Commission Payments Must Factor Into Holiday Pay, European and German Courts Reinforce

Workers earning variable pay such as commissions have often seen their holiday pay fall far short of what they actually earn — a problem that courts across Europe have been chipping away at for years. The underlying goal: ensure no employee is forced to skip vacation because it would cost them money.

In 2014, the European Court of Justice ruled in case C-539/12 that variable compensation components closely tied to the performance of work must be included in holiday remuneration. Without that, the reasoning went, workers could face a financial penalty for taking the leave they are legally entitled to.

Germany’s top labor court, the Bundesarbeitsgericht (BAG), had already adopted that position in 2000 (9 AZR 266/99). Its interpretation of Section 11 of the German Federal Holiday Act (Bundesurlaubsgesetz — BUrlG) likewise requires commissions to be taken into account when calculating holiday pay and any payout for untaken leave.

Courts outside Germany have followed the same line. Spain’s Tribunal Supremo, for instance, confirmed that all ordinary remuneration components belong in holiday pay. While truly exceptional annual bonuses can be excluded, fixed monthly allowances cannot.

Calculating Holiday Pay for Minijobs and Irregular Schedules

The same principles apply to workers in so-called Minijobs — low-paid, often part-time roles. For someone on a six-day working week, the statutory minimum is 24 working days of leave. The individual entitlement is then calculated from the ratio of actual weekly working days to the standard work week.

When working days are irregular, the annual total serves as the baseline: 260 days for a five-day week, 312 for a six-day week. Fractions of leave days of at least half a day must be rounded up.

Special rules come into play for unpaid special leave. On March 19, 2019, the BAG decided (9 AZR 315/17) that an employee who is granted unpaid leave for an entire calendar year earns no paid annual leave during that period. Since the mutual principal obligations of the employment contract are suspended, no new holiday entitlements accrue.

Illness, Reduced Capacity, and Insolvency: Where the Rules Get Tested

A contentious area involves the forfeiture of holiday claims after long-term illness. On July 7, 2020, the BAG referred a question to the ECJ (9 AZR 245/19 (A)) asking whether the 15-month forfeiture period still applies when the employer has failed to meet its duty to cooperate.

When a company enters insolvency, existing holiday entitlements survive. During the first three months after the insolvency petition is filed, holiday pay is secured through insolvency benefits (Insolvenzgeld).

Protection against wage garnishment draws a firm line: standard holiday pay is subject to the usual attachment rules. An additional holiday bonus, however, is exempt from seizure within normal bounds. These exemption thresholds are adjusted each year on July 1.

Social Law: Holiday Payout Treated as Compensatory, Not Income

The Social Court of Düsseldorf ruled on a separate but related point: a holiday pay-out of roughly 400 euros gross qualifies as a zweckbestimmte Einnahme — a payment with a specific purpose. It is meant to compensate for lost holiday enjoyment, not to cover living costs. As a result, it is not counted against a recipient’s Bürgergeld (citizen’s benefit).

A side note for employers: the tax-free meal allowances for business travel remain at their 2020 levels through 2026. For absences exceeding eight hours, the daily rate is 14 euros; for a full day away from the office, it is 28 euros. If the employer provides meals, those flat rates are reduced accordingly.

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