Holiday Ready? – What Business Owners Need To Know About Holiday Pay


Finally it’s summer, which can only mean one thing – a sudden inundation of clashing employee holiday requests! While accommodating a plethora of holiday dates is an awkward task, it’s not the only complexity business owners must consider when it comes to annual leave.


For German businesses specifically, it is vital that business owners appreciate the difference between Vacation Pay (Urlaubsgeld) and Vacation Remuneration (Urlaubsentgelt) in order to meet the latest employment law regulations.


Vacation Remuneration refers to circumstances in which an employee’s salary will continue throughout the duration of their vacation, while Vacation Pay constitutes an additional payment that is intended to contribute to the employee’s holiday-related expenses. Under Federal Vacation Law, all employees across Germany are entitled to Vacation Remuneration for a set number of days per year, as outlined in their employment contract. Vacation Pay, on the other hand, is currently only granted to approximately half of German employees, with no legal structure to support this claim.


Unlike Vacation Remuneration, Vacation Pay can be granted if it has been specifically agreed, either in the individual contract with the employee or in a wider company agreement. The payment can be refused based on the employee’s work performance, qualification, or work-experience, although a business owner will need to present factual evidence to support this refusal as possible. If pre-agreed Vacation Pay is refused without an adequate explanation, businesses could be found in breach of the labour law principle of equal treatment.


As well as diary-juggling therefore, business owners should make sure their holiday pay policies are up to scratch and in alignment with regulations across their jurisdiction.


By Dr. Niklas MirbachPartner at Huth Dietrich Hahn, Globalaw

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