Holiday Pay Included in Fixed Salary: The Clause Must Be Transparent

Imagine: you are a medical secretary in Changé, in the Sarthe department. For five years, you have worked thirty hours per week, with twelve weeks of holiday per year – much more than the statutory five weeks. Your contract states an hourly wage of 18 euros "holidays included". You never ask questions, until the day you realise that your colleagues, in a neighbouring practice in Allonnes, receive a holiday pay allowance on top of their basic salary. You ask your employer: "But do I really get paid for my holidays?" His answer is evasive. You consult a lawyer, who explains that the clause in your contract could be void. And then the question becomes: what does the law say?

This question is asked every day by thousands of employees and employers in France. Can you, with a stroke of a pen, include holiday pay in a fixed salary? The answer, given by the Cour de cassation in a judgment of 29 November 2023 (n° 22-10.494), is clear: yes, but only if the clause is transparent and understandable. In other words, the contract must distinguish in black and white what relates to salary for work performed and what covers holidays, and the allocation of these sums to a specific, actually taken holiday must be specified. Otherwise, the employee can claim back pay for their holidays, even if their overall remuneration exceeds the statutory minima.

In this article, I will tell you the story behind this decision, dissect the judges' reasoning, and above all give you the keys to avoid this type of dispute, whether you are an employer or an employee. Because this case, which started from a simple contract in Changé, could change the way you read your payslip.

The Facts: A Story Like Many Others

Mrs U., a medical secretary in a private practice in Changé, was hired in 2015 on the basis of a part-time employment contract of thirty hours per week. Her remuneration was set at 18 euros per hour, with the mention: "holidays included". The practice closes for twelve weeks a year, during which Mrs U. is on holiday, with no other remuneration than her smoothed monthly salary. For five years, she did not question it. But in 2020, she learned that her colleagues in a practice in Allonnes received a separate holiday pay allowance. She then claimed back pay from her employer, who refused, arguing that her fixed salary already included everything.

The dispute came before the industrial tribunal (conseil de prud'hommes) of Le Mans, which ruled in favour of Mrs U. in 2021: the clause "holidays included" was neither transparent nor understandable, because it did not distinguish the part of salary for work from that for holidays. The employer appealed. The Angers Court of Appeal upheld the judgment in 2022. The employer then appealed to the Cour de cassation, arguing that the hourly wage of 18 euros, well above the minimum wage, necessarily included holiday pay, and that Mrs U. had benefited from twelve weeks of holiday, far more than the statutory five. He added that during these holidays, she received her monthly salary, which covered the holiday pay.

But the Cour de cassation, in its judgment of 29 November 2023, dismissed the appeal. It approved the Court of Appeal: the simple mention "holidays included" is insufficient. To be valid, the clause must explicitly indicate the part of remuneration that corresponds to work and the part that corresponds to holidays, and specify to which specific holidays these sums are allocated. Failing that, the remuneration paid during holidays is not holiday pay, but simply payment for working hours under the annual smoothing arrangement. Mrs U. is therefore entitled to back pay for her unpaid holiday pay, as well as for the period of closure of the practice exceeding five weeks.

The Reasoning of the Court — Dissected

The Cour de cassation relies on Article L. 3141-24 of the Labour Code, which provides that holiday pay is due to the employee when taking their holidays. This article requires that this allowance be calculated according to the rule of one-tenth of the gross remuneration received during the reference period, or according to the rule of salary maintenance if more favourable. The Court specifies that this allowance can only be included in a fixed salary if specific conditions justify it, and on condition that the clause is transparent and understandable.

In this case, the clause "hourly wage of 18 euros, holidays included" did not meet this requirement. Why? Because it did not allow to know what fraction of the 18 euros corresponded to work and what fraction to holidays. In other words, the employee could not verify that the holiday pay was actually paid. The Court insists on two points: firstly, the clause must clearly distinguish the work part and the holiday part; secondly, it must specify the allocation of these sums to a specific, actually taken holiday. Here, the contract mentioned twelve weeks of holiday, but without stating that each week was covered by a part of the remuneration. Consequently, the remuneration paid during holidays was not holiday pay, but simply payment for the smoothed hours.

