Reference period for calculating the entitlement to vacation pay in lieu

BAG - June 3, 2025, 9 AZR 137/24

On June 3, 2025, the Federal Labour Court (BAG) rendered an important ruling on the calculation of vacation pay in lieu of leave. The decision concerns employees who were absent for a longer period of time through no fault of their own, for example due to illness or because they received a full disability pension. The ruling clarifies how the financial compensation for vacation not taken is to be calculated in such cases.

Background to the case

The employee had been working for her employer since December 2012. She worked six hours a day, five days a week and had an annual leave entitlement of 26 days. In 2018, she was unable to work due to illness from December and received a full disability pension from October 2019. The employment relationship ended in May 2022. The employee still had remaining leave from 2018, which she was unable to take due to her illness and subsequent full disability pension. She demanded financial compensation from the employer for these vacation days.

The point of contention in the appeal was how much this vacation pay should be. The employer was of the opinion that only the earnings in the last 13 weeks in which the employee had actually received remuneration should count for the calculation. The employee, on the other hand, demanded that the minimum wage applicable at the time of termination of the employment relationship (2022) should be used for the calculation.

Legal basis

The Federal Leave Act (BUrlG) stipulates that leave that can no longer be taken due to termination of the employment relationship must be compensated (Section 7 (4) BUrlG). The amount of compensation is based on the average earnings of the last 13 weeks before the start of the leave (§ 11 Para. 1 BUrlG). Reductions in earnings due to absences through no fault of your own, such as illness or a full disability pension, may not lead to a reduction in the entitlement (§ 11 Para. 1 Sentence 3 BUrlG).

Key statements of the ruling

The BAG has clarified that the "usual pay" is to be used as the basis for calculating vacation pay.  The employee should receive remuneration that is comparable to the remuneration for periods of work performed.

This means that even if the employee has not worked in the last 13 weeks before the end of the employment relationship, for example because they were ill or receiving a full disability pension, it is calculated as if they had worked normally.

The court emphasized that periods in which the employee receives a full disability pension are also deemed to be periods of absence through no fault of their own. The claiming of such a pension is not culpable absence from work, but is due to illness or disability. For this reason, the employer may not reduce the entitlement to leave compensation.

The minimum wage applicable at the time of termination of the employment relationship is therefore decisive for calculating the amount of vacation pay in lieu of leave, unless there are higher contractual entitlements.

In this case, this meant that the employee was entitled to payment of 16 days' leave, calculated at the minimum wage of 9.82 euros per hour, which applied in 2022. As she would have worked six hours on each working day, this resulted in a daily rate of 58.92 euros gross. In total, the employer had to pay 942.72 euros gross for the 16 days of leave.

Practical significance

The ruling is particularly relevant for employees who have been absent due to illness or other reasons for which they are not responsible and whose employment relationship ends before they have been able to take their vacation. It protects them from having their entitlement to vacation pay reduced as a result of the absence. When calculating vacation pay in lieu of leave, employers must act as if the employee had worked normally during the reference period and earned accordingly (in the case of absences through no fault of their own).