Soon the holiday money in your account: how much does it cost?

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Many Dutch people will receive their holiday pay again at the end of this month. A nice extra, but how much money do you actually make? And how much tax do you pay on your holiday pay?

“We call it holiday pay, but it’s actually a misnomer from a legal perspective,” says Dik van Leeuwerden, head of legislation and regulation at HR and payroll services provider ADP. .

“Holiday pay is actually the money that you continue to receive from your employer if, for example, you go on vacation for three weeks. The money that many Dutch people receive in May or June is officially the holiday allowance. It is included in the Minimum Wage and Minimum Vacation Pay Act.” This holiday allowance dates from after the Second World War and since 1968 it has been established that it must be at least 8% of the gross salary.

“Anyone with a work contract, allowance or contract as a temporary worker receives holiday pay,” explains Marjan Heemskerk, accountant and blogger at The Happy Financial. “However, the latter group often receives their holiday pay monthly. Employees are not required to pay it annually.” The only rule is that the money must be paid no later than June.

Accumulation of paid leave may differ

The structure of your holiday pay may differ. “It depends on the composition of your terms of employment,” says Van Leeuwerden. “So always start by looking at what has been agreed in your contract. For example, your employer can take a reference month, for example May, and take 8% of this gross salary and multiply this amount by twelve (months). “

“Other companies save 8% of your gross salary every month from June 1 to June 1. If your income is stable, it’s easy. But if there are fluctuations, it requires a little more calculation. And then there are also companies that have a calendar year,” says Van Leeuwerden.

Tax on paid vacation income

If you know your gross vacation allowance, you can check what is actually deposited into your account. Many people are shocked by the fact that a lot of taxes are withheld. “That’s because it’s a special rate,” says Heemskerk.

However, we are not there yet. You can see on your payslip that it shows a higher percentage than the highest regular rate of 49.5%. What’s up with that? Heemskerk: “This is because a correction is being made to tax credits. These reductions are income-related. The more you earn, the less you get reductions. Holiday pay increases your income, so your tax credits decrease.”

Van Leeuwerden: “We call this the settlement percentage. Your general tax credit and the tax credit for employed persons decrease due to your higher income, so it seems that you are paying even more tax on your nest egg vacation.”

Temporarily out of service

If you leave your job in the meantime, your accrued vacation pay will of course still be paid out. “Just like your exceptional vacation days,” says Heemskerk. “If you then start with a new employer, you will build up holiday pay there from then on.”

Van Leeuwerden notices that vacation pay is becoming less and less popular due to the increase in individual choice budgets. “These are included in many collective labor agreements. You may know them from the kitty that you can use to buy a bike, for example, or from which you can pay for a study. Some companies choose to deposit holiday pay into these pots, so people have more to spend in their personal choice budgets.”

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