Vacation pay (Urlaubsgeld) is a voluntary bonus payment from employers in Germany – there is no statutory entitlement to it. However, entitlement can arise from employment contracts, collective bargaining agreements, works council agreements, or established company practice. Currently, only 44% of employees in Germany receive vacation pay, with collective bargaining coverage being the decisive factor.

Definition: What Is Vacation Pay (Urlaubsgeld)?

Vacation pay (Urlaubsgeld) is a special bonus that employers pay in addition to regular salary – typically once a year before the main holiday season. Its original purpose: to provide employees with financial support for their annual vacation.

Important: Vacation pay (Urlaubsgeld) should not be confused with vacation entitlement pay (Urlaubsentgelt). Vacation entitlement pay refers to the regular continued payment of wages during vacation – this is a statutory entitlement under the German Federal Vacation Act (Bundesurlaubsgesetz, BUrlG). Vacation pay, on the other hand, is an additional bonus with no legal basis.

A further distinction applies to recreation allowance (Erholungsbeihilfe): This is tax-advantaged under certain conditions (maximum €156 per year for employees), while vacation pay is fully taxable.

Entitlement to Vacation Pay – 4 Possible Legal Bases

Since there is no statutory entitlement to vacation pay, a binding claim can only arise in four ways:

1. Employment Contract

If vacation pay is agreed in the individual employment contract, there is a contractual entitlement. The amount, payment date, and any conditions are determined by the contract clause.

2. Collective Bargaining Agreement (Tarifvertrag)

Collective bargaining agreements frequently establish an entitlement to vacation pay. Prerequisite: The company is bound by collective agreement (through membership in an employers' association) or the agreement has been declared universally binding. According to the WSI Collective Agreement Archive, 72% of employees in companies bound by collective agreements receive vacation pay – without such agreements, only 34% do.

3. Works Council Agreement (Betriebsvereinbarung)

A works council agreement between employer and works council can also establish vacation pay entitlement. The works council has co-determination rights regarding distribution principles (Section 87 Para. 1 No. 10 of the Works Constitution Act).

4. Established Company Practice (Betriebliche Übung)

If an employer pays vacation pay for at least three consecutive years at the same amount without explicit reservation, an established company practice is created. Employees can then claim a legal entitlement for the future.

HR Tip: To avoid established company practice, a voluntariness clause must be clearly and unambiguously formulated. The Federal Labor Court (BAG) has ruled: If bonus payments are precisely defined by conditions and amount in the employment contract, a voluntariness clause cannot apply simultaneously – the clause would then be invalid (BAG, February 20, 2013, 10 AZR 177/12).

Vacation Pay 2025 – Current Figures and Facts

Who Receives Vacation Pay?

According to the current WSI analysis (2025), only 44% of all employees in the private sector receive vacation pay – a decrease from the previous year (2024: 46.8% according to the Federal Statistical Office).

The key influencing factors:

• Collective bargaining coverage: 72% of employees with collective agreements receive vacation pay; without such agreements, only 34%.
• Company size: In large companies (over 500 employees), 59% receive vacation pay; in smaller companies (under 100 employees), only 36%.
• Region: In Western Germany, 46% receive vacation pay; in Eastern Germany, only 33%.

How Much Is Vacation Pay?

The amount of collectively agreed vacation pay varies significantly by industry. The WSI Collective Agreement Archive shows a range for 2025 from €186 to €2,820 (each for employees in the middle wage group).

Industries with high vacation pay:

• Wood and plastics industry (Westphalia-Lippe): €2,820
• Metal industry: approx. €2,900
• Printing industry and insurance sector: above average

Industries with low vacation pay:

• Agriculture in Mecklenburg-Western Pomerania: €186
• Hotel and restaurant industry: €195-240
• Temporary employment: average €326-446

The average for employees covered by collective agreements was €1,644 gross in 2024. There is a difference of around €500 between Western Germany (€1,692) and Eastern Germany (€1,196).

