What is the Dutch holiday allowance — and how do you get the cash?

If you are employed in the Netherlands then you are required to contribute a portion of your wages towards your vakantiegeld (holiday allowance.) Sounds like a snoozefest, right? Well, not if it’s May. 

Let’s break down that word: vakantiegeld or vacation money. Sounds like a dream, right? So, what is it exactly, why do we have to contribute to it — and what does it do for us?

What is the Dutch Holiday Allowance?

Dutch Holiday allowance is a mandatory payment by employers of an extra wage to their employees. As of January 2020, the standard rate is a minimum of 8% of your total wage or 8.33% for temporary workers.

READ MORE: Wages in the Netherlands: the 2020 guide to Dutch salaries

A Collective Bargaining Agreement (CAO) is operated by most work sectors, which is applicable to employment contracts (check yours with your employer.) The CAO contains agreements between the employers and the trade union within your sector who represent the employees and can affect your holiday pay entitlements.

What’s the history behind the Dutch Holiday Allowance?

Holiday allowance was introduced originally in the 1920s as a way for employers to give their employees an incentive to go on holiday. However, it wasn’t really until the 1960s that workers were able to afford lavish holidays abroad and that is when the summer holiday really took off.

The idea was that employees would receive this salary in May, so holidays could be planned for their summer leave with the money that had already been put aside and saved. So holiday pay is typically still paid in May and should appear on your payslip.

It has been coined as the 13th-month salary, as it is an extra months payment on top of your yearly wage. Any changes to that are usually agreed prior between each individual employer/employee.

Side note: Although it is common to receive holiday allowance in May, some employers spread it out throughout the year. Always check your contract/employment agreement for any details regarding your holiday allowance and annual leave days and discuss them with your employer.

How many days off do I get off a year in the Netherlands?

Legally you receive a minimum of 20 vakantie days per year. However, some employers honour up to 25 days paid leave in the Netherlands. On top of that, you get around 10 public holidays each year — but this varies from region to region.

READ MORE: Vacation, Free Time and Working Hours in The Netherlands: All You Need to Know

So, why do we have to pay vakantiegeld?

Since 2018, the employer also has to pay the minimum wage on average for overtime. This means that he also has to pay holiday pay for these extra hours. Holiday pay is calculated on the full value of the overtime (including the possible overtime bonus).

The employee contributes a monthly amount deducted from their salary and the employer may also make a contribution. As you accrue holiday throughout the year this is then given back to you in May as a holiday payment. It is paid on top of your yearly salary. Think of it as pocket money for adults.

How is it Dutch vakantiegeld calculated?

Everything is based on that magic number of 8%. So, in the simplest terms your holiday allowance will be 8% of your yearly salary.

Now if that’s not an incentive to start planning your all-inclusive holiday to the Bahamas I don’t know what is?

Does everybody receive it?

In a word – No. Depending on your type of employment, you may not qualify for holiday allowance. For example:

• If you are a freelancer ZZP’er (zelfstandige zonder personnel): Naturally you do not get paid holiday allowance as you are your own boss and the employee (lucky you, or — perhaps not). You set your own terms, so I guess if you really wanted to you could take as many or as few holiday days as you feel works for you.
• If you are on an internship: Internships are generally not paid in the Netherlands. Some employers will subsidise their intern with a payment of between 100 and 500 euros. So, it follows that when it comes to holiday as an intern, do not expect an allowance.
• If you earn more than three times the Dutch minimum salary: Then holiday allowance may be reduced or even eliminated. As your holiday allowance is paid by your employer this should all be agreed upon and outlined in your contract with them.

What happens to my Holiday Allowance if I quit my job before May?

If you terminate your employment with a company before May, the accumulated vacation money will be paid within your last salary payment or the following month. So have no fear, you can quit and still have your allowance to go on that planned trip.

Is vakantiegeld taxed?

I’m sorry to say it is. Remember when I said it’s like pocket money? Well it’s true. But think of it as Uncle Pim wants a teeny tiny cut of your lemonade profits. Sorry, that’s just how it goes.

How long do I have to take a holiday?

Your holiday days should be taken within six months of receiving your holiday allowance. If not, these will lapse without any compensation. So use the time wisely. Just a note: your holiday days and your vakantiegeld is separate — but most people use their vakantiegeld for their holiday.

Side note: You cannot swap holiday days for more pay. You are always entitled to take those days off. You can, however, trade in holidays days for sick leave if you are sick (see below).

I’m sick and I have a holiday booked!

If you are sick and unable to take your pre-booked holiday, your holiday entitlement will not lapse. If you inform your employer immediately then you can have the sick days logged sick leave and then use your holiday at a later date (just don’t abuse this system guys —not cool!). The accrual of your holiday allowance also continues and you will be paid for holidays accrued during your sickness.

Do I have to spend it on a holiday?

No, you don’t. It is your money and you are free to do with it as you wish. The idea is that if you did want to take a holiday in the summer months then you would have your “13th month” salary to cover it rather than having to spend time saving up the money.

It’s already there for whatever you want. If you want to spend it renovating your house, doing up the garden, or as a payment on some new wheels that is entirely up to you.

With the pandemic likely putting a dampener on many holiday plans this year, what will you spend yours on?

Feature Image: Jess Bailey/Unsplash