The value of a vacation day is important when holidays are taken and when they are paid out (whether or not at the end of the employment). During vacation, an employee is entitled to his usual wage. In practice, it is not always clear what constitutes as usual wage. In this blog we explain what is included in the so-called ‘holiday pay’.
Vacation with continued payment of salary
The general principle is that an employee must receive wage during his vacation that is comparable to the wage for periods in which work is performed. The employee may not suffer any (postponed) financial disadvantage for taking holidays.
The holiday pay
The wage that an employee must receive during his/her vacation or when the vacation days are paid out, consists of (i) the basic wage and (ii) all components that are intrinsically linked to the work of the employee and for which he receives financial compensation. Occasional and additional costs (such as pure (expense) allowances) incurred by the employee in the performance of his work do not form part of the holiday pay. It is ultimately up to the (national) judge to determine whether an intrinsic link exists between the wage component and the work of the employee.
Case law shows that the following wage components belong to the holiday pay:
- The fixed salary;
- A holiday allowance, fixed thirteenth month and fixed year-end bonus;
- A bonus that depends on the performance of the employee, both individually and as part of a team (such as a commission);
- A bonus that depends on the company’s results, provided that the employee also receives this bonus for periods that he does not work (such as a profit share);
- An overtime allowance, provided that (i) the overtime worked results from an obligation under the employment contract, (ii) the employee works the overtime on a regular basis and (iii) the allowance is a significant component of the total allowance;
- Irregularity allowance and evening, night and/or weekend allowance;
- Shift allowance, structural operational allowance and on-call allowance;
- Employer’s share of the pension premium*.
Case law also shows that the following components are not part of the holiday pay: (i) a travel and expense allowance and (ii) a lease car that is driven privately. A car allowance, however, is included in the holiday pay.
Statutory and non-statutory vacation days; atv-days
Dutch law makes no distinction between statutory and non-statutory vacation days. Both vacation days have the same value. However, atv-days (days off in connection with the reduction in working hours) are not considered to be vacation days. The value of atv-days depends on what parties have agreed upon.
To determine the value of a wage component, case law usually uses an average period. To determine this period, case law uses a so-called reference period, which varies from three to six years.
Holiday pay and illness
Although an employee may receive (only) 70% of his regular salary during illness, an sick employee must receive 100% of his/her salary during the vacation. This also applies to the payment of vacation days accrued (during illness).
Key Action Points for Human Resources and In-house Counsel
Case law on this component is inconsistent. For case law in which it was ruled that the employer’s share of the pension premium is not part of the holiday pay, we refer to the article in the Advocatenblad “Wat is een vakantiedag waard?” (only in Dutch). In our opinion, however, this wage component should be considered part of the holiday pay, because the pension premium is paid during the vacation period.