Based on European Union legislation an employee (worker) is entitled to paid annual leave. Nevertheless, the directive based on which the worker is entitled to such paid leave does not give a detailed explanation on the amount of remuneration that should be paid for those vacation days. There is case-law from the European Court of Justice, which clarifies the amount of remuneration that should be paid for the vacation days. Basically the European Court of Justice has ruled that annual leave remuneration must be maintained at the level the worker would have received if he would have been working.
Occasional of ancillary costs need not be taken into account in the calculation of payment of annual leave. All other remuneration which has an intrinsic link to the performance of work by the employee should be part of the remuneration during annual leave.
This means that compensation such as the allowances for irregular working times, structural commission payments, holiday allowance etc. should be taken into consideration when determining the financial value of vacation days. The same will apply to average bonus payments if there is an intrinsic link between this bonus payment and the performance of the task by the employee.
These rulings by the European Court of Justice have more recently received the interest of trade unions and individual employees in The Netherlands. This also led to several lower court rulings in which the value of a vacation day is clarified. Many employers in The Netherlands have apparently not adjusted the way of calculating the financial value of outstanding holidays, which is of course generally an issue when it comes to termination of the employment contract.
It is up to the national courts of the European member states to determine whether there is an intrinsic connection between certain part of the remuneration and the work performed. In general, however it is important for the entrepreneurs to reconsider if they comply with those European Court of Justice rulings.
In case you have any further questions with regard to this topic, feel free to contact our attorneys at law at the different member states of our Proteus network.
