All-in Salary is history?

28th of March

Of course, it is common knowledge that the European court spoke clearly its judgment regarding all-in salary. However, in the Netherlands it is not so clear what is possible and what is forbidden. At this moment this discussion is a hot item, and we clearly conclude a shift in social experience.

What is an All-in Salary?

In Dutch labor conditions there are several primary elements, like salary, holiday allowance and holiday leave. When employer and employee agree upon an All-in salary, then the periodic payment to employee is the sum of periodic salary, holiday allowance and the salary value of the assigned holiday leave. So, the employee gets payed immediately all the wage elements regarding that period. That leads to an uncommon procedure when an employee enjoys his holiday leave. It is a right of the employee to enjoy holiday leave. Even if employer already has payed the salary value of it. However, the employee will not be payed during the leave, because this was already payed in earlier stage.

Also, the ‘normal’ procedure of an employer paying holiday allowance just before enjoying the holiday leave (mostly payed in May or June) will not occur.

Why European court not approve this procedure?

In this procedure the employee itself is responsible to make the financial reservation to survive the holiday leave: During holiday leave all costs in normal live proceed, like mortgage, contributions to insurance, taxes and such. Besides that, most people have more expenses during their holiday. The European court states that people will not enjoy their holiday like they should when their financial reservations are not fully made. It is expected that this reservations are not fully made when it concerns larger amounts. Holiday leave has an important function of recuperation. So, any negative influence on this, is not allowed. Therefore, an All-in Salary has this negative influence.

What happened in The Netherlands?

Mostly this all-in salary is used employees ‘on call’. The zero-based labor agreements. Just when employer needs them, they will ask the employee. Only the actual labor hours will be payed, including directly the wage elements of holiday leave and holiday allowance. In 2013 and 2014 there was important jurisprudence that Dutch court actually approved the all-in salary procedure, but they made several conditions to make clear when this is to be allowed:

So, the employer needs to communicate in some way how and when holiday leave is enjoyed. As an employer you need to inform and advise.

Very important is also to state clearly in the labor agreement with employee what elements are payed directly and furthermore to state clearly that during holiday leave no payment is to be expected. Also, is it very important to break down the elements and inform this clearly in the salary slip of this employees.

Mostly, with flexible zero-based contracts, it is likely to be small amounts of reservations. At this moment it is not fully clear what the definition is of ‘small amounts’.

Cumulative factor on this change

Since January 1st 2018 the law on minimum wage and minimum holiday allowance has become stricter: The holiday allowance should also be payed on wage regarding overtime. Second change is that the elements of minimum wage should be payed in an earlier stage (has to meet the same terms as the rules of salary payment). So, we experience more social tuition on the wage elements in this matters.

Biggest problems

Some sectors in The Netherlands are using the All-in salary procedure for many years, which was socially accepted back then. This is currently happening in the sector of physiotherapy, for instance. They work with an alternative procedure in wage. Mostly the employee may keep a part of the turnover that was produced, and all wage costs (elements) should be payed of that figure in that period. So, it is more or less an all-in salary, even more complicated. Because it concerns large amounts every period, it is likely not to fit within the terms of above jurisprudence. Now employees, supported by lawyers, the existence of all-in salary is threatened with extinction in this sector. Compensation claims can be large, like € 25.000,- or more, still excluding the legal costs. We advise not to wait and see what the case law will be, but change the employment conditions as soon as possible to more usual standards. Because the shift in social experience is clear at this point. We already experienced the complexity of the unbundling of the wage elements during two pilots in this sector. We are ready to adjust. If you recognize this situation, please take action as soon as possible.