Due to changes in the planned reduction of employee tax credit, most employees can expect to be paid less holiday allowance this year compared to previous year. However, employees with a minimum income or with a part-time income lower than or equal to minimum wages will receive slightly more in holiday allowance.
According to recent calculations by HRM and payroll service provider ADP, most employees will be paid less holiday allowance (also called holiday pay) in 2021 compared to 2020. The decline is a result of changes in the reduction of employee tax credit. Employees with an average income (€ 2,816 per month) will therefore miss out on a few euros in holiday allowance. Employees earning three times the average in income per month will be disadvantaged the most, as they will miss out on € 487 in allowance. This last group of employees will have to pay 6% more in tax over their holiday allowance this year due to the stated changes in the reduction of employee tax credit. And although these changes also mean they will receive € 37 more per month in salary, this ‘windfall’ is completely canceled out by the decline in holiday allowance.
A slight increase in holiday allowance for employees with a minimum income
On the other hand, employees with a minimum income or with a part-time income lower than or equal to minimum wages (€ 1,685 per month) will actually receive € 15 more in holiday allowance. APD also calculated the following:
- Employees earning one and a half times the average in income (€ 4,225 per month) will receive € 2,43 less in holiday allowance.
- Employees earning twice (€ 5,633 per month) or two and a half times (€ 7,041) the average in income will receive the same in holiday allowance this year as in 2020.
- And as mentioned before, employees earning three times the average in income per month (€ 8,449) will be paid € 487 less in holiday allowance.
For employers struggling financially as a result of the crisis caused by the coronavirus pandemic, it may be difficult to cough up the money to pay employees their holiday allowance. However, a unilateral decision by an employer to not pay employees their holiday allowance, or to spread or postpone the payment of it, is not permitted.