Remaining holiday entitlement at the end of the year – when does it actually expire.

Many employees are told that they must take their remaining holiday entitlement by the end of the year, otherwise it will expire. However, this is only true under certain conditions. What employees need to bear in mind and what role the employer plays:

“Leave must be granted and taken in the current calendar year.” This is stated in Section 7 (1) sentence 1 of the Federal Leave Act. As is so often the case, a look at the law helps, but is not enough for practical purposes. On the one hand, the employer must fulfil its obligations to cooperate so that a leave entitlement actually expires. This means firstly that the employer must enable the employee to take the leave entitlement. On the other hand, the employer must request the employee to take the leave and inform them in good time that it will expire at the end of the year. The burden of proof lies with the employer. If the employer fails to comply with their obligation to provide information, any leave that has not expired by 31 December will be added to the leave accrued for the following year.

Holiday carry-over: when and how is it possible?

According to section 7 (1) sentence 2 of the Federal Leave Act, leave may only be carried over to the following year “if urgent operational reasons or reasons relating to the employee justify this”. If one of the reasons listed below applies, the holiday entitlement will be automatically carried over to the first quarter of the following year. However, this is also subject to the proviso that it can only be granted and taken before 31 March.

What matters as an employer

Fulfilling the obligation to cooperate is the most important point for employers when it comes to the expiry of holiday entitlement. It should be noted that this must refer to the holiday entitlement for a specific year. Although written notification is sufficient, general references to expiry in notices, leaflets or circular emails are insufficient. In addition, the employer must be able to prove that they have actually enabled the employee to take the holiday entitlement. The employee must be in a position to decide freely whether to take the holiday.

Employees who are permanently unable to work due to illness

To prevent the holiday entitlement of employees who are continuously unable to work due to illness from accumulating indefinitely, until recently case law held that any entitlement would automatically expire at the end of 31 March of the second following year in which it was accrued. This is where the so-called 15-month period comes from. However, this case law was superseded in 2022 by a decision by the European Court of Justice. Since then, employers have been required to fulfil their obligations to cooperate even in the case of employees who are permanently unable to work so that the entitlement can expire. This also applies if the employee initially worked during the holiday year and then became permanently unable to work due to illness. In this case, the employer would have to fulfil its obligations to cooperate beforehand so that the entitlement expires after the 15-month transition period. However, the situation is different if the failure to fulfil the obligation to cooperate was not the reason why the employee did not take the leave. For example, because they were continuously unable to work for the entire fifteen-month period. The entitlement then expires even if the obligations to cooperate are not fulfilled.