The Italian Court of Cassation reaffirms the obligation to include all ordinary components of remuneration in holiday pay (Camera di Commercio Italo-Francese – Vittorio De Luca, Silvia Zulato)

With Order No. 27253 of October 12, 2025, the Italian Court of Cassation (Labour Section) reaffirmed that the remuneration to be paid to employees during their holiday period must be equivalent to that received during ordinary working periods. In other words, the employer must also include allowances related to the duties performed if these constitute a stable and continuous component of remuneration.

The case concerned an employee of a well-known Italian railway company who worked as a train manager. During his holidays, the company had excluded from his payslip several items such as the on-board allowance, the out-of-district service allowance, the efficiency allowance, and commissions. The employee therefore claimed payment of the pay differences, arguing that these sums formed an integral part of his normal remuneration and should therefore have been duly paid during holidays.

The Court of Appeal of Milan upheld the employee’s claims, recognising that these allowances were closely linked to the duties performed and that their exclusion resulted in an unjustified reduction of salary during holidays—one that could discourage the employee from fully enjoying his rest period. According to the appellate judges, excluding such items led to an unjustified reduction of pay during the holiday period, in breach of the European principle of pay equivalence and potentially capable of deterring employees from exercising their right to annual leave.

The Court of Cassation confirmed this decision, referring to EU Directive 2003/88/EC and the case law of the Court of Justice of the European Union, which establish that the right to paid annual leave is a fundamental principle of European social law. Therefore, during the rest period, the employee must receive “ordinary” pay, including all elements that are stably connected to the performance of work.

The Supreme Court also clarified that a reduced salary during holidays may constitute an “economic deterrent”, inducing employees to forgo their right to rest. For this reason, any pay component reflecting the usual conditions of work—such as mobility allowances, commissions, or compensation for specific inconveniences—must also be included during the holiday period.