EXPLAINED: Dutch Holiday Allowance Scheme

The holiday allowance is a great perk for employees when living and working in the Netherlands. Under the Dutch Labour Law, employees in the Netherlands accrue entitlements to holiday allowance, which is referred to as ‘Vakantiegeld’ in Dutch. This word probably rings a bell for you, as typically discussed by your Dutch colleagues. Equally important, they also have the right to certain days of holiday. 

If this is your first time working in the Netherlands, this blog will explain everything you need to know about the Dutch holiday allowance. 

The history of holiday allowance 

The holiday allowance was introduced in the Netherlands in the 1920s to encourage workers to take a vacation. It used to function as a type of paid leave.  In the past, vacation trips were extravagant, so in the 1960s it became an extra payment on top of the salary. 

The idea for this incentive to be paid in May is to encourage employees to plan a trip for their summer after receiving the money, which ultimately promotes work-life balance. The Dutch system believes this would be a benefit for the health of the employee, and thus reduce absenteeism and other health-related costs. Although vacation money is granted as an extra reason for you to enjoy your time off work, it is up to you how you would spend the money. 

Holiday allowance (Vakantiegeld) 

Employees in the Netherlands are entitled to holiday allowance from their employers.  Just like a parent gives their kid 2 euros every day to buy lunch, employers give their workers 8% of their gross yearly wages for vacations.  

In your bookkeeping, it’s important to keep in mind that this allowance is unrelated to the actual holiday days your employee takes. The average full-time employee is entitled to at least 20 days of paid vacation days per year. If an employee uses up all 20 days during the year, you would still be required to pay the holiday allowance. 

Update: As of January 2020, employers will be required to pay a slightly higher holiday allowance for workers employed on a temporary basis. Read more about the updates here.

When is the holiday allowance paid? 

Typically, holiday allowance is paid out once per year as a lump sum during the month of May. Since the idea behind the allowance was to provide employees with funds to finance their vacation, this tradition began. Nowadays, employees and employers may agree to have holiday allowances paid out every month instead – resulting in a higher net salary per month. 

The holiday allowance is granted to the employee in May or June. Therefore, if you are working in the Netherlands, you can expect to receive this payment in your payslip around that time of the year. 

If you happen to terminate your employment contract before May, the accumulated vacation money is still included in your last salary payment. 

Is everyone entitled to the holiday allowance? 

It is mandatory for employers to grant the holiday allowance to the employees, although the amount may differ if you belong to a collective labor agreement. In extraordinary cases, this benefit is excluded, for instances: 

• Freelancer ZZP’ers (zelfstandige zonder personnel) are self-employed individuals or entrepreneurs who are not committed to long-term employers. Therefore, their work and holiday arrangements are set on their own terms, which holiday allowance is not naturally applicable. 
• In the Netherlands, there is no obligation for companies to pay for internships. However, it is common for Dutch employers to offer some form of compensation ranging from 100 to 500 euros per month or more. Generally speaking, vacation allowance is not expected if you do an internship. 

• If the employee’ earnings is triple the Dutch minimum wage, the vacation pay may be reduced or eliminated. It very much depends on the agreement between the employee and the employer in the labor contract.