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A Guide to Vacation Entitlements and Leave Encashment in Germany

If your company is hiring employees in Germany, you will find a very structured approach to vacation or leave entitlements.  This includes the amount of leave time that must be offered, and what happens if an employee does not take the statutory leave entitlements each year.

Like most European countries, leave is generous in Germany compared to a country like the US.  Your employees will expect you to know and offer the type of leave they are accustomed to, so here are the basics to get you started.

How much vacation time are employees entitled to in Germany?

The statutory leave entitlement is four weeks per year (20 office days), plus 9-12 public holidays depending on the state.  German employers often give as much as 25-30 office days per year.  There is full compensation during the vacation leave, and a holiday bonus is frequently offered.

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Is there a probation period before employees receive full vacation entitlements?

The full year’s vacation entitlement starts after six months on the job, and any termination prior to that (or within the first six months of a calendar year) would result in an entitlement of 1/12 of the leave period, multiplied by the number of months worked.

Client Case: Leave Encashment Policy in Germany

Context:

A client of ours with employees in Germany wanted to know if they could pay out unused leave days each year if an employee did not take a full holiday.

Solution:

There is strong public policy in Germany that mandates employees to take their vacation leave whenever possible, as a way to relax from work, so paying out leave is generally prohibited.  However, because the leave is forfeited if not taken each year, employers can offer a bonus instead based on the employee’s daily salary multiplied by the unused leave days.

Unused leave can also be carried forward to March 31st of the following year, but only if the reason for not taking leave was for urgent personal or business reasons.  Carried over leave that is not taken is forfeited without compensation.  The only time that unused leave can be legally paid out as such is during a termination.

Do you need more information about Germany?

If you are new to hiring in Germany, you might have more questions about leave such as:

How is the ‘holiday bonus’ typically calculated if offered?

What are the maternity and paternity leave entitlements in Germany?

Does leave need to be taken all at once, or can an employee divide it into two or three shorter holidays?

If an employee becomes ill during their vacation leave, does that then become sick leave for the days of illness?

These are the types of questions that come up frequently for our clients, and we offer assistance to make sure they stay compliant with payroll, benefits, and immigration rules in the host country.  We make international employment simple.

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