Residual leave in a termination agreement: everything you need to know

Leaving a job can be associated with many questions and challenges. One of these issues concerns the employee’s remaining leave. What happens to residual leave when it leaves the employer?

Some employees mistakenly believe that the remaining leave simply expires. However, employees in Germany have the right to settle the residual leave. This means that they can receive financial compensation for the remaining leave that they were not able to use. Compensation is usually made by a clause in the termination agreement.

The termination agreement is a joint agreement between the employer and the employee that terminates the employment contract. In many cases, such an agreement is the best solution for both sides and avoids a lengthy legal dispute. So if you are planning to terminate your employment or your employer has given you notice, you should definitely also address the issue of residual leave in the termination agreement.

In this article, you will learn everything you need to know about the settlement of residual leave in the termination agreement in order to be best prepared and know your rights.

The termination agreement and residual leave still available

A termination agreement is a contract between employer and employee that ends the employment relationship. In this agreement, questions regarding the settlement of the remaining leave can also be settled. But what happens if the employee still has residual leave, but it is not explicitly mentioned in the termination agreement?

In principle, the employee is entitled to compensation for his remaining vacation. This results from the Federal Leave Act. It is irrelevant whether the employee has resigned or been given notice of termination. The employer must pay out the remaining leave if the employee can no longer take it.

However, it can also be explicitly agreed in the termination agreement that the remaining vacation will be compensated. However, it is important that this is clearly stated in writing. The employee should therefore make sure that the termination agreement contains a provision for the settlement of remaining leave.

• If the termination agreement does not contain a provision on residual leave,
• the employee is entitled to compensation,
• however, a clear written provision in the termination agreement can be useful.

This agreement should also specify the amount of the entitlement, the deadlines and other details regarding the settlement of the remaining leave. It is advisable to seek advice on this from an employment law expert.

Have residual leave compensated in the termination agreement

Anyone who quits their job or is given notice and still has residual leave often asks themselves the question: How will the residual leave be compensated??? One possibility is to have the remaining vacation compensated in the termination agreement.

In the termination agreement, the employee and employer can agree that the remaining vacation will be paid out with the last salary payment. It is also possible to offset the remaining leave against unpaid leave or severance pay.

It is important to make sure that the remaining leave is calculated correctly in the termination agreement. Legal requirements and collective bargaining regulations must also be taken into account.

If the remaining leave is not compensated in the termination agreement, it usually expires automatically at the end of the year. In exceptional cases, however, it may be carried over to the next year or paid out upon request.

• Bottom line: come to an agreement with your employer and have the remaining vacation compensated in the severance agreement to avoid losing vacation time.

Advantages and disadvantages of compensation for remaining vacation in a termination agreement

The settlement of the remaining leave in the termination agreement can have advantages and disadvantages. One advantage is that the employee is paid the money for the remaining leave immediately and thus receives financial support. This can be particularly advantageous in financially difficult times.

Another possibility is that the employee can start working more quickly. If the employee has found a new job, he or she can start sooner without having to compensate for the remaining leave beforehand. For many employees, it is difficult to take the leave within the given deadlines, especially if it is difficult to get this time during the working year.

However, there are also disadvantages that can occur when the remaining vacation is settled in the termination agreement. One disadvantage is that the employee forgoes the vacation that he should actually enjoy and rest. In many cases, the employee needs just this leave to recharge his batteries and prepare for the next challenges.

Another negative side may be that the employee may have to pay taxes and duties. Compensation for remaining leave may be considered additional income, which can affect tax liability.

Ultimately, the decision as to whether residual leave should be compensated depends on each person individually. It is important to weigh all the pros and cons and make a decision that best fits one’s needs.

Compensation of the remaining leave in the termination agreement

One of the most important issues when agreeing on a termination agreement is the compensation of the remaining leave. It is important to know that the employee is generally entitled to the full vacation entitlement, even if he has not yet taken all of his vacation at the time of leaving the company.

In the termination agreement it can be agreed that the remaining vacation will be compensated. This means that the employer pays the employee financial compensation for the remaining leave. The amount of compensation is calculated on the basis of the employee’s hourly or daily rate and the number of vacation days still outstanding.

However, there is also the possibility to take the remaining leave within the notice period. In this case, the employer must give the employee the opportunity to take any outstanding vacation days until the end of the notice period.

Another option is to transfer the remaining leave to the new employment relationship. However, both parties must agree to this and it must be ensured that the leave can actually be taken in the new employment relationship.

• Conclusion: The compensation of the remaining vacation in the termination agreement can be agreed upon in different ways. It is important to discuss all options in advance and find a suitable solution.