What happens to your holiday entitlement if you are dismissed?

Dismissed – that comes as a surprise for most employees. Therefore, almost no one has the opportunity to take the annual leave before a notice by their employer. What happens in Germany to the remaining vacation days – do they expire, can you still use them or do they have to be paid out? Is a “leave of absence” during the notice period automatically equivalent to a vacation? This blog article answers these and other questions about termination and holiday entitlement in Germany:

Holiday entitlement despite termination?

If an employer issues an ordinary termination, the employment relationship ends after the period of notice has expired. Regulations on holiday entitlements are often made as part of a severance payment agreement (termination agreement). But it also happens that employers refuse to give vacation leave in the event of a dismissal. But that’s not really possible. Because neither a normal nor a termination without notice invalidate the holiday entitlement. In principle, the employer must allow the departing employee to take his remaining vacation time. You can carry out a rough check for the range of a severance payment here:

How is holiday entitlement calculated in the event of termination?

The minimum holiday entitlement is regulated in the Federal Holidays Act. With a five-day week, there must be at least 20 working days of vacation. And less if you only work part-time. But that is the absolute minimum. In many collective bargaining agreements or employment contracts, employers grant significantly more (e.g. 30 days) vacation. According to the law, however, the holiday can only be redeemed after 6 months in the company. If there are disputes between employer and employee during the “trial period” or a notice of termination is given, this can become important.

What happens to the remaining vacation time after termination?

In the event of termination, the remaining vacation time must always be taken before the end of the employment relationship. If vacation can no longer be granted, the employer must compensate for it by paying vacation pay (note: vacation pay is not the same as vacation pay!). It does not matter who terminated the employment relationship and for what reason.

What happens to the remaining vacation time when you are released from duty?

If the employment relationship is to be terminated, the employer often tries to “release” the employee from duty. This means that the employee no longer has to show up for work and still receives his salary until the last day of the employment relationship. Employers and employees often both have an interest in a leave of absence. However, an employee is often released and the employer does not make it clear that the release is intended to compensate for the remaining holiday entitlement. In this case, the employee can, in principle, request payment of the unused leave in money in addition to the severance pay upon termination of the employment relationship. However, since the employee who has been released is no longer active, he should not, as a rule, also receive holiday pay. A corresponding regulation is permissible – if there is an irrevocable exemption.

Clear agreements required

In the event of termination or annulment, an express agreement must always be made. Because if the employer only declares that he is releasing the employee, giving him or her a leave of absence or suspending him or her until the end of the notice period, this basically means a revocable release. This applies in principle to both termination by termination agreement and termination. Holiday entitlement still exists in both cases, unless this is expressly “irrevocable”. In the case of a revocable release, the employer could ask the employee to return to work. And he would then have to return to his job, so he does not have sufficient security. Only if the employer expressly and irrevocably releases the employee, taking into account outstanding holiday entitlements, does the employer waive his right to continue employing the employee. And then the remaining vacation days are counted.

(When) Can you simply have remaining vacation time paid out?

A “payout right” for the remaining vacation time only exists if the remaining vacation time can no longer be granted or can only be partially granted because the remaining working hours are not sufficient for this. Section 7 of the Federal Holidays Act allows employees to have their holidays paid out. The prerequisite is that when the employment relationship ends, there is still vacation time left and at the same time it can no longer be taken. This is the case, for example, if the employee and employer conclude a termination agreement with immediate effect and vacation is no longer possible. The amount is determined by law,  based on the average earnings of the last 13 weeks before the start of the holiday. Overtime payments, for example, do not count in this calculation, but commissions do.

* A note about our wording. We do not always “gender” – E.g. when we are talking about employees. But we are trying to keep things simple. German labor law is complex enough. For the sake of  clarity and legibility in our texts, we have therefore decided to omit most gender formulations.

You can find more information about what to look out for here: