Deloitte Alert – Overtime wage and holiday allowance
Consequences of the new Dutch Minimum Wage and Minimum Holiday Pay Act
As of 1 January 2018, new statutory Dutch legislation has entered into force with regard to the minimum wages and minimum holiday allowance (hereinafter: WMM).
24 April 2018
The following changes have been made to the WMM:
- Broader scope WMM: in certain circumstances, also people who are not working on the basis of an employment agreement are entitled to the statutory minimum wage (hereinafter: WML) and minimum holiday allowance.
- Piece wage: the WML and minimum holiday allowance will be calculated on the basis of the actual time that an employee has spent on the execution of the work performed and no longer on the basis of the time reasonably devoted to the execution of the work performed.
- Additional work/overtime: additional working hours must at least be paid at minimum (hourly) wages. Additional work means the hours that the employee works more than the normal working hours within the company (for example, 40 hours per week). It is therefore a more specified form of the concept of overtime.
Overtime: consequences and points of attention
The new legislation prescribes to pay at least the minimum wage for every hour an employee exceeds the agreed hours in the employment agreement or the normal/ regular working hours within the firm.
Another consequence of the new legislation is that this extra income of the employee need to be included in the base for the calculation of the holiday allowance.
Exceptions could apply in the following three situations:
- In case the employee earns a threefold of the statutory minimum wage. In this situation the wage that exceeds the threefold of the statutory minimum wage, will not have to be included in the base for calculating the holiday allowance. Company practice and contractual arrangements could make this different however.
- It is possible to agree in a collective labor agreement that no or less holiday allowance is due. Besides, in case the employee earns a threefold of the statutory minimum wage, it is also possible to make an exception by a written agreement with the employee. In this situation the agreement can also be that no, or less holiday allowance will be paid then statutory obliged. Therefore on should always check these documents.
- It is possible that the obligation to pay holiday allowance is excluded or reduced in a collective agreement (of social partners).
In all cases it is obliged to pay at least a yearly wage that corresponds with 108% of the statutory minimum wage.
Holiday allowance in international perspective
In the Netherlands the WMM is qualified as an overriding mandatory provision. This means that it applies to all employees who work in the Netherlands (both temporary on an assignment as permanent) and under circumstances to Dutch employees living in the Netherlands but working abroad.
Based on our information the common practice is often that holiday allowance is calculated over only the base salary. However, employees may be able to successfully claim holiday allowance on other remunerations up to five years. As from 1 January 2018 this includes also the remunerations based on overtime work.
We recommend to evaluate the current base for the calculation of the holiday allowance, including any collective labor agreements and any individual agreements with your employees. Please feel free to contact us to discuss your specific situation. If after this evaluation it is deemed necessary to adjust the holiday allowance in the payroll, then please let us know.