Netherlands: The All-In Wage: Is It Allowed or Not?

Do you employ an on-call worker? Then you might make use of it: the all-in wage. This is salary that consists not only of the basic hourly wage, but also the holiday allowance and an allowance for holiday hours. There is a lot of discussion about the all-in wage, especially in the light of European and Dutch holiday legislation. In this blog, I will take a closer look at the ins and outs of the all-in salary and explain this subject further on the basis of a recent judgment of the Supreme Court.

Why is there a discussion about the all-in wage?

The discussion is not so much about the payment of the holiday pay. The law stipulates that holiday pay may be paid monthly, provided that this has been agreed in writing between the parties. The discussion about the all-in salary mainly concerns the discounting of the entitlement to paid holiday with the salary. Why?

The right to paid holidays

Legally, all employees – including on-call workers – are entitled to paid holidays. This right is enshrined in European legislation. According to the Court of Justice of the European Union (CJEU), this right should be considered ‘a particularly important principle of Union social law‘. It is not allowed to deviate from this just like that.

According to settled European case-law, the right to paid annual leave is intended to place the worker in a situation comparable in terms of remuneration to periods of work during his leave. In this way, the employee is able to actually take the holiday to which he is entitled.

The on-call worker

With an on-call worker, who usually receives an all-in wage. This means that the holiday hours are included in the hourly wage. As a result, the on-call worker does not receive any salary during holidays. As a result, there is less motivation for on-call workers to take holidays.

In practice, the all-in wage is widely used. The question, however, is whether that is legally permitted.

Transparency requirement

In a recent ruling, the Supreme Court explains the all-in wage as follows:

“According to the CJEU, Article 7 of the Working Time Directive does not, in principle, preclude amounts paid, together with the remuneration for work performed, in a transparent and comprehensible manner as remuneration for the minimum annual leave in the form of allowances in instalments, spread over the working year in question, from being set off against the remuneration for a particular holiday that the employee actually takes.”

This means that an all-in salary is allowed, as long as it is stated in a transparent and clear manner which part of the salary relates to the basic salary, and which part relates to the payment of holidays and holiday allowance. In addition, an all-in salary may not lead to the employee actually being unable or unwilling to take a holiday.

In this judgment, the employees’ wages depended in part on the turnover they generated, discouraging them from going on holiday. After all, the employees earned more if they continued to work. The Supreme Court ruled that this was in violation of the right to paid vacation.

Consequences of unclear breakdown of wages

If it is not clearly specified which part of the salary relates to the basic salary, holidays or holiday allowance, there is a risk that the all-in salary is not legally valid. If an employer does not clearly determine which part of the salary is intended as compensation for holidays, the employee may assume that the salary does not include compensation for holidays. In that case, the employee retains the right to a separate payment of wages for the accrued holidays. This can lead to the employer eventually having to pay “double”.

Tips for practice

In short, the all-in wage is allowed, but only under strict conditions. Please note the following:

• Write clearly how the all-in salary is structured, both in the employment contract and on the payslip.
• If a collective labor agreement applies, check what the collective labor agreement says about the all-in wage.
• Make sure that the on-call worker actually takes vacation.

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

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

Disclaimer: Transatlantic Law International Limited is a UK registered limited liability company providing international business and legal solutions through its own resources and the expertise of over 105 affiliated independent law firms in over 95 countries worldwide. This article is for background information only and provided in the context of the applicable law when published and does not constitute legal advice and cannot be relied on as such for any matter. Legal advice may be provided subject to the retention of Transatlantic Law International Limited’s services and its governing terms and conditions of service. Transatlantic Law International Limited, based at 84 Brook Street, London W1K 5EH, United Kingdom, is registered with Companies House, Reg Nr. 361484, with its registered address at 83 Cambridge Street, London SW1V 4PS, United Kingdom.