Vacation Pay, Carry-Over Leave, and Special Leave in Germany: What Employers Need to Know

German vacation law is among the most complex in Europe — and also one of the areas employers most frequently get wrong. Not out of bad intent, but because the rules are scattered across multiple sources, partially superseded by collective agreements, and regularly updated through court decisions.

For small and mid-sized businesses without an in-house legal team, this is a particular challenge. This article gives you a practical overview of vacation law for small businesses in Germany — from the German Federal Leave Act (Bundesurlaubsgesetz, BUrlG) to carry-over leave to special leave — and shows how modern absence software takes the compliance burden off your plate.

Note: This article is for general information only and does not substitute individual legal advice.

---

The German Federal Leave Act (BUrlG): The Legal Foundation

The German Federal Leave Act (Bundesurlaubsgesetz, BUrlG) is the legal basis for every employee's entitlement to paid leave in Germany. In force since 1963, it has been supplemented multiple times by court decisions and European Union law.

Statutory Minimum Leave

The German Federal Leave Act (BUrlG) guarantees every employee a minimum of 24 working days of leave per calendar year — calculated on the basis of a six-day working week. For a five-day working week (Monday to Friday), this translates to exactly 20 working days.

In practice, most German employers grant more: collective agreements often provide for 25 to 30 days, and many small businesses voluntarily offer 28 or 30 days to remain competitive in the war for talent.

Waiting Period in the First Year of Employment

In the first year of employment, full leave entitlement does not arise until six months of service have been completed (the waiting period). Before that, employees are entitled to pro-rated leave: one-twelfth of the annual entitlement for each full month of employment.

Example: An employee starts on 1 April. Their annual leave entitlement is 24 days. Up to 30 September (end of the waiting period), they are entitled to 6 × 2 = 12 days. From 1 October, the full entitlement of 24 days arises — minus any days already taken.

This calculation is error-prone when done manually. Absence software computes it automatically based on the entered start date.

Granting and Timing of Leave

In principle, an employee has the right to take leave at the time they request. This right can, however, be limited by operational requirements or the leave preferences of other employees. This gives the employer the right to decline leave requests — but only with objective reasons.

---

Carry-Over Leave: When Does Unused Vacation Lapse?

What happens to untaken leave is one of the most common sources of uncertainty under German vacation law for small businesses. The legal position has shifted significantly over recent years due to several European Court of Justice (ECJ) rulings.

The Old Rule: Lapse on 31 March

Under the German Federal Leave Act (BUrlG), leave must generally be taken within the current calendar year. If it cannot be taken in full due to urgent operational or personal reasons, it may be carried over to the first quarter of the following year — deadline: 31 March.

Traditionally, leave not taken by 31 March of the following year lapsed without compensation.

The New Legal Position After the ECJ: Employer's Duty to Act

The European Court of Justice has clarified in several rulings — most recently confirmed by the Federal Labor Court (Bundesarbeitsgericht) — that leave only lapses if the employer actively notified the employee that their carry-over leave was at risk of lapsing and urged them to take it.

This has far-reaching implications: employers who do not proactively and timely alert employees to outstanding leave cannot later rely on the lapse rule. In extreme cases, leave entitlements can accumulate over years and be claimed as financial compensation upon termination.

What this means for small businesses:

• You must actively inform employees when they have carry-over leave
• This notification should be documented (in writing or digitally)
• Best done in good time — for example in October or November of the current year

A good absence management system sends automated reminders: if an employee still has more than five carry-over days left in November, both they and their manager receive a notification. This protects the employer and the employee equally.

Special Case: Illness and Carry-Over Leave

If an employee is on long-term sick leave, their leave entitlement does not lapse immediately. Under ECJ case law, the entitlement survives for 15 months after the end of the relevant leave year — i.e., until 31 March of the year after next.

For extended periods of illness, a significant leave entitlement can therefore accumulate, which must be paid out financially when the employment relationship ends.

---

Special Leave: What Is Legally Required?

Special leave refers to paid time off for particular personal events. Unlike regular vacation, it is not deducted from annual leave entitlement.

