The work-related costs scheme: checks, mistakes and a checklist for your firm
The 2026 discretionary scope, the four-step test and the mistakes you meet in practice. Including the changes announced for 2027.
The short answer
You test the Dutch work-related costs scheme (werkkostenregeling, WKR) in four steps: is the allowance or benefit wages, does it fall under an exemption or a targeted exemption, has it been designated as final levy wages, and does the total fit within the discretionary scope.
For 2026 the discretionary scope is 2.00% of the taxable wage bill up to and including € 400,000 and 1.18% above that. Over the amount exceeding the discretionary scope, the employer pays an 80% final levy.
The government has announced changes for 2027 that you should flag to clients this autumn. The separate exemption for staff discounts on the employer's own products, currently a maximum of € 500 per year at a discount of no more than 20%, would lapse on 1 January 2027 and be absorbed into the discretionary scope. Decision-making on further simplifications, including scrapping the first bracket, is still to follow. So treat these points as intended policy until the legislation is final.
What the WKR governs
The WKR determines how you treat allowances, benefits in kind and provisions made available to employees. Instead of determining per allowance whether it is taxable, you designate allowances as final levy wages and keep a collective budget: the discretionary scope. What fits inside it is untaxed for the employee. What does not fit costs the employer a final levy.
Alongside the discretionary scope there are targeted exemptions (for example for travel costs, training and certain workplace facilities), nil valuations for facilities at the workplace, and items that are not wages at all.
The 2026 discretionary scope and the final levy
| Item | 2026 | From 2027 |
|---|---|---|
| Discretionary scope up to € 400,000 of taxable wage bill | 2.00% | Intended: 2.16% |
| Discretionary scope above € 400,000 | 1.18% | 1.18% |
| Final levy on the amount above the discretionary scope | 80% | 80% |
| Separate exemption for staff discount | € 500 per year, maximum 20% discount | Intended: lapses and falls under the discretionary scope |
A worked example with a taxable wage bill of € 600,000 in 2026: 2.00% of € 400,000 is € 8,000, plus 1.18% of € 200,000 is € 2,360. The discretionary scope is then € 10,360. If the employer designates € 12,000 as final levy wages, € 1,640 is excessive and costs an 80% final levy, so € 1,312.
Mind the calculation basis: the discretionary scope is calculated on the taxable wage bill of the year itself. So work with a forecast and a definitive calculation after the year, not with last year's wage bill.
The four-step test
Step 1: is it wages?
Anything an employee receives from the employment relationship is wages in principle. A benefit unrelated to the employment falls outside the WKR, for example a funeral wreath or a personal token in exceptional circumstances. That boundary is narrower than employers assume.
Step 2: is there an exemption or nil valuation?
Workplace facilities such as an office chair and coffee at the office are valued at nil. Targeted exemptions apply to travel costs, training, relocation and a few other items, each with its own conditions and sometimes a maximum per kilometre or per period.
For tools, computers and phones the necessity criterion applies: if, in the employer's reasonable judgement, the facility is necessary for the proper performance of the job, it is untaxed. The employer bears the cost of what is necessary. If the employee chooses a more expensive version without a business need, an employee contribution for that extra cost may be possible. If the facility is no longer needed, the employee must return it or reimburse the residual value.
Step 3: designating as final levy wages
What is not exempt, you designate as final levy wages and charge to the discretionary scope. If you do not, it is simply taxable wages for the employee, with payroll taxes and consequences for their net pay.
Designation must happen no later than the moment of the allowance or benefit. Repairing it afterwards can cause problems, so this is exactly the moment to have new allowance types assessed rather than letting them run on.
Step 4: does it fit in the discretionary scope?
Track the designated final levy wages during the year, not only in January. Then you can still adjust course, for example for a staff event planned in December.
What is expected to change from 2027
Two changes to discuss with clients now:
The staff discount would, under the announced plan, no longer have its own exemption. Employers who structurally give a discount on their own products would have to charge it to the discretionary scope from 2027. If it does not fit and the discount is part of the employment terms or a collective agreement, the employer may face a choice: adjust the employment term or pay an 80% final levy on the excessive part.
