That’s right, but from 1 January 2018, employees must always be paid at least the minimum wage for the hours they have worked. See also our article Minimum wage in 2018.
Time for time
The term “time for time” refers to the arrangement whereby an employee who works more hours than agreed during one period takes time off in lieu during another period.
Let’s take as an example an employee who, according to their contract, works 40 hours a week. If this employee works 48 hours in week 1 and takes those hours off in week 2 under the “time for time” scheme, they will work only 32 hours in week 2.
The alternative to “time for time” is for the employee to be paid for the overtime. This can be at the standard rate of pay. However, the standard rate of pay is often increased by an (overtime) allowance. The employee in the example would then receive pay for week 1 based on 48 hours. But in week 2, he would, of course, have to work “just” 40 hours.
Minimum Wage Act (WML)
Every employee in the Netherlands is entitled to at least the minimum wage. To prevent this from being undermined by making employees work longer hours, from 1 January 2018, overtime must also be paid at no less than the minimum wage. Furthermore, that wage must actually be paid to the employee.
The employee in our example must therefore receive at least the following pay for week 1: 48 hours * the minimum hourly wage. Until 1 January 2018, the employer was permitted to pay only 40 hours * the minimum hourly wage.
It should be noted, however, that the “time for time” principle may be applied within a single pay period. If the employee is paid every 4 weeks, and if they work the agreed 40 hours in weeks 3 and 4, the minimum pay for that pay period must be: (48 + 32 + 40 + 40) * the minimum hourly wage. The standard for the 4-week pay period is 160 hours and for a calendar month 173.33 hours.
Provisions in the collective agreement
These rules apply exclusively within the framework of the Minimum Wage Act. For employees who receive a wage higher than the minimum wage, the “time-for-time” arrangement may continue to be used even after 1 January 2018.
For example, if an employee has an hourly wage of €13 and works 5 extra hours in a week, they will receive a wage of 40 * €13 = €520 for that week. The minimum hourly wage is €9.20. The minimum wage payable is therefore: 45 * €9.20 = €414. As the employee receives a higher wage (€520), “time for time” compensation may be applied to the overtime.
With effect from 1 January 2019, “time for time” is permitted in the context of the minimum wage, provided that this option is included in the applicable collective labour agreement. The employer must then agree the “time for time” arrangement with the employee in writing. Furthermore, the employee must be able to take time off in lieu of the extra hours worked before 1 July of the following year. If they have not been taken by then, they must be paid out.