Understanding allowances on your payslip
allowances on a payslip arise either by agreement between the company and the employee, through a company-level agreement, or because they are established in the applicable sector's collective bargaining agreement.
I recall a company that introduced an "academic excellence allowance" — not linked to the employee's own performance, but to their children's academic results. For every top mark achieved, up to a certain age, the employee received a cash payment (e.g. €100 for each perfect score their child obtained). The idea was to encourage employees to go straight home after work and help their children with their studies, rather than spending time on leisure activities.
I use this example to illustrate that allowances can be used to incentivise or compensate for whatever the parties agree upon.
collective bargaining agreements typically set out various allowances depending on the nature of the work, such as:
- Hazardous substances allowance
- Dangerous conditions allowance
- Night-work allowance
- Shift-work allowance
- On-call availability allowance
- Length-of-service allowance
- etc.
Allowances must be included in holiday pay
In a ruling dated 9 May 2024, the Supreme Court reaffirmed its case law of 4 December 2019 and 1 October 2020, establishing that pay received during holiday periods must be equivalent to the remuneration the employee normally receives throughout the rest of the year. In other words, any allowances that an employee regularly receives must be included in their holiday pay.
The Supreme Court takes the view that omitting these allowances would place the employee at a financial disadvantage and act as a deterrent to taking holiday. In the case before it, the court recognised the right of a local police officer employed by the City of Córdoba to receive, during his holiday period, additional payments for rotating shifts, night work (covering hours between 10 p.m. and 6 a.m.), and work on Sundays and public holidays — particularly given that he had been receiving these payments in every monthly payslip throughout the year.
