The national “holiday allowance” is an additional sum of money that most workers employed in the Netherlands receive in May or June. Under the Dutch Labour Law, employees in the Netherlands are entitled to a holiday allowance, which is referred to as ‘Vakantiegeld’ in Dutch.
The Dutch holiday allowance often comes as a nice, unexpected perk to expats new to the Netherlands. But to those who have lived and worked in Holland for years, the additional 8% holiday allowance is an essential expectation.
If you’re unfamiliar with the concept, this blog will explain everything you need to know about the Dutch holiday allowance.
The history of holiday allowance
In the Netherlands, we “work to live” instead of “living to work”. Nothing exemplifies this better than the existence of “vakantiegeld.”
The holiday allowance was introduced in the Netherlands in the 1920s to encourage workers to take vacations. It used to function as a type of paid leave. In the past, vacation trips were extravagant, so in the 1960s it became an extra payment on top of the salary.
The idea for this incentive to be paid in May is to encourage employees to plan a trip during the Summer – supporting employee’s work/life balance. The idea is that employees who maintain a healthy work/life balance are happier, healthier, and less likely to miss work.
Although vacation money is granted as an extra reason to enjoy time off work, it is up to your employees to decide how to use the time.
What is the “holiday allowance” (vakantiegeld)
Think of the holiday allowance as the Dutch answer to “pocket money” for adults. As a child, you received an allowance from your parents for fun things you wouldn’t otherwise be able to afford. In Holland, most workers are paid that “pocket money” by their employers instead of their parents.
As a rule of thumb, the holiday allowance amounts to 8% of an employees’ yearly gross salary. So if an employee earns around €50.000,- euro’s gross per year, you can expect to receive an estimation of €4000,- euro’s gross (before taxes) per full worked year.
Update: As of January 2020, employers will be required to pay a slightly higher holiday allowance for workers employed on a temporary basis.
Tracking vacation in The Netherlands
Full-time employees are entitled by Dutch law to a minimum of 20 days of paid leave in a year. This Holiday Allowance serves as your “budget” to cover all those paid days. The average of holiday day in the Netherlands by companies is around 25 days.
In your bookkeeping, it’s important to track the difference between these different types of paid leave. The different types of paid leave (leave due to illness, legal minimum, company offered, etc) can make knowing how many vacation days your employees have generated over time very complicated.
The “legal minimum” of paid days usually expires 1 year and 6 months after the Holiday Allowance is paid. Any additional days your business chooses to honor outside of these 20 days by law can usually be claimed up to 5 years in the future.
Vacation days cannot be exchanged for monetary compensation in the Netherlands. That’s why it’s especially important for employers to carefully track how the holidays are used, and to prioritize the first 20 “legal minimum” vacation days in your bookkeeping.
When is the holiday allowance paid?
Typically, holiday allowance is paid out once per year as a lump sum during the month of May. Since the idea behind the allowance was to provide employees with funds to finance their vacation, this tradition began. Nowadays, employees and employers may agree to have holiday allowances paid out every month instead – resulting in a higher net salary per month.
If the employment contract is terminated before May, the accumulated vacation allowance is still included in the last salary payment.
Is everyone entitled to the holiday allowance?
It is mandatory for employers to grant the holiday allowance to their employees, but only employees who use their holidays properly are entitled to use it. There are also extraordinary situations where an employee may not be entitled to this allowance. For example:
- Freelancer ZZP’ers (zelfstandige zonder personnel) are self-employed individuals or entrepreneurs who are not committed to long-term employers. Therefore, their work and holiday arrangements are set on their own terms, which holiday allowance is not naturally applicable.
- In the Netherlands, there is no obligation for companies to pay for internships. However, it is common for Dutch employers to offer some form of compensation ranging from 100 to 500 euros per month or more. Vacation allowance is not expected if you do an internship.
- Employees must use their holidays within 6 months after the year they received their holiday allowance. Otherwise, the allowance will expire.
- If the employee’s earnings are triple the Dutch minimum wage, the vacation pay may be reduced or eliminated. It very much depends on the agreement between the employee and the employer in the labor contract.