Note: In the public sector (TVöD collective agreement), there is no separate vacation pay. Instead, employees receive an annual special payment that combines vacation and Christmas bonuses, paid in November.

Vacation Pay in Special Cases

Upon Termination

As a general rule, vacation pay already paid does not need to be repaid upon termination. Exception: A valid repayment clause in the employment or collective agreement. However, the Federal Labor Court sets strict standards for such clauses. In case of mid-year departure, the entitlement may be reduced to pro-rata vacation pay.

In Mini-Jobs (Marginal Employment)

Mini-jobbers have no statutory entitlement to vacation pay. However, the equal treatment principle applies: If full-time employees in the same company receive vacation pay, mini-jobbers are also entitled – proportionally to their working hours. Caution: Vacation pay can lead to exceeding the €520 monthly limit.

During Parental Leave and Illness

During parental leave, the employment relationship is suspended. Whether there is an entitlement to vacation pay depends on the purpose of the payment: If vacation pay exclusively rewards work performance, there is no entitlement. If it also rewards company loyalty, a pro-rata entitlement may exist. The legal situation is similar for illness – the contractual provisions are decisive.

Frequently Asked Questions About Vacation Pay

Is vacation pay legally required in Germany?

No, there is no statutory entitlement to vacation pay. Entitlement can only arise from employment contracts, collective bargaining agreements, works council agreements, or established company practice. Do not confuse this with vacation entitlement pay – continued wage payment during vacation is legally guaranteed.

When is vacation pay paid out?

Typically in June or July, before the main holiday season. The exact timing depends on contractual agreements. Some collective agreements also provide for payment per vacation day taken.

What is the difference between Urlaubsgeld and Urlaubsentgelt?

Urlaubsentgelt (vacation entitlement pay) is the regular continued payment of wages during vacation – you have a statutory entitlement to this under the Federal Vacation Act. Urlaubsgeld (vacation pay) is an additional bonus payment with no legal basis.

Does vacation pay need to be repaid upon termination?

Generally no. Vacation pay already paid only needs to be repaid if a valid repayment clause exists. The Federal Labor Court sets strict standards for such clauses.

Do mini-jobbers receive vacation pay?

No statutory entitlement, but the equal treatment principle applies: If full-time employees receive vacation pay, mini-jobbers are also entitled on a pro-rata basis.

Is vacation pay tax-free?

No, vacation pay is subject to full income tax and social security contributions. It is taxed as a special payment. An alternative can be the tax-advantaged recreation allowance (max. €156/year for employees).

When does established company practice arise?

After at least three years of payment at the same amount without reservation. To prevent this, the voluntariness clause must be clearly and unambiguously formulated.

Conclusion

Vacation pay is a voluntary employer benefit with no statutory entitlement in Germany. For HR professionals, it is important to know the four possible legal bases for entitlement – especially established company practice can quickly lead to unintended obligations. Clear contract drafting and transparent communication can help avoid legal risks.

For companies, vacation pay can be an effective tool for employee retention and strengthening the employer brand – especially in industries with strong competition for skilled workers.

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Sources

• WSI Collective Agreement Archive: Vacation Pay 2025. Institute of Economic and Social Research (WSI) of the Hans Böckler Foundation, 2025. https://www.wsi.de/de/tarifarchiv.htm
• Press Release: 46.8% of Collectively Covered Employees Receive Vacation Pay in 2024. Federal Statistical Office (Destatis), July 2024.
• Federal Labor Court Ruling on Voluntariness Clauses (10 AZR 177/12). Federal Labor Court (BAG), February 20, 2013.
• Vacation Pay: You Get More with a Collective Agreement! German Trade Union Confederation (DGB), 2025. https://www.dgb.de/service/ratgeber/urlaubsgeld/
• Vacation Pay: Obligation or Bonus? Haufe Personal, 2025.