. a) The minimum wage of USD 10.10 per hour has been agreed with the employee.
    b) The number of hours to be paid is a maximum of 40 hours per week or the equivalent calculated based on the applicable wage period.
    c) The employee is entitled to the tax-free amount and redeems it against the employer within the meaning of Article 8, paragraph 2, of the LB BES Act.

For the sake of completeness, I note that this approval relates to the deduction of wage tax and does not apply to income tax. If unexpectedly wage tax is deducted with an employee who meets the above conditions, the Inspector of the Tax Authority will cooperate in a refund upon request.

3. Entry into force and expiry date

This decision enters into force on the day after the date of issue of the Government Gazette in which it is published and has retroactive effect until July 1, 2024.

How do we adjust wage tax in Celery?

In Celery, according to the monthly tax table, USD 6.08 of wage tax is indeed deducted from the minimum wage, but in view of the attached decision in the Government Gazette, the employer may therefore waive the deduction of wage tax in the relevant wage calculations.

Since being able to waive the deduction of wage tax is not a legal obligation, Celery will not automatically waive the deduction of wage tax, but employers can ‘return’ the deducted wage tax in the same payroll calculation as a manual change by adding existing Celery wage code 626 ‘Wage tax restitution’, see the pay slip above here.

The amounts of wage tax refunded on wage code 626 will also be deducted from the wage tax in all existing Celery reports, including the periodic Wage Tax Return and the Annual Statement and Annual Collective Wage Statement, by applying this Celery code.

The above-mentioned option to waive the deduction of wage tax only applies to payments of the minimum wage. This is not applicable if the salary is more than the minimum wage or in the case of additional payments like overtime, commission, bonuses, etc.

Relevant attachment:

Staatscourant 24267 inzake minimumloon