These figures follow from calculations by HR and salary service provider ADP, which provides an annual insight into what employees are left with more or less.
Dik van Leeuwerden, responsible for legislation and regulations at ADP Netherlands, explains that holiday pay is not the correct term from a legal point of view. “Officially, holiday pay is continued payment of wages during leave. But holiday allowance is an extra reward that must financially enable the employee to actually go on holiday. Holiday allowance is therefore the official name of what is popularly referred to as holiday allowance.”
Increase in holiday pay insufficient to compensate for the effects of inflation
The minimal increase in the net holiday pay will certainly not be enough to compensate for the price increases of holidays and other things, such as energy costs. Various studies have also shown that holiday pay is increasingly being used to pay monthly expenses or arrears. Many employees with financial problems wonder whether the holiday pay should be transferred to the bailiff if there is a wage garnishment. That is the case, because the holiday pay falls under the wage attachment. The employee is entitled to an attachment-free footing. This is the minimum amount that must be left to cover the basic cost of living. In most cases, however, this is already taken into account in the regular salary. In that case, the entire holiday pay falls under the wage attachment.
Van Leeuwerden: “This is different only if the employee earns less than the attachment-free rate. For example, if the employee earns EUR 30 per month less than the attachment-free rate applicable to him, he may keep EUR 360 of the net holiday pay. The remainder must then still be sent to the bailiff. In such cases, it is wise for employers to coordinate this in advance with the coordinating bailiff. After all, if it turns out that too little has been transferred, the employer is liable and it will still be difficult to claim back from the employee.”
Holiday pay and payroll tax
The answer to the question of whether more tax is paid on holiday pay is complex. With a gross payment of holiday pay, you do not have the same net amount as if you were to calculate the same amount as monthly salary from gross to net. However, this does not mean that someone pays more tax on the holiday pay. When calculating the regular net wage, an associated annual wage is calculated for each period to determine the payroll tax. Incidental rewards such as holiday pay are then not taken into account. The tax rate and the amount of the tax credits are adjusted to that annual salary. In the case of monthly pay, these annual results are divided by twelve, so that the payroll tax to be paid and the tax credits to be settled are divided proportionally over twelve periods.
If an extra reward is paid on top of that, such as holiday allowance or a bonus, the tax rate will not so much change, but the amount of tax credits will be affected. The annual income increases as a result of this incidental payment, but this is not taken into account in the calculation of the periodic payments. This is necessary in order to calculate the tax credits up to the correct amount. Depending on your annual income, an incidental payment determines how much you have to add to or subtract from the standard tax rate via a settlement percentage, in order to have the tax credits reconciled immediately. In concrete terms, this means that with an annual income of up to € 21,300, the regular tax rate is reduced because there is still a tax credit to settle. With an annual income above, the regular tax rate is increased because the tax credit is reduced. The settlement percentage is visible on the pay slip.
Holiday pay less popular due to the rise of individual choice budget
Since more and more organizations and companies have introduced a so-called individual choice budget, the traditional holiday allowance is less popular in May. In the case of an individual choice budget, the employer deposits a proportional part of the holiday pay and any end-of-year bonus each month in a piggy bank. It is up to the employee, within the rules of the choice budget, when and how the amount is paid out. “For example, you can choose to have it paid out due to an unexpected major expense or to include it tax-free in connection with the costs of a study,” says Van Leeuwerden. “Especially in this time of financial uncertainty, this can offer employees a solution.”
Holiday allowance 2022: most employees receive a few euros more
Source link Holiday allowance 2022: most employees receive a few euros more