Your employees are entitled to vacation days, but sometimes they take too many. May you set off excess vacation days against salary without consulting your employee?
Set off leave balance during employment
The law stipulates in which cases you as an employer may set off claims against wages during employment. This is allowed, for example, if your employee must pay compensation, has outstanding fines or has received too much pay. However, a claim due to excess vacation time is not included in the law. Setoff is therefore not allowed, unless a contractual provision allows it. So don’t forget to include this in the employment contract.
Set-off can only take place up to a maximum of one-tenth of the salary per month. Also, your employee must always receive at least the minimum wage. Any claims can therefore only be recovered from the wages your employee receives above the minimum wage limit.
Set off leave balance at the end of employment
The possibility of set-off at the end of employment is broader. Settlement with wages is possible, if those wages do not fall below the so-called ‘attachment-free foot’. This means, that you have to pay at least about 90% of the social security standard to your employee, so that your employee can at least pay his fixed expenses that month. Because of this broader set-off power, you and your employee can also agree by contract, that you will refund or set off excess vacation days at the end of employment.
What if you have no contractual set-off power?
That issue came up, among others, in an Oct. 18, 2021 ruling by the Central Netherlands District Court.
The common thread is that as an employer, you are responsible for the creation of a high negative leave balance, especially in the case of a temporary employment contract. You should not assume that this will be restored during the course of a subsequent year by working unpaid additional hours (the “time-for-time” system). The negative balance should not be so high that it cannot be made up by your employee during employment, with the result that you have to set off a (too) large amount against the salary. Of course, your employee also has his or her own responsibility in this.
In an employment relationship, where your employee works too few hours too quickly and where incentives are lacking to prevent arrears, this is primarily the responsibility of you as the employer.
Informing about and recording vacations
It is therefore in your best interest to regularly inform employees of their shortfall in accrued vacation days. In addition, you would be wise to lay down the settlement option by contract.
Conclusion
If you have any questions on this topic, please contact Richard Ouwerling, a lawyer specializing in labor law.