The discretionary scope over the first € 400,000 would rise to 2.16% under the announced plan. That would soften the effect for smaller employers, but not necessarily for employers with a high wage bill.
The government is also examining further simplifications, including scrapping the first bracket of the discretionary scope. A decision on that is due in August 2026; check the state of play before advising clients about 2027.
Ten mistakes you meet in practice
- An allowance paid gross while it could have fallen under a targeted exemption.
- Not designated as final levy wages, so an allowance became taxable wages for the employee after all.
- The discretionary scope calculated on last year's wage bill instead of the current year.
- Applying the group scheme without testing the conditions where there are several companies.
- A staff party at an external venue treated as a workplace facility.
- Christmas hampers not included in the designated final levy wages.
- An employee contribution not split out, while only a non-necessary extra cost can be charged to the employee.
- A travel allowance above the exempt amount without splitting it into an exempt and an excessive part.
- The final levy not processed in the return, or processed in the wrong period.
- The final levy not processed in the annual report, so the payroll liability does not reconcile, see Preparing corporate income tax.
The annual WKR check
- Determine the taxable wage bill for the year and calculate the discretionary scope.
- Put all allowances and benefits on one list, including those paid outside the payroll administration.
- Test per item: wages, exemption, designated, within the discretionary scope.
- Check the items that often run outside the payroll administration: purchase invoices for staff outings, Christmas hampers, gift vouchers, gym memberships.
- Calculate the designated total and compare it with the discretionary scope.
- Determine the final levy and process it in the return for the correct period.
- Post the final levy in the books and reconcile it with the payroll journal entry.
- Record the calculation and the assessment per item in the file.
- Discuss the outcome with the employer, including what could be done differently next year.
Step 4 produces most corrections in practice: expenses sitting on a cost account that never passed the payroll administration. A fixed check on those accounts during the monthly close prevents a surprise in January.
Agreements with the client
Make three things explicit: that new allowances are reported before payment, who tracks the discretionary scope during the year, and what happens if the budget is already full in November. Without those agreements the WKR check becomes a backward-looking exercise instead of an instrument for adjusting course.
Targeted exemptions: where the most room can be gained
An allowance covered by a targeted exemption is not charged to the discretionary scope. That is where the first gain sits, even before the question of whether the budget suffices. These categories occur at almost every employer.
| Category | Point of attention during the check |
|---|---|
| Travel costs and business kilometres | The exempt amount per kilometre and the substantiation of the distance travelled |
| Public transport and season tickets | Business use and the treatment of private use |
| Training and study | Aimed at income or at the role, and who bears the cost on departure |
| Relocation for work | The conditions and the maximum amount |
| Meals during overtime or business trips | Different from meals at the workplace, which have their own valuation |
| Tools, computers and phones | The necessity criterion; record the necessity and any employee contribution for a non-necessary extra cost |
| Occupational health facilities | Only what falls under health and safety policy, not every health-related allowance |
| Working-from-home allowance | A fixed amount per day, and not to be combined with a travel allowance for the same day |
Two practical checks: see whether allowances that could have been exempt were not pushed into the discretionary scope unnecessarily, and check that the excessive part of an allowance was actually split out rather than treated as exempt in full.
The group scheme with several companies
Employers with several private limited companies can, under conditions, apply the group scheme: the discretionary scope is then calculated on the combined wage bill and the excessive part may be declared by one of the companies.
That is attractive when one company has scope left over and another exceeds it, but it is not a free choice. Conditions apply to the interest the companies hold in each other and to the period the scheme covers, and the choice applies for the whole year. Test those conditions each year and record the test, because a group scheme that turns out not to be allowed means an additional assessment at several companies at once.
Next step
See how Giroo Payroll records allowances, tracks designated final levy wages during the year and reconciles the final levy with the payroll tax return.
Content reviewed: July 2026. Percentages, amounts and conditions change each year and the plans for 2027 are still in progress; verify amounts with the Tax Administration and have borderline cases assessed by a payroll or tax specialist.