Most people get their vacation pay (vakantiebijslag) around May, when the most popular vacation time is approaching. This has been the case in the Netherlands for the past 50 years. This is done so that people can use their vacation pay as intended. But more and more often employers pay vacation pay on a monthly basis.
This is possible, but only if it is stipulated in your employment contract. If the employer pays vacation pay in May, but wants to switch to monthly payments, he must first discuss this with the employee. The director cannot unilaterally change the contract.
The amount of vacation pay that an employee receives for the year does not change depending on the method of payment. This amount must be at least 8 percent of your annual gross salary. Since this payment is approved by law and enshrined in many collective agreements, the employer cannot pay less vacation pay. This does not increase the employee's hourly wage. Vacation pay is a standard bonus over salary. At the same time, the base part of the salary (without additional payments and bonuses, including such as vacation pay) must not be less than the minimum established wage.
Sometimes employees feel that they are paying more tax on vacation pay. However, here everything is a little more complicated than it might seem. Vacation pay tax can indeed be higher. This is due to the fact that the IP applies a progressive tax scale. That is, different tax rates apply to your salary: 36,65% to the part of your salary up to 20.385 euros; 38,1% to the fact that between 20.385 and 68.508 euros, and for everything that is higher, you pay 51,75% in tax. In addition, all possible tax credits and exemptions apply when calculating the taxable amount of your salary. They do not apply to vacation pay, income tax and insurance premiums are deducted from vacation pay and bonuses in accordance with the highest tax category corresponding to your salary, without tax benefits. This is called a special rate. With an average income, this is usually 38,1%.
However, for ease of calculation, many employers assume vacation pay falls into the highest category. This is not a problem, as the income tax deducted from your salary is an advance payment. Your annual income will only become completely clear at the end of the reporting year. And only then it will become clear how much taxes you really have to pay. If at the end of the year it turns out that you have earned less than 68.508 in total, you will receive a tax refund upon filing your return.
Therefore, it’s up to you to decide how it’s more convenient to receive vacation pay. The only thing worth considering is that it is actually more convenient to receive them in one payment and immediately spend them for their intended purpose. But situations are different, and, accordingly, solutions to this issue may be different.
Publication Date: 31.07.2019
