The Dutch government have finalised plans that will see working parents in the Netherlands benefit from a higher childcare allowance next year. From January 1, 2025, average-income households with children will save up to 1.000 euros for the year.

Childcare allowance in the Netherlands to increase in 2025

At the beginning of October, the Dutch Ministry of Social Affairs and Employment announced that it would make 429 million euros available next year to increase the childcare allowance. According to NU.nl, this brings the Netherlands one step closer to achieving the goal of making childcare almost free that the government wants to implement by 2027. 

Working parents who earn an income between around 29.400 euros and 159.200 euros will get some financial relief from January 1, 2025. Currently, the maximum hourly rate that the government will provide compensation for is 10,25 euros. From the beginning of next year, this will increase to 10,71 euros. Based on an example given by the ministry, a household with an income of 63.100 euros will receive 994 euros extra with the higher allowance. This will give parents 1,5 percent more disposable income.

Higher percentage of childcare costs covered by Dutch government

In the Netherlands, parents can claim compensation for childcare after they have already covered the cost themselves. How much of a family’s childcare costs that the government will cover with the benefit is determined by the number of children in childcare, the type of childcare and the parents' taxable income. 

For example, in 2024 a household that earns 45.000 euros per year with one child in daycare will get 87,3 percent of the costs back. With the increase in the allowance from next year, families like this who earn up to 47.404 euros will get 96 percent back, while households that earn more will receive a smaller percentage of the costs back. 

Increased childcare allowance not advantage for all parents

With the high costs of childcare often costing more than the government allowance, many parents will often work fewer days at their jobs to avoid paying for more days of childcare. "If ten extra children go to childcare because of a higher allowance, roughly two extra mothers will go to work," Thomas van Huizen, economist at Utrecht University told NU.nl. This shows that parents won’t necessarily go to work more often if childcare is more affordable.

It could also make childcare more expensive as more parents send their children to daycare more often. The staff shortage in the sector could put a strain on employees which means they can ask for higher salaries. "If there is more demand for care, care organisations can ask for more money," suggested Van Huizen. This would actually make childcare even more unaffordable for lower-income families.

The plans to freeze the hourly rates from 2026 could also see parents paying more out of pocket as the allowance will be based on the frozen rates but childcare centres can charge increasingly higher amounts.