The Cour de cassation thus validates the reasoning of the Court of Appeal, which had held that Mrs U. could claim back pay for her holiday pay and for the period of closure of the practice exceeding five weeks. It does not matter that her total remuneration was above the minimum wage or the applicable collective agreement minima: what matters is the transparency of the clause. This decision is in line with a consistent line of case law that protects the employee against obscure or globalising clauses. It reminds us that employment law is a matter of public policy: one cannot circumvent the rules on holiday pay by a simple imprecise sentence.

What This Means for You — Practically

If you are an employer: You can no longer be satisfied with a mention like "salary holidays included". If you wish to include holiday pay in a fixed salary, your contract must contain a detailed clause. For example: "The basic hourly wage is X euros, to which is added a holiday pay allowance of Y euros (i.e. 10% of the basic wage), making a total of Z euros. This allowance is allocated to the 5 statutory holiday weeks that the employee will actually take." Failing that, you risk a retroactive back pay claim for 3 years (statute of limitations), with holiday pay on that back pay. Imagine an employee paid €18/hour for 30 h/week: their monthly salary is €2,340. If the clause is void, the employer will have to pay them 10% of their annual salary, i.e. approximately €2,808 per year, multiplied by 3 years = €8,424, plus holiday pay on that back pay (€842). That is nearly €10,000.

If you are an employee: Check your contract. If the clause "holidays included" is vague, you can claim back pay. Gather your payslips for the last 3 years, calculate 10% of your gross annual salary, and compare it with what you received during your holidays. If the difference is significant, consult a lawyer. Be careful: if you have taken more than 5 weeks of holiday, as in the Changé case, the employer may think the clause is advantageous, but the Cour de cassation says that is not enough: transparency is paramount.

If you are a property professional or advisor: This decision also concerns the employment contracts of building caretakers, concierges or employees of co-ownerships. Check the clauses of fixed remuneration including holidays. In Allonnes, for example, a property management company had to pay €12,000 in back pay to a caretaker after a similar clause.

Four Tips to Avoid This Type of Dispute

• Draft a detailed remuneration clause: Instead of "holidays included", break down the salary into "basic hourly wage" + "hourly holiday pay allowance", and indicate the percentage (10%). Specify that this allowance is paid for each day of holiday actually taken, up to a maximum of 5 weeks per year.
• Have a receipt for taking holidays signed: For each holiday period, have the employee sign a document stating the dates and the amount of the allowance paid. This proves that the sums are indeed allocated to a specific holiday.
• Avoid annual smoothing without transparency: If you smooth the remuneration over the year, specify in the contract that the monthly salary includes a part for holidays, with an annual breakdown. For example: "Over 12 months, the employee receives X € per month, of which Y € corresponds to the 5 weeks of holiday, i.e. Z € per holiday month."
• Consult a lawyer to validate your contract: Before generalising an "all-inclusive" clause, have it checked by an employment law specialist. A poorly drafted clause can cost thousands of euros in back pay.

Further Reading: Related Case Law and Developments

This decision confirms a jurisprudential trend already initiated by the Cour de cassation. In a judgment of 13 October 2021 (n° 20-10.852), the Social Chamber had already held that a clause providing for a "fixed annual remuneration including holiday pay" was void if it did not allow distinguishing the work part from the holiday part. The Court had then referred to the transparency requirement set out in EU Directive 91/533/EEC on the employer's obligation to inform employees. The 2023 judgment goes further by also requiring allocation to a specific and actually taken holiday.

Conversely, some Courts of Appeal had validated similar clauses when the remuneration was well above the collective agreement minimum, considering that the employee could not complain. The Cour de cassation puts an end to this divergence: transparency is an imperative condition, regardless of the amount. In the future, we can expect lower courts to be stricter. Employers must therefore review their contracts urgently.

This case law also fits into a broader movement of protecting employees against obscure clauses, as in the areas of fixed-price day-rate arrangements or non-competition clauses. The message is clear: the employment contract must be legible and understandable for the average employee.

Summary and Next Steps

FAQ:

1. Can I still include holiday pay in a fixed salary? Yes, but only if you meet three conditions: transparent clause distinguishing work/holidays, allocation to a specific holiday, and actually taken holiday.
2. What should I do if my contract contains a vague "holidays included" clause? Consult a lawyer to assess your rights. You can claim back pay for the last 3 years.
3. Can my employer dismiss me if I claim back pay? No, that would be discriminatory dismissal. You are protected by Article L. 1132-1 of the Labour Code.
4. What is the time limit to act? The statute of limitations is 3 years from the date you knew or should have known the facts (Article L. 3245-1 of the Labour Code).

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