Whether working from home in Germany or abroad, trust-based leave or where-you-want jobs – Flexibility and greater work-life balance are decisive factors when it comes to Work 4.0 and New Work concepts. This is also why companies are increasingly offering their employees sabbaticals to improve their image as an attractive employer. This gives employees the opportunity to fulfill their dreams of traveling the world, of continuing their education or renovating a house. Companies stand to benefit, too: Ideally, employees return with better qualifications, broader horizons, motivated and full of ideas. Finally, sabbaticals can serve as a means of retaining older employees over 55 when they need time to care for family members or if they need longer leave to recuperate beyond their annual vacation. In the event of a downturn in orders, sabbaticals spare employers the costs while enabling them to forgo layoffs. Good planning and consultation in advance are essential to ensure that both sides benefit. We outline the key aspects for employers:
- Are employees entitled to a sabbatical?
A fundamental legal entitlement to a sabbatical with the right to return does not exist. Employers need to approve every sabbatical on an individual basis. There are exceptions for civil servants and employees in the public sector. In addition, some collective bargaining agreements regulate sabbaticals for employees. Also, for example, if employees at companies with more than 15 employees would like leave to care for close relatives pursuant to Section 7 (1) of the Caregiver Leave Act (PflegeZG), they have the option of taking up to six months of unpaid leave without social insurance.
- How long does a sabbatical last?
In most cases, employers and employees agree on a period of three to twelve months. In principle, a sabbatical year can also be extended. However, companies are usually leery of this option because of concerns about difficulties reintegrating into the workplace.
- What models and financing options exist?
There are various models for the concrete implementation and financing of a sabbatical:
- Special leave for up to one month: Sometimes workers need longer leave but not necessarily for an entire year. The solution is a simple model: A four-week special leave of absence. The employee does not receive their salary for the duration of the special leave. However, they remain employed and, therefore, covered by social insurance. Employees who would like to use their accumulated annual leave and add four weeks of special leave, then have at least two months off. Yet employees have to be careful because if the special leave lasts longer than one month, the employment relationship is considered to have been interrupted and they are no longer covered by social insurance.
- Unpaid leave of absence:An unpaid leave of absence is also simple and straightforward. Essentially, there is no limit to the duration of the absence. The employment relationship can be resumed at any time without having to conclude a new employment contract. However, it is important to bear in mind that the employment relationship will be suspended if the leave of absence lasts longer than four weeks. This means that the employee no longer has social insurance coverage. Instead, they have to take care of their health and long-term care insurance on their own. The same applies to pension and unemployment insurance. However, there is no mandatory insurance for these. On the other hand, those who do not make voluntary contributions will later receive a smaller pension because of their sabbatical year.
- Voluntary wage sacrifice: As an alternative, the employer and the employee may reach an agreement where the employee initially works full-time yet sacrifices part of their salary. The part sacrificed is then paid out during the sabbatical. As long as this is paid out, employment relationship continues and the employee also retains their social insurance coverage.
- Building up working time credit: One model which enables employees to remain employed, covered by social security, and receive a salary is to save up overtime in a working time account. However, this requires that the company also records its employees’ working time. A special arrangement is required where companies utilize trust-based working time. The amount of salary during the sabbatical depends on the amount of overtime previously worked. The working time credit is generally used for sabbaticals lasting no longer than three months.
- Use of time assets:In the case of leave lasting more than three months, the recommended approach is to save for the sabbatical via a lifetime working time or long-term account. The employer pays overtime, bonuses, Christmas bonuses or unused vacation days which exceed the statutory minimum leave into this account. During the sabbatical, employees can then draw on the saved hourly or salary credit that they stashed and retain their social insurance coverage. It is important to be aware that this requires more than just a written agreement regarding the lifetime working time account. Section 7e of the Fourth Book of the German Social Code also stipulates a supplementary agreement to cover the event of insolvency. This is known as a contractual trust agreement. The accumulated value credit is then transferred to a trustee who manages it and can pay it out by converting it into the employee’s salary. This model involves a certain amount of administrative overhead and cost.
- What arrangements do employers need to make in advance?
Regardless of the model, unless sabbaticals are governed by a collective bargaining agreement, company agreement or employment contract, the leave conditions have to be negotiated individually and documented in writing. The agreement needs to address the following questions:
- When does the leave start and end?
- Is the employee entitled to compensation from their employer during the sabbatical?
- Who fills in for the employee and how is a smooth handover guaranteed? One option is to document the previous tasks and activities.
- Is the employee required to be available during their sabbatical to answer questions about ongoing projects, for example, or to make decisions which are important to the company?
- Can the employee return to their previous job?
- How does the time off affect the employee’s company pension plans and other social benefits?
- How are health insurance and social security handled?
- Do any periods of illness extend the sabbatical and how are they calculated?
- Is there an early return option?
- Is the employee entitled to vacation despite their sabbatical? With regard to sabbaticals as unpaid special leave, the Federal Labor Court made a clear ruling in its decision dated March 19, 2019: If there is no obligation to work, there is also no entitlement to vacation. Accordingly, an employee shall not be entitled to recreational leave for a calendar year in which they are continuously on unpaid special leave. If the sabbatical is shorter than one year, the employer may reduce the vacation entitlement proportionately.
- Which rules apply to protection against dismissal: Have an exclusion of termination or an extension of the notice period been agreed?
- Does the General Equal Treatment Act need to be considered?
If employers wish to exclude certain employment groups from the sabbatical option in a collective bargaining agreement or a works agreement, they need to observe the general principle of equal treatment under labor law pursuant to sections 7 and 1 of the General Equal Treatment Act (AGG). If multiple employees with comparable job profiles have already been granted sabbatical leave, this may constitute a claim in view of equal treatment.
- What about plans entitling employees paid part-time educational leave?
As we have already reported, the German Government’s coalition agreement included plans to entitle employees paid educational leave oriented on the Austrian model. Accordingly, the bill for the Continuing Education Act as drafted by the Federal Minister of Labor Heil initially also included regulations addressing paid leave to enable training and further education. However, the Federal Employment Agency’s funds are already stretched thin after many companies applied for short-time work benefits during the corona pandemic. In view of this situation, the federal government approved the draft of the Continuing Education Act without including corresponding regulations. A second legislative package is intended to implement paid part-time education. However, the qualification subsidies remain in place: Employees at companies who want to obtain further qualifications in response to structural change and transformation receive up to 67 percent of their previous net pay if they otherwise risk losing their job. Our blog series includes specific recommended actions for anyone interested in discovering how companies can best plan and implement training concepts to address digitization and decarbonization.
Even if it involves a certain amount of work – employers stand to benefit from sabbaticals, too: As a rule, employees return to work highly motivated and with new energy. This approach can help to prevent burnout. In addition, expanding their horizons often leads people to question established processes and even identify potential optimizations. When employees take leave to further their education, this can be especially advantageous for employers. As such, companies undergoing structural changes and transformation will benefit if paid training leave based on the Austrian model is actually implemented as expressed in the coalition agreement.