The German Federal Leave Act (BUrlG) itself addresses special leave only in rudimentary terms. The primary legal source is Section 616 of the German Civil Code (Bürgerliches Gesetzbuch, BGB), which provides that an employee is entitled to continued pay for a temporary, personally unavoidable absence.

Typical Special Leave Scenarios and Common Arrangements

Marriage / registered civil partnership: In practice, 1–3 days of special leave is standard. Many collective agreements provide for one day. There is no statutory requirement for a specific number of days.

Birth of a child (for the non-birthing parent): There is also no statutory minimum outside of maternity protection law. Collective agreements frequently grant 1–2 days. In practice, 1–3 days is common.

Death of a close family member: For the death of a spouse, child, or parent, 1–3 days of special leave is standard and legally reasonable. For more distant relatives (siblings, grandparents), 1–2 days is typical.

Moving house: One day of special leave for a work-related move is widely accepted. There is no legal entitlement for a private move — but many employers voluntarily grant one day.

Serious illness of a child: Parents are entitled under Section 45 of Social Code Book V (Sozialgesetzbuch V) to child sickness benefit when their child (under 12) is ill — 10 days per child per parent per year (20 days for single parents). This is not leave granted by the employer, but a benefit paid by the health insurer.

Collective Agreements and Works Agreements

If your company is covered by a collective agreement (Tarifvertrag), that agreement takes precedence over individual arrangements. Collective agreements often contain detailed special leave provisions that you must comply with — even if you never explicitly agreed to them.

Tip: Check whether your company falls under a collective agreement (generally applicable agreements apply even without union membership) and configure the relevant rules in your absence management system.

---

Vacation Pay: No Statutory Entitlement

A common point of confusion: vacation pay (an additional payment made during leave) is not legally required in Germany. There is no provision in the German Federal Leave Act (BUrlG) mandating a bonus payment.

An entitlement to vacation pay arises only through:

• A collective agreement
• A works agreement
• An individual contractual arrangement
• Established company practice (if you've voluntarily paid it for several consecutive years)

That last one is particularly tricky: if you've voluntarily paid vacation pay for three years running, a legally binding entitlement can arise — even without a written agreement. To avoid this, include an explicit non-binding reservation (Freiwilligkeitsvorbehalt) when making the payment.

---

How Absence Software Automates Compliance

German vacation law for small businesses is complex enough that even experienced HR professionals make mistakes. Digital absence systems help prevent those mistakes — not through legal advice, but through automated processes.

Automatic Leave Calculation

The system calculates leave entitlement based on start date, part-time ratio, and contract details. No manual arithmetic, no rounding errors.

Carry-Over Tracking and Reminders

The system always knows exactly how many vacation days each employee has left. Automated reminders give timely notice of pending lapse — and document that the notification was given. This is critical for legal protection.

Configurable Special Leave

Define once which special leave categories apply in your company and how many days each carries. Special leave is then recorded correctly, shown separately, and not deducted from annual leave entitlement.

Documentation and Audit Trail

Every leave request, approval, and rejection is stored with a timestamp. In the event of a dispute or audit, you have complete documentation — with no extra effort on your part.

GDPR-Compliant Data Storage

HR data is subject to the General Data Protection Regulation (GDPR). A reputable system stores all data within the EU, provides you with a data processing agreement, and makes it easy to fulfill data deletion requests.

---

Conclusion

German vacation law for small businesses isn't an impenetrable mystery — but it has enough pitfalls to cause even well-meaning employers costly mistakes. The key takeaways:

• At least 20 working days of leave per year (five-day week)
• Carry-over leave only lapses if the employer has actively notified the employee of the impending lapse
• For long-term illness: a 15-month window rather than the standard 31 March deadline
• Special leave is only minimally regulated by statute — collective agreements and established practice are what matter
• Vacation pay is not a legal entitlement, but can become one through consistent practice

Digital systems help you apply all these rules correctly — without needing to be a lawyer.

If you'd like to learn more about how to digitize your absence tracking in practice, read our article on Absence Tracking for Small Businesses. And for how to structurally avoid vacation conflicts, see our piece on Team Vacation Planning.

---

TodayOff automatically tracks carry-over leave, special leave, and lapse deadlines — GDPR-compliant and built for German SMBs. Set it up now. → https://app.todayoff.de