Holiday pay compensation after dismissal

When does an entitlement to holiday pay compensation arise?

Under § 7(4) BUrlG, holiday that can no longer be granted in whole or in part because the employment has ended must be paid in lieu. The claim therefore arises by operation of law when the employment ends; no separate application is required.

It makes no difference whether the employer or the employee gave notice. Summary dismissal and a termination agreement leave the claim unaffected as well.

The statutory minimum holiday under § 3(1) BUrlG is 24 Werktage a year. Under § 3(2) BUrlG, Werktage are all calendar days except Sundays and public holidays. Converted to a five-day week, that is 20 working days. Employment and collective agreements often provide for more.

You acquire the full annual holiday under § 4 BUrlG only after the employment has existed for six months. If you leave after that in the first half of the calendar year, § 5(1)(c) BUrlG reduces the entitlement to one twelfth per completed month of employment. Leaving in the second half of the year leaves the full annual holiday in place.

Lapse of holiday and limitation of the compensation claim

The CJEU ruled on 6 November 2018 in cases C-619/16 and C-684/16 that holiday lapses only if the employer has first put the employee in a position to take it. The employer must call on the employee to do so and give timely notice of the impending lapse.

The Federal Labour Court (BAG) transposed this requirement into German law by judgment of 19 February 2019, case 9 AZR 541/15. Without such a call and notice, holiday lapses neither at the end of the year under § 7(3) sentence 1 BUrlG nor in the first three months of the following year under § 7(3) sentence 3 BUrlG.

Where the employee is continuously unfit for work, a carry-over period of 15 months after the end of the holiday year applies. If the employee still worked during the holiday year before the illness began, the claim only lapses after this period if the employer fulfilled its duties to cooperate in good time (BAG, judgment of 20 December 2022, case 9 AZR 245/19).

If, by contrast, the employee was unfit for work for the whole holiday year, the claim lapses after 15 months even where the employer never gave notice of the impending lapse. A notice would not have enabled the holiday to be taken in any event.

The compensation claim becomes time-barred under § 195 BGB after three years. As a rule the period starts at the end of the year in which the employment legally ends. Whether the employer previously fulfilled its duties to cooperate makes no difference to this (BAG, judgment of 31 January 2023, case 9 AZR 456/20).

Calculating the holiday pay compensation

The amount of the compensation follows the calculation of holiday pay under § 11 BUrlG. What matters is the reference period, the composition of earnings and the number of outstanding holiday days.

Basis of calculation under § 11 BUrlG

Compensation per holiday day is based on average earnings from work in the last 13 weeks (§ 11(1) BUrlG), calculated for the compensation from the end of the employment. The calculation includes ongoing gross earnings including regular allowances and commissions.

Remuneration paid additionally for overtime is left out under § 11(1) sentence 1 BUrlG. It only counts if the additional work has permanently altered the contractually owed working time and has thereby become the regular working time.

An increase in earnings within the calculation period is included in the compensation under § 11(1) sentence 2 BUrlG, provided it is not merely temporary in nature. A one-off allowance is disregarded.

Partial holiday and pro-rata calculation

If you leave in the first half of the calendar year after completing the waiting period, § 5(1)(c) BUrlG entitles you to one twelfth of the annual holiday per completed month of employment. If the employment ends in the second half of the year, the full annual holiday remains in place.

A broadly worded settlement or full-and-final clause in a termination agreement in principle also captures the holiday pay compensation, according to the case law of the Federal Labour Court (judgment of 14 May 2013, case 9 AZR 844/11). Expressly exclude the claim in the text of the agreement.

Holiday pay compensation in cases of illness and release from work

Two situations regularly lead to disputes over holiday pay compensation: the ending of employment during incapacity for work, and release from work after dismissal.

Compensation in cases of incapacity for work

If you are unfit for work when the employment ends, the compensation claim under § 7(4) BUrlG remains in place. Fulfilment through release from work is not possible, because you are in any case released from the duty to work during incapacity. The holiday is paid out.

In cases of long-term illness, claims accumulate over several holiday years if the employer failed to fulfil its duties to cooperate and the holiday therefore did not lapse under § 7(3) BUrlG.

Crediting holiday against a release from work

A release from work only fulfils the holiday entitlement if the employer unambiguously and irrevocably releases you from the duty to work and states that the release serves as holiday (BAG, judgment of 10 February 2015, case 9 AZR 455/13, marginal no. 19). If the employer grants the holiday only as a precaution, in case its dismissal is invalid, it must pay the holiday pay before the holiday begins or unconditionally promise to pay it (BAG, judgment of 25 August 2020, case 9 AZR 612/19).

A mere release from work without a crediting statement is not sufficient for this. The compensation claim then remains in full.

Further information on employment law

These topics may also be of interest:

• Received a dismissal
• Reviewing a termination agreement
• Severance pay after dismissal

This information does not constitute legal advice in an individual case.