Netherlands: Supreme Court Rules that Compensation for Mandatory Structural Overtime Should be Included in Wages During Holiday

The case concerns an employee that had worked a total of 2.868 hours of overtime between 2013 and 2018 and has received overtime renumeration for these hours. However, the wages he had received during his holidays did not contain overtime compensation as he did not work overtime for the period he was on holiday. The employee now claims back-payment of underpaid wages during his holidays on the ground that his employer wrongly disregarded overtime when calculating the wages during holiday. The employer opposes this claim by saying employees work overtime on an entirely voluntary basis as employees cannot be forced to work overtime and therefore, the compensation for the overtime should not be included in wages during holidays.

The national obligation to pay an employee during his holiday derives from European legislation. The Supreme court, therefore, notices that case law regarding this subject from the Court of Justice of the European Union is relevant. Case law states that compensation for overtime should be considered part of the holiday wage when[1]:

• The obligations under the employment contract require the employee to work overtime on a regular basis; and
• The employee’s renumeration for overtime constitutes a significant part of the total renumeration he receives for his occupational activity.

Furthermore, the Supreme court noticed that the goal of the specific European legislation regarding wages during holidays is to make sure renumeration during holidays is similar to renumeration while working. This is to make sure the employee actually is able to take holidays without losing income.

Considering the above, the Supreme Court concludes that European law does not entail that overtime only counts in determining the wages during holidays in the event that the employer can unilaterally force the employee to work overtime and could enforce it. Seeing as the relevant employees’ overtime falls under the two abovementioned requirements, the Supreme court ruled that the salary during holidays should be increased with the average payment of overtime (in this case EUR 2.200,-).

[1] Based on Dutch case law, other allowances (such as commission or irregularity allowance) should also be included in pay during holidays.

Key points HR:

• In order to prevent claims similar to the one above, we advise agreeing in the employment contract that overtime is deemed to be included in the monthly salary given the nature of the work. However, please note that:
  • the actual average hourly wage (calculated as monthly salary divided by actual hours worked) must not fall below the statutory minimum wage. As this could result in: (I) a salary claim, possibly including statutory interest and statutory increase and (II) a penalty from the Labour Inspectorate.
  • some collective bargaining agreements may consist specific rules regarding remuneration for overtime. In such cases, it is not possible to agree that overtime is deemed to be included in the monthly salary.

Source: ECLI:NL:HR:2024:1322.