Are outplacement costs tax-deductible in the Netherlands?

In the Netherlands, outplacement costs are usually tax-deductible for employers as normal business expenses when they are linked to dismissal, redundancy or reintegration. For employees, individually paid outplacement costs are in most cases no longer deductible in personal income tax. This article explains the main principles in clear language and connects them to typical Dutch HR and dismissal situations.

How outplacement works and who usually pays

Outplacement is professional guidance towards a new job or career after (impending) dismissal. A programme often combines career coaching, labour market orientation, application training and sometimes retraining. Dutch employers use outplacement frequently in reorganisations, redundancy situations or when parties separate through a settlement agreement.

In most cases the employer pays for the programme. Sometimes this is part of a social plan, sometimes the result of individual negotiations with the employee. A provider like Care4Careers supports both the organisation and the employee in structuring a realistic and effective programme.

• Outplacement supports the transition to new work after dismissal.
• Employers are in most cases the paying party.
• For employers, costs are usually deductible business expenses.
• For employees, individual tax deduction is very limited.

Tax position of employers

According to Dutch tax rules, employers may deduct costs that are made for running the business, including personnel and restructuring expenses. Outplacement costs fall in this category when they are clearly connected to dismissal, redundancy or reintegration. The invoice from the provider is booked as personnel, training or restructuring costs and is normally fully deductible from taxable profit.

This applies to individual programmes as well as to group programmes during reorganisations. It also covers situations where outplacement is part of a wider package that combines transition payment, notice period and guidance. For many employers, this tax treatment lowers the threshold to structurally offer outplacement in sensitive HR transitions.

• Outplacement is treated as a normal business expense.
• Invoices are booked as personnel or restructuring costs.
• Both individual and group programmes are deductible.
• Clear documentation of the link with dismissal is helpful.

Tax position of employees

For employees, the tax situation is different. Individually paid outplacement, for example from private funds or from a net part of a severance payment, is in practice no longer deductible as a personal expense. The Dutch Tax and Customs Administration generally does not treat these costs as deductible training expenses for employees.

This means that an employee who pays an outplacement programme from their own resources bears the full net costs. There is no individual tax relief that compensates for part of the investment. From a financial and tax perspective, it is therefore usually more favourable when the employer directly pays the outplacement provider.

• Privately paid outplacement is no longer deductible for employees.
• Paying from a transition payment does not create a tax deduction.
• The full costs remain for the employee on a net basis.
• Direct payment by the employer is usually more efficient.

Transition payment and outplacement: structuring the package

The Dutch transition payment is a statutory severance that employers owe in many dismissal situations. For the employee it is taxable income. If an employee uses part of this payment to finance outplacement, the full transition payment is taxed, while the outplacement costs themselves are not deductible in income tax.

A more favourable solution is often that the employer pays the outplacement provider directly and pays the remaining part of the transition payment in cash to the employee. In that case, the employer can deduct the full outplacement invoice as a business expense, while the employee receives a net transition payment and guidance without having to pay the programme from already taxed income.

• The transition payment is taxable income for the employee.
• Using it for outplacement does not create a personal tax deduction.
• Direct payment by the employer is often more tax-efficient.
• Good structuring should be laid down in the settlement agreement.

Settlement agreement (VSO) and outplacement arrangements

In many Dutch dismissal cases, parties use a settlement agreement (vaststellingsovereenkomst, VSO). This contract records the end date, financial arrangements and any guidance such as outplacement. From a tax and HR perspective, it is sensible to describe the outplacement arrangements as concretely as possible.

Typical elements are: which provider will be used, what budget is available, who will be the contracting party and how long the programme will last. If the employer is the contracting party and pays the invoice directly, the tax treatment is usually the most straightforward. The employee then receives a net transition payment and guidance that is not taxed as additional salary.

• Record outplacement clearly in the settlement agreement.
• Let the employer be the contracting and paying party.
• Specify budget, duration and provider.
• Align financial and tax aspects with the overall dismissal package.

Outplacement in dismissal and long-term sickness situations

Outplacement is often used in reorganisations and redundancy situations, but it can also play a role in long-term sickness. Dutch employers have a legal reintegration duty for employees on sick leave. When return to the original job is no longer realistic, guidance towards other work, sometimes outside the current employer, can become necessary.

In such cases, employers may combine reintegration activities with an outplacement programme, for example when it becomes clear that sustainable return within the organisation is not feasible. The associated costs are usually treated as normal business expenses, similar to regular reintegration costs. Programmes such as outplacement linked to long-term sickness or outplacement after burnout fit within this framework.

• Outplacement can support reintegration after long-term sickness.
• Costs are normally deductible for the employer.
• They are treated similarly to other reintegration expenses.
• Good coordination with HR and occupational health services is essential.

Key takeaway: who should ideally pay for outplacement?

From a Dutch tax and HR perspective, it is usually most efficient when the employer pays for outplacement directly. The employer can deduct the costs from taxable profit, while the employee receives guidance without having to finance it from taxed income. Individual tax deduction for employees is in practice no longer available.

When negotiating a dismissal package, both parties benefit from looking beyond the gross amount of the transition payment. A well-designed combination of cash compensation and a structured outplacement programme often leads to a better net outcome and a smoother transition to new work.