Holiday allowance and minimum wage to be due in respect of earnings from overtime starting 1 January 2018

Date: 8 December 2017

From 1 January 2018 onwards employers must pay the minimum wage for overtime. Employers will also be obliged to pay holiday allowance in respect of overtime. Until 2018 'earnings from overtime' are still excepted from the definition of 'wage' under the Minimum Wage and Minimum Holiday Allowance Act. This means that no minimum wage nor holiday allowance are owed in respect of overtime work. This exception ends with effect from 1 January 2018.

This means that, as from 1 January 2018, employees are not only entitled to minimum wage in respect of their earnings from overtime, but also to holiday allowance in respect of their full overtime wage. The overtime wage may consist of the hourly wage, whether fixed or not, and an overtime allowance. 

Taking time off for overtime
The alternative to paying out the overtime, is to have an employee take time off for this overtime. In 2018, it will still be possible to come to a written agreement with the employee that overtime will not be paid out but that the employee must take paid time off on an equivalent time basis. With effect from 2018 the time off for overtime must also be taken before the 1st of July of the year following the calendar year in which the hours arose. If this is not the case, the overtime will be paid out. After 2018, paid time off for overtime may only be taken if this has been agreed upon in a collective agreement. If this is not the case, or if no collective agreement applies, the overtime must be paid out in the first following month.

It may be stipulated in employment contracts that overtime is considered to be included in the wage. Such a provision will still be allowed as from 2018 provided that at least the minimum wage is paid for the actual hours spent working. 

Please note: no transitional arrangement
The legislative change has immediate effect: no transitional law has been created. This means that after the 1st of January 2018 an employer will also have to pay holiday allowance in respect of the overtime that was performed prior to the 1st of January 2018, but is paid out after 1 January 2018. Employers who wish to avoid being obliged to pay holiday allowance in respect of overtime performed prior to 1 January 2018 have two options: they can pay out the overtime before the turn of the year or make sure that the employee will take time off for this overtime. 

This is a Legal Update from Linda van der Vaart. Click here for pdf. 

For more information:

Linda van der Vaart
+31 30 259 5552