When your employment ends in Germany—whether through resignation, dismissal, or mutual agreement—you may still have outstanding vacation days. But what happens to these days once the contract ends? Can they be transferred, or must they be paid out?
Under German labor law, the answer is clear: if you haven’t used your statutory or contractual vacation by the time of termination, you’re entitled to financial compensation. This is known as Holiday Pay on Termination of Employment.
This article explains how holiday pay works at the end of an employment relationship in Germany, when you’re entitled to it, how it’s calculated, and what to watch out for—especially as an expat.
1. What Is Holiday Pay on Termination of Employment?
Holiday pay on termination of employment refers to the cash compensation employees receive for unused vacation days when their employment ends.
According to Section 7(4) of the Federal Vacation Act (Bundesurlaubsgesetz – BUrlG):
“If vacation cannot be granted due to the termination of the employment relationship, it must be compensated financially.”
📌 This compensation is not optional—it is a legal obligation for the employer.
2. When Does Holiday Pay Apply?
You are entitled to holiday pay if:
✅ Your employment has ended (by resignation, dismissal, or agreement)
✅ You have unused statutory or contractual vacation days
✅ It is no longer possible to take the vacation before the end date
💡 Holiday pay only applies after termination. If you’re still employed, your employer can insist that you take your remaining leave.
3. What Types of Leave Are Compensated?
There are two types of leave in Germany:
1. Statutory Leave
- 20 days per year (based on a 5-day workweek)
- Mandatory under German law
- Must always be paid out if unused at termination
2. Contractual/Additional Leave
- Any extra days granted by contract, collective agreement, or employer policy
- Also compensable unless explicitly excluded in writing
📌 Both types are usually included in the payout unless your contract says otherwise (in clear terms).
4. How Is Holiday Pay Calculated?
Holiday pay is calculated based on your average gross earnings in the 13 weeks prior to termination, excluding:
- Overtime
- One-time bonuses
- Reimbursement expenses
Formula:
(Gross average daily pay) × (Number of unused vacation days)
Example:
- Monthly gross salary: €3,000
- 5-day workweek = €3,000 ÷ 21.67 = approx. €138.50/day
- 8 unused days → €138.50 × 8 = €1,108 gross holiday pay
📌 Holiday pay is subject to income tax and social security contributions.
5. Do You Still Get Holiday Pay If You Resign?
Yes. Whether you are dismissed, resign voluntarily, or sign a settlement agreement—unused vacation must be compensated.
However, if you resign without working the full year, your vacation entitlement may be pro-rated.
Example:
You resign on June 30. You’re entitled to half of the annual leave = 10 days (for a 5-day workweek), unless your contract grants more.
6. What Happens If You Were on Sick Leave?
If you couldn’t take vacation due to illness:
- You can carry over unused leave for up to 15 months
- If the employment ends within that time, you’re still entitled to a payout
📌 A doctor’s note is essential to prove incapacity for work. Courts have ruled that even long-term sick employees must receive holiday pay on termination.
7. Are There Time Limits?
Yes. In some cases, holiday pay claims expire if not enforced in time.
- Limitation period: 3 years from the end of the year in which the claim arose
- Shorter periods may apply in contracts or collective agreements—often within 3 months
📌 If your contract has exclusion clauses (Ausschlussfristen), you may need to assert the claim in writing quickly.
8. Can an Employer Refuse to Pay?
Not legally. Employers must pay compensation for all accrued and unused vacation.
Common (but invalid) refusals include:
- “You didn’t request the leave”
- “The company has no money”
- “You didn’t work the full year” (unless truly prorated)
📌 If your employer refuses, you can file a claim in the labor court.
9. What Expats and Foreign Employees Should Know
If you are working in Germany as a foreign national:
- You are entitled to the same vacation and compensation rights as German employees
- Your holiday pay must be settled before you leave the country
- Be sure to get the payout in writing and keep your payslip
- If you’re moving abroad, you may need to report the income in your home country (depending on tax laws)
📌 If you return to your home country and don’t receive the payout, pursuing the claim may become more difficult.
10. Tips for Employees
✅ Track your used and unused vacation days regularly
✅ Verify entitlements with your HR department
✅ Keep written proof of requests or leave rejections
✅ Don’t sign a termination agreement without checking your leave balance
✅ Ask for the holiday payout to be included in the final salary slip
Conclusion
Holiday pay on termination of employment is not a bonus—it’s a legal entitlement. If your job ends and you haven’t used all your vacation days, you must be compensated financially.
Whether you’re resigning, being dismissed, or signing a mutual agreement, check your leave balance and demand the payout you’re owed. For expats, this is especially important before leaving the country or changing visa status.
