Holiday and Short-Time Work: What Happens to Your Entitlement
Short-time work bites not only into your monthly budget but also into your holiday entitlement — in a way that surprises many employees. If you do not work at all for months, you may not accrue holiday for that period either. Conversely, an employer cannot simply order holiday at will to avoid short-time work. The legal position is now well settled, but little known.
Zero-hours short-time work reduces holiday entitlement
In 2021 the Federal Labour Court held that working days fully lost during zero-hours short-time work reduce statutory holiday entitlement pro rata. The reasoning is straightforward: holiday exists to allow recovery from work performed. Where the duty to work falls away entirely, no need for recovery arises. For every three full months of zero-hours short-time work, annual leave is therefore reduced by a quarter.
With a statutory minimum of 20 days on a five-day week that means: three months of zero-hours short-time work cost five holiday days, six months cost ten. What matters is the number of working days fully lost, not the calendar month as such. Contractual leave above the statutory minimum is only reduced where the employment or collective agreement expressly provides for it — otherwise it remains untouched.
With reduced hours the entitlement survives
Where working time is merely shortened without whole days being lost, holiday entitlement remains in full. Someone working five days a week at four hours instead of eight loses not a single holiday day. It only becomes critical where short-time work is organised as whole free days — a three-day week, for instance. A pro rata reduction can then come into play, because the number of working days per week falls.
The distinction therefore matters already at the works agreement stage: whether short-time work is implemented as days off or as a daily reduction in hours has direct consequences for holiday. Employees and works councils should raise this point actively before the agreement is signed.
How holiday pay is calculated
If you take holiday during short-time work, it is not paid at the reduced rate. § 11 (1) sentence 3 of the Federal Holiday Act expressly provides that reductions in earnings due to short-time work are disregarded when holiday pay is calculated. For holiday days you therefore receive full pay based on your average earnings over the last thirteen weeks before the holiday begins — without the short-time deduction.
For those holiday days there is then no entitlement to the allowance, because no loss of pay occurs. Arithmetically that is the better deal: full holiday pay beats the combination of reduced wages plus allowance in practically every constellation. To see how large the difference is on your salary, set the loss of work in the short-time work calculator first to zero and then to your actual figure.
Leftover holiday has to be used first
Before the allowance can be paid, § 96 SGB III requires that the loss of work be unavoidable. That includes using up leftover holiday from the previous year, so far as no prior holiday wishes of the employees stand in the way. Current-year leave, by contrast, need not be consumed in advance if it is already planned or if you wish to take it at another time.
In practice this often causes friction. Record holiday wishes in writing and register planned holidays early — a holiday already approved cannot be repurposed after the fact to avoid short-time work. Credit on a working time account must generally be run down first as well, though collective and statutory exceptions exist for protected balances.
What to do concretely
At the start of short-time work, check three things: how is the short-time work organised — whole days or shortened days? Does your employment contract contain a reduction clause for contractual leave above the statutory minimum? And how much leftover holiday is still open? With those answers, holiday entitlement can be estimated reliably. For the financial side, work your months through in the short-time work calculator. This article gives a general overview and does not replace individual employment law advice.