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The prohibition on payment in lieu during employment
As long as the employment relationship exists, leave cannot be replaced by money. Leave serves recuperation, and that purpose cannot be paid out. An agreement providing otherwise is ineffective.
In practice that means: anyone realising in November that they cannot fit their days in cannot have them paid out. They can only take them or, under the conditions of section 7(3) BUrlG, carry them over.
The calculation
Payment in lieu is at the holiday pay that would have accrued for the days in question, that is on the average of the last thirteen weeks (section 11 BUrlG).
The payment is remuneration subject to tax and contributions. It is not damages and not a severance payment.
Also where the employment relationship ends with death
The European Court of Justice has held that the entitlement to financial compensation for leave not taken also exists where the employment relationship ends with the death of the employee. The entitlement passes to the heirs (judgments of 06/11/2018, C-569/16 and C-570/16).
Example: leaving on 31 July
- Annual entitlement 30 days, qualifying period complete, departure after 30 June.
- Full annual entitlement, no reduction to twelfths.
- Taken: 12 days, outstanding: 18 days.
- At 144.46 euros of holiday pay per day: 18 × 144.46 euros = 2,600.28 euros gross.
Common mistake
On a departure after 30 June, the entitlement gets reduced pro rata. Anyone who has completed the qualifying period and leaves in the second half of the year has the full annual entitlement, and it has to be paid in lieu in full.
This is not legal advice; for a specific case at your workplace you are better off asking someone qualified to give it.
- Section 7(4) BUrlG
- „Where leave can no longer be granted in whole or in part because the employment relationship ends, it is to be paid in lieu.“
Published by: AMNAU GmbH
Editorial responsibility: Ugur Aydogan, Product development.
Last reviewed: 2 September 2026