All employees within an organization have the same right to vacation. Although some employees do not use up all their vacation days and thus have some days left at the end of the year, others actually need more vacation days than the number they are entitled to. Employers can offer a helping hand here: they can give their employees the opportunity to buy or sell vacation days. Of course, the selling and buying of vacation days does come with the necessary points of attention regarding administration, finance and labor law.
When buying vacation days, the only restriction imposed by Dutch law is that employees cannot accrue more than 100 times their average weekly working hours in total vacation entitlement (i.e. the sum of all statutory vacation days, extra-statutory vacation days and other vacation-related days of leave). Until January 1, 2021, there was a maximum of 50 times their average weekly working hours.
Being guaranteed a minimal resting period
However, more restrictions apply when selling vacation days. For example, an employee can only sell any remaining statutory vacation days when leaving employment. The employer must then cash out any remaining vacation time (both statutory and extra-statutory) to the employee. During employment, employees can only sell their extra-statutory vacation days. The reason for this restriction is to ensure that employees always have vacation days left, so that they are always guaranteed a minimal resting period to recover from work.
Statement of remaining vacation days
When cashing out any remaining vacation time, employers must provide the respective employee with a ‘verklaring vakantiesaldo’ (a statement of remaining vacation days), which details how many vacation days the employee had left. Employees will need this statement to prove to their new employer how many vacation days were left when they resigned from their previous job.
Right to vacation days
It is then possible for the new employer, if desired so, to agree in writing with the respective employee that the latter will receive fewer extra-statutory vacation days than the number of remaining days mentioned in the statement. However, such agreements cannot be made for any remaining statutory vacation days. The employee is always entitled to the number of remaining statutory vacation days mentioned in the statement. Though, the new employer does not have to pay wages during these remaining vacation days, as the employee already received these wages when his/her previous employer cashed out the remaining vacation time.
Buying vacation days
It is up to the employer to decide whether or not employees are given the option to buy extra vacation days, unless specific agreements on this topic are included in the collective labor agreement. Any vacation days bought by employees are always regarded extra-statutory, meaning that these days do not expire until five years after the year in which they were bought. However, there is the option for employers to agree with respective employees that any bought vacation days will be cashed out if they remain by the end of the calendar year.
Similarly, employers can set a maximum to the number of vacation days employees can buy. For example, an employer can dictate that at most 5 extra vacation days can be bought per year. This way, employers can prevent employees from accumulating a large number of vacation days and getting into staffing problems when employees take out many of these extra vacation days in one go.
How to seal the deal
We recommend one of the following three ways to arrange the purchase of extra vacation days by employees:
- have the employee take unpaid leave on the desired vacation days, which means his/her gross wages are not paid on those days;
- have the employee accrue the extra vacation days monthly by deducting the ‘price’ of these days from his/her gross wages;
- or, the price of the extra vacation days can be offset against holiday allowance, a thirteenth month payment or any bonus(es).
Selling vacation days
Unless stated otherwise in the collective labor agreement, it is the employer who decides whether or not employees have the option to sell their vacation days. During employment, employees can only sell extra-statutory vacation days if stated so officially in writing, for example in their employment contract or the terms of employment. The way in which vacation days are sold must also be stated officially in writing.
As mentioned before, an employer can make agreements to cash out any remaining extra-statutory vacation days by the end of the calendar year. Doing so will not only prevent employees from stockpiling vacation days but also avert any complicated administrative hassle in keeping record of all bought, sold and expired vacation days.
Buying vacation days through the ‘cafetariaregeling’
Employers can also opt to give employees the option to buy (extra-statutory) vacation days through the ‘cafetariaregeling’, an arrangement whereby employees can exchange gross wages for a net remuneration at their choice. In the case of buying vacation days, the gross wages are thus exchanged for vacation days. Although this option does not give employees any tax benefits to take advantage of, as the exchange does not involve exchanging gross wages for net wages, they will have extra vacation days at their disposal.
Employers can set a limit to the number of vacation days that can be bought this way as well as make agreements with employees on the expiration of this extra vacation time.
Vacation days can also be exchanged through the ‘cafetariaregeling’ for net wages. However, only extra-statutory vacation days may be used for this purpose. Again, employers can set a maximum to the number of extra-statutory vacation days that can be used for this purpose.
Buying vacation days through individual budget
Employees can also buy (extra-statutory) vacation days through the so-called ‘individueel keuzebudget’ or ‘IKB’, an individual budget available at the discretion of an employee. Part of this budget is then spent on the purchase of vacation days. Again, employers can set a limit to the number of days that can be bought this way as well as make agreements with employees on the expiration of this extra vacation time.
For example, if by the end of the year employees still have some of their individual budget left, they can spend it on buying extra-statutory vacation days. After all, these days will not expire until five years after the year of purchase – unless the employer has agreed with the employee in writing that any bought vacation days which remain by the end of the year are cashed out. If such agreements are not made, the employer must remember not to cash out the bought vacation days in a later year.
Extra-statutory vacation days can also be exchanged for more individual budget. In this case, the respective employee will thus increase his/her individual budget by the value or ‘price’ of the exchanged vacation days. However, whether this is possible or not is fully at the discretion of the employer.
Settling the purchase of vacation days
We recommend one of the following two ways to arrange the purchase of extra vacation days through the individual budget:
- a benefit from the individual budget: when the vacation days are taken, the employee takes an unpaid leave of absence and receives a benefit from his/her budget for those days;
- the purchase of vacation hours from the individual budget: vacation days are bought from the individual budget and the employee will be paid regular wages during these bought vacation days.
The value of a vacation day
But what is the value or ‘price’ of a vacation day? In principle, Dutch law does not officially set the value of a vacation day. This means it must be agreed upon by employer and employee – unless, of course, the collective labor agreement sets the value of a vacation day. The value can, for example, be based on a base salary plus an 8% holiday allowance. For a fulltime employee, this would be 1.08 times his/her gross monthly wages, multiplied by 12 (months) and subsequently divided by 52 (weeks). The result is then divided by 5 (workdays) to give the value of a vacation day.
Alternatively, the value can be based on the salary the employee would receive during a paid vacation. The value of a vacation day should include, in addition to the base salary and holiday allowance, all other wage components that are intrinsically related to the employee’s work and for which (s)he receives payment. Such components are, for example, a thirteenth month payment, an end-of-year bonus, an allowance for working irregular hours, an allowance for working in shifts, and a distribution of profits.
Whichever method you use to set the value of a vacation day, it is advisable to include any agreements on this in advance officially in writing, for example in the terms of employment.