Vacation days as currency in the war for talent.

 How individual wage and vacation arrangements in employment contracts can attract employees.

Vacation days as currency in the war for talent.

Above all younger employees and applicants appreciate flexibility with regard to their salary and vacation. Individual provisions in employment contracts can reconcile an employee’s desire for more salary and less vacation or more vacation and less salary.

Flexibility: an advantage for employers in the war for talent

The competition for talent is fierce and the war for talent shows no sign of waning. In this situation, employers are well advised to respond flexibly to (potential) employees’ wishes and needs as a means of winning over applicants and retaining employees.

Individual arrangements have proven to be particularly popular among young people, who now expect a certain degree of flexibility from employers. This also applies to organizing working conditions.

A trend is emerging here: A willingness to forgo wages in favor of more vacation or to forgo vacation time for a salary for a more individual work-life balance.

Employment contracts allow individual provisions

Labor law does not stand in the way of this desire for flexibility and individual arrangements.

Although there is no legal entitlement to exchange salary for vacation days or vice versa, individual agreements between employers and employees are possible, subject to certain limitations.

Ideally, agreements regarding more vacation and less money or less money and more vacation need to be documented in writing – either in the employment contract or a supplementary agreement – to comply with the law on evidence.

Limited by the legal entitlement to minimum leave

Employers and employees are not completely free to negotiate the purchase or sale of vacation days. Employers are legally required to grant employees (with a six-day week) at least 24 days of vacation. Moreover, Section 3 of the Federal Leave Act (BUrlG) along with the statutory minimum leave entitlements for young people and severely disabled persons (Section 19 of the Young Persons Protection of Employment Ac (JArbSchG) and Section 208 (1) of the Social Security Statute Book IX (SGB IX)) must also be observed.

Less then the stipulated minimum leave is not possible even with an individual arrangement. This is due to reasons of employee protection. Minimum leave is intended to maintain employees’ health and ability to work.

Collective agreements impose further limits

Collective bargaining agreements sometimes stipulate additional requirements regarding minimum leave. If the employer and employee are bound by a collective agreement, leave entitlements can only be reduced if permitted by a corresponding clause in the company’s collective agreement with the trade union. If a collective agreement is only included in the employment contract, deviating from the collective agreement is not a problem.

This means that foregoing vacation for “more money” is only possible regard to additional leave granted voluntarily by the employer. In this case, parties are free to agree on more pay or on more additional leave and less pay in lieu of these additional vacation days granted by the company.

Clarity is important

Employers need to clearly state the arrangements with their employees regarding the increased or decreased leave.

One recommended approach is to clearly separate the statutory minimum vacation from any additional vacation days.

Documenting the conditions governing the purchase or sale of working days is also important. The price of a vacation day in existing employment relationships is based on the earnings of the last 13 weeks and the number of working days. These factors for the calculation may vary if earnings fluctuate greatly depending on the season.

Finally, any agreement needs to clearly state whether the regulation applies once or permanently.

What can we do for you?

Do you have questions about buying or selling vacation days? Do not hesitate to contact us!

Summary of the key facts:

  • Buying and selling vacation days is possible provided that the statutory or collectively agreed minimum vacation is complied with.
  • A written provision in the employment contract or in a supplementary agreement is essential.
  • The terms of the purchase/sale need to be clearly defined.