Employment of a director-major shareholder clarified: employment contracts for director-major shareholders

DGA employment contract: contract between a private limited company (BV) and a director-major shareholder. Unlike a regular employee: a DGA is usually not subject to employee insurance contributions (no unemployment insurance, no disability insurance via the UWV), customary salary is mandatory (Art. 12a of the Wage Tax Act), and there are specific tax aspects regarding pensions. For an SME BV with a DGA, it is essential to document this correctly. Below are the differences compared to a regular employee and potential pitfalls.

The short answer

• What: employment contract between a BV and a director-major shareholder.
• Customary salary: minimum €56,000 (2024) or comparable market rate.
• Employee insurance:usually none (unemployment insurance, disability insurance, sickness insurance) — exception: shareholder < 5%.
• Pension: usually not via a regular collective scheme.
• Supplement to management agreement: often in combination with a management BV structure.

Who is a DGA?

Director-major shareholder: director of a private limited company with a substantial interest (≥ 5% of shares). In practice:

• Owner of own private limited company (100% shares).
• Co-owner of a private limited company (together 5%+ of shares).
• Family director of a family business.

In the case of multiple owners: assess per shareholder whether a director-major shareholder applies.

Customary wage (Art. 12a Wage Tax Act)

Director-major shareholder must receive a “customary salary” — at least:

• €56,000 (2024) — statutory minimum, or
• Highest employee salary in a BV, or
• 75% of the salary for a comparable position elsewhere.

Salary too low: Tax and Customs Administration corrects additional income tax assessment. Reason: otherwise, the director/major shareholder would distribute everything as a dividend (taxed at a lower rate).

Salary too high: additional income tax burden without corporate tax benefit.

Employee insurance

Not standard for Director-Major Shareholder:

• No unemployment benefits: director/major shareholder cannot dismiss themselves to qualify for unemployment benefits.
• No WIA: no UWV benefit in case of incapacity for work.
• sickness benefit: no sickness benefit upon departure.

Well:

• Health Insurance Act contribution (Health Insurance Act).
• State pension (national insurance).
• ANW (national insurance).

Exception: Director-major shareholder with < 5% of shares is covered by employee insurance (rare for SMEs).

Pension for Director-Major Shareholders

Since 2017: self-administered pension schemes abolished. Routes:

• Annuity: build up with a bank/insurer.
• Voluntary affiliation with an industry-wide pension fund:for certain sectors.
• Personal pension account: via PPI or insurer.
• Investing in your own BV: retaining current profit instead of distributing it.

For director-major shareholder: tailored solutions depending on age, BV position, and tax planning.

Content of the Director-Major Shareholder employment contract

1. Parties: BV and Director-Major Shareholder.
2. Position: Director, powers.
3. Start of employment: date.
4. Salary: customary wage, holiday allowance.
5. Allowances: company car, telephone, internet.
6. Insurance: group accidents, supplementary coverage, etc.
7. Holidays: days per year.
8. Sickness benefit scheme:continued payment (no WIA benefit).
9. Confidentiality: trade secrets.
10. Non-compete clause:during and after employment.
11. Notice period: statutory minimum or longer.

Combination with management company

Many director-major shareholders work via a management BV structure:

• DGA employment contract between Management BV and the DGA personally.
• Management agreement between Management BV and operating company.
• Benefits: VAT deduction, flexible income planning.

Requires proper tax setup.

Honest recommendation

For Director-Major Shareholders (DGA): combine employment contract (standard salary) with dividend planning for an optimal income strategy. Arrange pension separately (annuity or investing in a BV). Disability insurance (AOV) is important — no WIA protection. If in doubt about the correct structure: consult a tax advisor + legal expert (€2,500-€7,500 for setup). For DGAs experiencing growth: evaluate annually.

For other topics: management agreement, borrowing from own BV and substantial interest.

Frequently Asked Questions