Extra increase in statutory minimum wage from 1 January 2023 – what should employers pay attention to?
In the Netherlands, the statutory minimum wage is indexed every six months. In short, the increase of the minimum wage normally follows the development of contract wages in the Dutch labour market. The regular indexation of the minimum wage is 1.934% as of 1 January 2023.
However, due to high inflation, influenced by high energy prices and the war in Ukraine, the minister has decided to introduce an additional one-off increase of the statutory minimum wage. This additional increase amounts to 8.05% starting 1 January 2023 and is in addition to the regular indexation. This brings the total increase in the legal minimum wage to 10.15%. This is the first time since the statutory minimum wage was introduced in 1969 that such an additional increase has taken place.
With effect from 1 January 2023, the statutory minimum wage will thus be €12.40 gross per hour for a 36-hour working week.
This exceptional increase is not only relevant for employees whose salary equals the statutory minimum wage. There are several provisions of Dutch employment law that are linked to the statutory minimum wage. The following briefly discusses what you, as an employer, should pay close attention to as a result of this increase.
Holiday allowance deviation
No right to holiday allowance
In principle, every employee is entitled to 8% holiday allowance every year. Employers can agree with an employee that the employee is not entitled to holiday allowance if the employee’s salary exceeds three times the statutory minimum wage (including 8% holiday allowance).
With the exceptional increase in the statutory minimum wage, this threshold will also increase by a lot. Employers will therefore be less likely to be able to agree with new employees that no holiday allowance will be paid. For current contracts, it is important to check whether this threshold will still be met in 2023.
Changing the moment of payment
In practice, it is often agreed with employees that holiday allowance is “deemed to be included” in their gross salary. This agreement seems to imply that the employee is therefore not entitled to holiday allowance. In fact, however, this agreement amounts to a change in the time of payment, and does not impact the employee’s actual entitlement to holiday allowance. After all, the holiday allowance is paid, but it is paid each month with the regular salary.
Such an agreement does not require the employee’s salary to exceed three times the statutory minimum wage. It will therefore remain possible to make this arrangement with employees even if their salary does not exceed three times the minimum wage. What is important here is that the salary slip must clearly distinguish between regular salary and holiday allowance, so that the employee can always check whether he has indeed received 8% holiday allowance.
Finally, this agreement is only valid as long as the employee’s salary including holiday allowance is at least 108% of the statutory minimum wage. This amount then consists of 100% statutory minimum wage and 8% holiday allowance.
Working Hours Act
Some provisions of the Working Hours Act do not apply to employees earning at least three times the statutory minimum wage. These are, among others, the following provisions:
- Registration of working hours;
- Rules on working and rest times, including the maximum number of hours an employee may work per day, week or month;
- Employee participation aspects.
Due to the sharp increase in the statutory minimum wage, employees who still earned more than three times the minimum wage in 2022 may no longer do so as of 1 January 2023. For those employees, the aforementioned provisions will therefore apply from then on, whereas they did not in 2022.
Continued wage payment during illness
Sick employees are entitled to continued payment of at least 70% of their last-earned salary during the first 104 weeks of their illness. Moreover, during the first 52 weeks of illness, an employee retains the right to at least the statutory minimum wage applicable to him or her.
Therefore, if you, as an employer, have a sick employee for whom this minimum entitlement applies, the salary will also have to be increased during illness as of 1 January 2023.
The exceptional increase in the statutory minimum wage from 1 January 2023 will therefore not only lead to a higher salary for employees earning the minimum wage, but potentially also affect employees earning (well over) that.