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During an employee’s vacation, their entitlement to remuneration is maintained even without the performance of the promised work.
The calculation of the amount of remuneration to be paid during the employee’s vacation is regulated in Section 11 of the Federal Vacation Act (BUrlG).
The payment of vacation pay should be distinguished from the payment of (additional) vacation bonuses (also called vacation gratifications). Vacation bonuses are an additional gratification from the employer and are generally a voluntary decision of the employer, while there is generally a statutory entitlement for the employee to the vacation pay discussed here.
According to Section 11 (1) Sentence 1 BUrlG, vacation pay is based on the average earnings that the employee received in the last thirteen weeks before the start of the vacation.
It is not crucial what specific payments the employee received in the thirteen weeks, but rather what earnings the employer owes for that period.
This also means that the employer can ignore any mistakenly overpaid wages when calculating the vacation pay.
If the wages are, as is often the case, calculated monthly, the thirteen weeks of Section 11 BUrlG correspond to the earnings from three monthly calculations.
Expenses, travel allowances, Christmas bonuses, loyalty bonuses, and similar components of the remuneration that are granted regardless of the work performed during a specific period are generally not included in the calculation basis for vacation pay.
Furthermore, overtime pay that the employee has earned in the last thirteen weeks before the vacation starts is not included in the calculation of the average earnings for the last thirteen weeks.
Below is a listing of various types of remuneration and their treatment under Section 11 BUrlG:
1.) Piece Rate Pay
Piece rate pay is a performance-based form of remuneration. Unlike time-based wages, where the employee is paid for a specific time period of work, piece rate pay compensates the employee based on the amount of work performed (e.g., a number of produced units).
Regarding the vacation pay to be paid, piece rate pay should not be based on general average values of achievable performance, but on the individual piece rate pay earned by the employee in the last thirteen weeks.
2.) Commission Pay
Commission pay is the most commonly used form of remuneration in consulting. It is based on the number or volume of product sales and can be structured either as exclusive remuneration or as a performance-based supplement to a fixed salary.
For commission pay, it is crucial for the calculation of vacation pay to determine whether and how much commission claims of the employee became due in the last thirteen weeks before the vacation begins.
If commission payments are irregularly due (e.g., in seasonal businesses), this may lead to unreasonable results. In such cases, it may be appropriate to extend the reference period for calculating vacation pay to one year (cf. Federal Labor Court, Judgment of 06.12.1995, Ref.: 5 AZR 237/94).
3.) Allowances
Often, in addition to the base salary, so-called allowances are paid. These include shift allowances, hazard pay, foreign allowances, on-call duty allowances, or so-called dirt allowances.
Since these allowances are paid as compensation for the work performed, they are considered as part of the remuneration under Section 11 BUrlG.
4.) Expense Allowances
Pure expense allowances, which are paid solely for the expenses incurred by the employee during working hours, should not be used for the calculation of vacation pay, as they are not a compensation for the work performed.
5.) In-Kind Benefits
In-kind benefits are all non-monetary benefits provided by an employer to an employee, such as utility allowances, free meals, or the private use of company cars.
If these in-kind benefits are granted as part of the remuneration, they must also continue to be provided during the vacation.
If the employer cannot provide the in-kind benefits during the vacation due to the employee’s absence, the value of the in-kind benefits should be appropriately compensated in money.
Important Notice: The content of this article has been prepared to the best of knowledge and belief. The complexity and constant changes of the subject matter necessitate the exclusion of liability and warranty.
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