Leave compensation pay out the leave entitlement

Leave compensationIf an employee leaves the company after termination and still has a few days in his leave account, they must be compensated. The purpose of the vacation payout is to ensure that each employee receives his or her full vacation entitlement, whether as a day of vacation actually taken or paid out. The entitlement to this compensation of vacation days is found in the Federal Vacation Act (BUrlG). Open vacation days should, however, only be paid out in exceptional cases if the employee leaving his or her job is no longer able to take his or her remaining leave. For example, if an employee still has 15 vacation days outstanding and the termination agreement stipulates that he or she will leave the company after just two weeks, this requirement is met. In this case, the employee would not be able to take his/her vacation before the termination of the employment relationship. Another reason may be if the employee is needed for operational reasons or has to be present for the training of his successor.

However, paid time off from work is always preferable to compensation, and employers should grant their employees this entitlement whenever possible. Similarly, the company may decide to release the employee before the end of his notice period. With this time off, the vacation entitlement is settled. However, this arrangement can only be implemented if the interests of the employee are safeguarded. If the period of leave is significantly longer than the remaining leave, it can be amed that the employee will be able to use his or her vacation days.

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How to calculate the financial compensation?

If employee and employee have agreed on vacation compensation, the remaining vacation is converted into money. This is based on the value of a working day that the employee would otherwise have received as normal pay. The calculation is based on the amption that each calendar quarter has a total of 13 weeks. Accordingly, the salary for this quarter is first calculated. Then divided by 13 weeks. An example for a monthly salary of 4.000 euros gross per month:

4.000 euros x 3 = 12.000 euros per quarter 12.000 Euro : 13 = 923,08 Euro per week

With a normal working time of 5 weekdays, the value of a vacation day is therefore: 923.08 Euro : 5 = 184.62 Euro

If the employee receives other compensation in addition to his salary, such as an annual bonus or commissions, these must be taken into account in the calculation. If the employee had taken leave normally, he would ultimately also be entitled to these payments. After termination without notice, the vacation payout applies in the same way as in the case of ordinary termination or a termination agreement. The misconduct that preceded the termination without notice does not affect the vacation entitlement. Further claims may arise if an employee takes leave during the notice period and falls ill during this time. Sick days cannot be counted towards the vacation entitlement, and consequently these days are to be valued as vacation not taken and must be compensated for.

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