A cap in the Dutch regulation on bonuses in the financial sector

In the Netherlands, the variable part of remuneration is not allowed to exceed 20% of the fixed remuneration. This is stricter than the 100% cap used elsewhere in the EU. The Dutch regulation on bonuses in the financial sector may affect decisions if and how to enter the Dutch market.

The relatively strict rules on bonuses may lead to higher labour costs, as bank and insurance companies may raise fixed salaries to offer a competitive remuneration. A higher fixed remuneration raises labour costs, as certain expenses are related to fixed and not to variable remuneration, such as pension contributions. The Dutch bonus policy for the financial sector can also lead to lower flexibility: bonuses are often linked to the financial performance of the institution, while fixed salaries are not. So higher fixed salaries are also potentially increasing the default risk of an institution, especially if the year-to-year profits are uncertain in the changing market environment.