Vacation and Termination

The right to vacation is an important part of the employment relationship and also plays a central role in employment law in the event of termination. Whether you resign or are terminated by your employer, the question often arises as to how to handle outstanding vacation entitlements and what rights and obligations must be observed regarding vacation and termination.

There are specific considerations regarding the termination period of the employment relationship. This can affect the length of the remaining vacation entitlement.

In this article, we clarify what vacation entitlements employees have when their employment relationship ends.

1. How much vacation time are employees legally entitled to?

The purpose of the minimum vacation entitlement is to allow employees to recover from their work. To this end, the employer pays for the days on which the employee takes time off.

The Federal Vacation Act (BurlG) was enacted to guarantee employees a minimum vacation entitlement.

Based on a 6-day workweek, this entitlement amounts to 24 vacation days. For employees, who today typically work only 5 days a week, the minimum vacation entitlement is therefore 20 vacation days.

However, in many cases, collective bargaining agreements, employment contracts, or other regulations provide for exceptions to this, so that the actual number of vacation days granted is usually higher.

In 2018, for example, the average vacation entitlement was approximately 28 days (Federal Statistical Office).

2. What happens to the vacation entitlement in the event of termination?

In the event of termination, the vacation entitlement remains at least equal to the amount already accrued. Either the employee must take the remaining vacation days during the statutory notice period, or the remaining vacation entitlement is compensated in cash (so-called vacation pay).

Here’s an example:

Employee N has an annual vacation entitlement of 30 days. She gives notice of termination on April 30, 2022. In this case, N has worked for 4 months, which is one-third of the calendar year 2022. She is therefore entitled to 10 vacation days (30 ÷ 12 × 4).

When paying out vacation entitlement in cash, it is necessary to calculate how much an employee earns per workday. The monthly gross salary for the 13 weeks prior to the vacation is used as the basis for this calculation.

The value of a workday is calculated as follows:

Monthly gross salary × 3 ÷ 13 = value of a workweek

If there are 5 workdays, the value of the workweek must be divided by 5. This gives the value of one workday.

If N from our previous example earns approximately 4,000 euros gross (overtime is not included in the calculation, but commissions are) and still has 4 days of vacation entitlement remaining, the calculation would look like this:

4,000 euros × 3 ÷ 13 = 923.08 euros (value of a workweek)

923.08 euros ÷ 5 workdays = 184.62 euros (value of one workday)

N would therefore be entitled to vacation pay of 738.48 euros (4 vacation days × 184.62 euros).

3. Does it matter when an employee resigns or is terminated during the calendar year?

Whether you give notice yourself or are terminated actually plays a decisive role in calculating vacation entitlement. If termination occurs on or before June 30, the employee is only entitled to a pro-rated portion of annual vacation.

Furthermore, half-days of vacation are rounded up. The examples assume that the employment relationship already existed on January 1 of the year and did not begin after that date.

Examples:   

30 days of annual leave:

25 days of annual leave:

If the termination occurs in the second half of the calendar year (July 1 through December 31) and the employment relationship has existed since at least January 1 of that year, employees are entitled to the full 20 days of vacation under the minimum vacation entitlement. But what happens to the vacation entitlement if an employee is entitled to more annual vacation, such as 25 or 30 days?

This depends on the terms of the employment contract.

Some employment contracts contain a so-called “pro rata temporis” provision (which can be translated as “proportional to the time worked”). This means that if employment is terminated in the second half of the year, only one-twelfth of the vacation entitlement accrues for each calendar month. However, such clauses reducing the additional vacation entitlement on a pro rata basis may also be invalid if they are incorrectly worded. This should be reviewed by a lawyer.

However, the statutory minimum vacation entitlement of 20 days must not be undercut.

If, however, the employment contract does not contain such a clause, the employee is entitled to the full vacation entitlement in the event of termination between July 1 and December 31.

As these differences already show, calculating the correct vacation entitlement is not always easy or straightforward. In such cases, it is advisable to consult a knowledgeable and competent certified specialist lawyer in employment law.

4. Can an employee choose between taking vacation or receiving vacation pay?

If employees still have unused vacation days remaining during the statutory notice period, they cannot freely decide whether to take the vacation or have the days paid out instead. In many cases, employees in expiring employment relationships are irrevocably granted leave of absence, and the vacation days are credited accordingly. Such leaves of absence are often valid or even stipulated in the employment contract itself. Important to note: A revocable leave of absence—that is, one in which employees can be recalled to work—does not entitle the employee to have vacation days credited.

Compensation is paid only if the vacation entitlement to which the employee is still entitled can no longer be taken.

Reasons for this may include, for example, that the employee’s labor is still needed until the last day, or that the employee simply has too many vacation days remaining and cannot take them all.

5. What happens if my employer terminates my employment while I’m on vacation?

If an employer terminates an employee’s employment while the employee is on vacation, the question arises as to what consequences such a termination may have. If the employee wishes to challenge the termination, they have only 3 weeks from receipt of the notice of termination to file a wrongful termination lawsuit in labor court.

However, if the employer knows that the employee is away on vacation, such a long absence could certainly be exploited to thwart the employee’s ability to file a lawsuit.

In such cases, while it’s advisable to have someone check your mail during extended trips, there are also legal options available. Under Section 5 of the Unfair Dismissal Protection Act (KSchG), the legislature has established a provision under which late lawsuits may still be admissible.

To qualify, the employee must prove that the delay in filing the lawsuit was not their own fault.

For example, if you were away for more than 3 weeks and can provide proof of this, a late claim for protection against dismissal may still be considered. The employee, however, has only 2 weeks to file this request.

Especially in such cases and when filing these motions, employees should seek the assistance of an experienced and competent lawyer specializing in employment law. Please call us at 030 / 890644-0 or send us an email at [email protected] . We’d be happy to advise you!