Netherlands Update: Overtime a Significant Part of your Salary? Then it is Probably Also Part of the Holiday Pay!

With the Christmas holidays just behind us, we would like to share a ruling from the Supreme Court on holiday pay. In this judgment, the Supreme Court answered the question of whether allowances for overtime worked count for the calculation of holiday pay. The holiday pay is the salary to which the employee is entitled during his holiday or when paying a remaining holiday balance at the end of employment.

The facts in the judgment

The employee has been employed by his employer as a crane operator since 1991. In 2019, he claimed payment of underpaid holiday pay for the period from 2013 to 2018, an amount of EUR 6,135.27 gross, in connection with overtime worked and allowances received in that period. The employer had not taken these remuneration components into account when paying salary during holidays. The Court of Appeal of The Hague upheld the employee’s claim. According to the Court of Appeal, the requirement that the overtime is an obligation of the employee arising from the employment contract has been met. According to the Court of Appeal, the overtime allowance therefore counts in the salary to which the employee is entitled during his holiday.

The Supreme Court

In cassation, the Supreme Court answered the question of when allowances for overtime worked count towards the calculation of holiday pay. According to the settled case law of the Court of Justice (Hein/Holzkamm judgment), the right to holiday pay requires that a worker be in a financially comparable position in terms of remuneration during his leave to that during periods of work, so that he is actually able to take leave.

The Court of Justice held in Hein/Holzkamm that overtime worked by the employee must be taken into account for the calculation of the holiday pay if three conditions are met:

• the overtime arises from obligations under the employment contract;
• the employee performs overtime on a regular and predictable or foreseeable basis;
• Overtime pay is an important part of the total compensation that the employee receives for his professional activity.

 
The Supreme Court ruled that the Court of Appeal of The Hague had failed to meet the first requirement by ruling that overtime should only be taken into account when determining holiday pay if the overtime is unilaterally imposed by the employer and is enforceable. According to the Supreme Court, the Court of Justice’s consideration should not be understood as meaning that overtime only counts when determining the holiday pay in the event that the employer can unilaterally impose and enforce the employee to work overtime. According to the Supreme Court, the Court of Justice’s consideration should be read as a whole: it refers to overtime that is part of the work that the employee usually performs in the performance of the employment contract and for which the remuneration forms a significant part of his salary.

The rule of law

It therefore follows from this judgment that, according to the first requirement from the Hein/Holzkamm judgment, the employee does not have to demonstrate that he was obliged to perform the overtime in order to include overtime allowances in the holiday pay. Instead, it must be assessed whether the work that the employee is required to perform under his employment contract requires him to perform overtime. In addition, the second and third requirements apply: that the overtime is performed regularly and concerns an important part of the salary.

Recent case law

Recently, the Court of Appeal of The Hague (ECLI:NL:GHDHA:2024:2307) ruled that an ‘important part of the total compensation‘ cannot be linked to a percentage, because a fixed percentage is not in line with the principle that a salary must be paid during holidays taken that is as close as possible to the salary paid during the period worked. This was in contrast to a judgment of the Court of Appeal of Den Bosch (ECLI:NL:GHSHE:2024:238) – from before the Supreme Court’s ruling – in which the Court of Appeal ruled that there was only an important part of the total compensation when there was 25% of the gross annual salary in remunerated overtime.

Has your employee just finished his/her Christmas holiday? Then take a good look at whether the correct salary has been paid.

By Hocker, Netherlands, a Transatlantic Law International Affiliated Firm. 

For further information or for any assistance please contact netherlands@transatlanticlaw.com

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