External Leave Savings in The Netherlands

Publication Date: July 8, 2025

For tax purposes the possibilities for leave savings have doubled in The Netherlands since 2021 to a maximum of 100 times the weekly working hours, at the request of social partners. However, the scheme remains underutilized in practice. We have investigated the causes of this impasse and have made proposals to the government to break it.

You can view our full analysis in PensioenMagazine. Below is a summary, which is handy if you don't have time to translate and read the entire article.

Historical objections

The original objections that employers and employees have against leave savings with the employer are:

• The risk of losing entitlements in the event of bankruptcy.
• The need to maintain high provisions.
• Backservice obligations in case of salary increases.

External leave savings is the promised solution

The historical objections largely disappear with external leave savings in money, provided it is well designed. The Tax Authorities have confirmed that external leave savings in time and money are allowed for tax purposes. A justified condition is that the employee only has the right to leave and not to the capital itself.

External leave savings in time or money

With leave savings in time, the employee saves days off, the value of which grows with salary developments. With external leave savings in money, the monetary value of the leave day is transferred to an external executor. The final number of leave days to be taken depends on the realized return and the hourly wage at the time of taking leave. This system thus has backservice obligations. If this needs to be avoided, external leave savings in money is a solution.

Bottlenecks and misunderstandings

The Wage Tax Knowledge Group of the Tax Authorities confirmed years ago that external leave savings in money and time is possible. However, there is confusion within and outside the Tax Authorities about the fiscal admissibility. In our article, we note confusing formulations in official positions and advocate for clear, unambiguous communication.

Five current bottlenecks

Despite the fiscal space and legal possibilities, external leave savings have not been implemented anywhere since 2021. We identify five current bottlenecks:

• The misunderstanding that external leave savings in money would not be allowed.
• The lack of suitable external executors.
• The fiscal rejection of blocked accounts in the name of the employee.
• The limited suitability of foundations as executors.
• The assumption that employers still have balance obligations despite external execution.

Executors and execution problems

Although pension execution organizations, banks, and asset managers are in principle suitable as executors, there is a lack of concrete initiatives. Reasons for this include:

• Uncertainty about fiscal approval.
• Limited demand from employers.
• The pressure of the Future Pensions Act on pension execution organizations.
• The short investment horizon of leave savings compared to pensions.

Legal and administrative conditions

In our article, we argue that external leave savings on a bank account is indeed possible if:

• The employee has no actual control over the balance.
• There is also a legally enforceable buyout prohibition.
• The balance is not on a payment account but on a blocked administrative account separated from payment traffic.

We compare this to the structure of a PPI (premium pension institution), where direct disposal (of pension) is also not possible and buyout is contractually excluded.

Accounting implications

When taking leave, the employer usually has to continue paying salary, premiums, and vacation allowance. If these costs are not covered by the leave balance, the accountant may judge that a provision on the balance sheet is still required. This also applies to external leave savings in time, due to backservice obligations in case of salary increases. This makes sectoral implementation complex, as each accountant must make their own judgment about the balance impact.

Our proposal: legislative amendment or policy decision

Following the Dutch Foundation of Labor (‘Stichting van de Arbeid’) , we advocate for a legal anchoring of the conditions under which third parties may act as executors. We propose adding a fourth paragraph to Article 11 of the Wage Tax Act, in which:

• Leave savings in time and money are explicitly recognized.
• Third parties are designated as executors.
• A buyout prohibition and lack of control are required.
• The account must not be linked to payment traffic.
• The inspector can issue a decision on request regarding the qualification as a leave savings scheme.

A policy decision would also suffice in our opinion, but it offers less legal certainty.