Holiday on Termination: Twelfths and Pay-Out
When an employment relationship ends, a single date often decides several hundred or several thousand euros. The reason is a threshold in the Federal Leave Act that runs exactly through the middle of the year and determines whether the full annual leave is owed or merely a fraction of it. Anyone who can still influence their leaving date should know about it.
The mid-year threshold
§ 5 (1)(c) BUrlG orders twelfths where an employee leaves in the first half of the calendar year after completing the qualifying period. Conversely: anyone leaving in the second half of the year, having completed the qualifying period, keeps the full annual entitlement — even where the employment lasted only seven of the twelve months that year.
The effect is substantial. On 30 contractual days and a leaving date of 30 June the entitlement is 30 × 6 ÷ 12 = 15 days; leaving on 31 July it is a full 30 days. A single month doubles the entitlement. At a daily rate of around 166 euros that means a pay-out of roughly 2,490 euros in the first case and around 4,980 euros in the second — a difference of almost 2,500 euros gross. Both variants can be compared in seconds in the holiday entitlement calculator.
The special case of the first year
Anyone leaving again during their joining year almost always falls under the twelfths rule — either under subparagraph (b), because the qualifying period had not been completed, or under subparagraph (a), because it could no longer be completed within the calendar year. What is counted are full months of the employment's existence. An employment beginning on the 15th of a month only yields a full month on the 14th of the following month. Conversely, § 5 (3) BUrlG operates as a protective provision: where more leave has already been granted in a subparagraph (c) case than the twelfths rule allows, the holiday pay already paid cannot be reclaimed. So someone who took three weeks in January and resigns in March owes nothing back.
From garden leave to pay-out
When the employment ends, outstanding leave is as a rule no longer taken but paid out. § 7 (4) BUrlG puts it briefly: if the leave can no longer be granted in whole or in part because the employment is ending, it must be compensated. The pay-out is a purely monetary claim and arises when the employment ends.
A period of release from duties often precedes the termination. The wording is then decisive: only an irrevocable release expressly set against the leave entitlement discharges it. A revocable release does not — the leave remains outstanding and must be paid out. Read the wording of the termination or settlement letter closely.
How the pay-out is calculated
The amount follows the holiday pay rule in § 11 (1) BUrlG: what counts is average earnings over the last thirteen weeks. In practice that means three gross monthly salaries, divided by 13 weeks and by the working days per week. The formula is: daily rate = gross monthly salary × 3 ÷ 13 ÷ working days per week.
A worked example: 4,200 euros gross per month, five-day week. (4,200 × 3) ÷ 13 ÷ 5 = roughly 194 euros per day of leave. With twelve outstanding days that gives a pay-out of about 2,328 euros gross. Overtime pay is expressly excluded from this calculation, while permanent pay rises within the reference period are taken into account.
Tax, social insurance and deadlines
A holiday pay-out is ordinary taxable pay subject to social insurance contributions — unlike a severance payment, which is contribution-free. It is added to the final payroll month and can noticeably raise the deduction there, because the wage tax tables initially treat the one-off amount like regular pay. Part of it comes back through the annual tax return.
For jobseekers there is a further point: a holiday pay-out can postpone the start of unemployment benefit, because entitlement is suspended for the days compensated. Register as seeking work within the deadline all the same and submit the payslip. Watch out too for cut-off clauses in employment and collective agreements requiring written assertion within three months — claim the pay-out promptly, in writing and with the arithmetic set out.
Conclusion
Two figures are worth knowing before any resignation: your entitlement on leaving in the first half of the year and on leaving in the second. The gap can amount to a month's salary. Run both scenarios through the holiday entitlement calculator before signing a settlement agreement. This overview is a non-binding orientation and does not replace employment or tax advice.