German Urlaubsgeld is a holiday allowance employers pay alongside an employee’s annual leave — it is not a legal right under the Federal Holiday Act (Bundesurlaubsgesetz, BUrlG), but most collective agreements and many employment contracts make it mandatory. The amount, trigger conditions, and pro-rata rules depend entirely on which collective agreement (Tarifvertrag) applies to the employee. For the roughly 60% of West German and 50% of East German workers covered by binding collective agreements, Urlaubsgeld is a standard component of total compensation.
This guide explains who owes Urlaubsgeld, how the amount is calculated under the most common collective agreements, when pro-rata reduction applies, and the tax treatment that surprises employers who treat it like ordinary salary.
Key takeaways
- Urlaubsgeld is not a statutory right — the BUrlG requires only that salary continue during leave (§1 BUrlG), not that a separate holiday allowance be paid.
- Most collective agreements (e.g. IG Metall, ver.di, chemist, public service) require Urlaubsgeld of 50–100% of monthly gross pay, paid before leave begins.
- Urlaubsgeld is subject to income tax and social security contributions — it is not a tax-free benefit.
- Employees on minimum wage or pro-rata contracts may receive a reduced Urlaubsgeld proportional to their entitlement.
- Employers must check the applicable collective agreement and employment contract — failure to pay when required is a wage breach under §611 BGB.
What is Urlaubsgeld?
Urlaubsgeld (holiday allowance or holiday bonus) is a one-off payment employers make in connection with an employee’s annual leave. It is distinct from:
- Urlaubsgeld (holiday pay) — this term is sometimes used interchangeably, but in German law the more precise term for salary continuation during leave is Urlaubsentgelt (§1 BUrlG).
- Weihnachtsgeld (Christmas bonus) — a year-end payment, often governed by the same collective agreement.
The key distinction is that Urlaubsentgelt is a legal obligation: the employer must pay the employee’s regular salary during leave. Urlaubsgeld is an additional payment whose obligation depends on the collective agreement or employment contract.
Who pays Urlaubsgeld?
Three sources can create the obligation:
- Collective agreement (Tarifvertrag) — the most common source. The relevant employer association and trade union negotiate the amount and conditions.
- Employment contract (Arbeitsvertrag) — individual contracts may grant Urlaubsgeld, sometimes referencing a specific collective agreement.
- Company practice (Betriebliche Übung) — if an employer has paid Urlaubsgeld consistently over several years without reserving the right to discontinue it, the payment may have become a binding obligation under the doctrine of Verwirkung.
If none of these apply, there is no statutory obligation to pay Urlaubsgeld beyond the regular Urlaubsentgelt.
Amounts under major collective agreements
The following table summarises Urlaubsgeld under the most commonly referenced German collective agreements in 2026:
| Collective agreement | Sector | Urlaubsgeld | Payment timing |
|---|---|---|---|
| IG Metall Baden-Württemberg | Metalworking / electrical | 50% of monthly gross | Before leave starts |
| IG Metall NRW / Hessen / Niedersachsen | Metalworking / electrical | 45–55% of monthly gross | Before leave starts |
| ver.di / TVöD | Public service (municipal) | €300–€1,200 (fixed amount) | Before leave starts |
| TV-L (public service federal/state) | Public service (federal/state) | €500 fixed | Before leave starts |
| Chemie-Tarifvertrag | Chemical industry | 50% of monthly gross | Before leave starts |
| Bau-Industrie | Construction | 50% of monthly gross | Before leave starts |
| Einzelhandel | Retail | 50% of monthly gross | Before leave starts |
Exact figures depend on the specific pay grade and any regional add-ons. The employer must consult the current version of the applicable Tarifvertrag.
Pro-rata reduction
Employees who do not work a full year are entitled to a proportional Urlaubsgeld. The pro-rata calculation depends on the collective agreement’s rules, but the standard approach is:
Pro-rata Urlaubsgeld = (Months worked in the leave year / 12) × Full Urlaubsgeld
Common triggers for pro-rata reduction:
- New hires starting mid-year
- Part-time employees — some agreements prorate by hours worked, others by calendar months
- Parental leave periods — typically excluded from the calculation
- Long-term sick leave — the treatment varies by agreement; some treat continued Urlaubsentgelt periods as “worked” for Urlaubsgeld purposes, others do not
The pro-rata rules in the collective agreement override any less favourable treatment in the employment contract.
Urlaubsgeld vs. Urlaubsentgelt
| Aspect | Urlaubsentgelt (holiday pay) | Urlaubsgeld (holiday allowance) |
|---|---|---|
| Legal basis | §1 BUrlG — statutory right | Collective agreement or contract |
| Amount | Regular salary | Typically 45–100% of monthly gross |
| When paid | During leave (or as regular salary) | Usually before leave starts |
| Subject to social security | Yes | Yes |
| Subject to income tax | Yes | Yes |
| Can be reduced below 100% | No — must be regular salary | Only if collective agreement allows |
Tax and social security treatment
Urlaubsgeld is fully taxable and subject to social security contributions. It is treated as part of the employee’s regular remuneration for the purposes of:
- Income tax — taxed at the employee’s marginal rate under the ElStG
- Health insurance (KV) — subject to contributions
- Pension insurance (RV) — subject to contributions
- Unemployment insurance (AV) — subject to contributions
- Nursing care insurance (PV) — subject to contributions
The employer must include Urlaubsgeld in the payroll run for the period in which it is paid and withhold and remit all applicable contributions. This differs from some countries where holiday bonuses receive preferential tax treatment — in Germany, there is no general exemption.
Practical employer obligations
Five steps cover most Urlaubsgeld compliance requirements:
- Identify the applicable collective agreement — check whether the employer or the employee is bound by a Tarifvertrag, and which pay group applies.
- Check the employment contract — confirm whether the contract grants Urlaubsgeld independently of a collective agreement.
- Calculate the amount — apply the full or pro-rata figure as the agreement requires, using the correct base period.
- Pay before leave begins — most agreements require payment before the leave period starts, not after.
- Process through payroll — include the payment in the standard payroll run with all tax and social security deductions.
Common pitfalls
1. Assuming Urlaubsgeld is optional
Many employers treat Urlaubsgeld as a discretionary bonus. If a collective agreement applies, it is as mandatory as regular salary. Non-payment is a wage breach and may trigger a labour court claim (Arbeitsgericht).
2. Paying after leave instead of before
Most collective agreements require payment before the leave period. Paying after leave can breach the agreement’s terms and create a dispute if the employee has already incurred holiday expenses based on the expected payment.
3. Not applying pro-rata rules
New hires, part-time employees, and employees returning from parental leave are frequently paid the full Urlaubsgeld amount. The collective agreement typically requires a proportional reduction, and overpayment creates a recovery risk.
4. Mixing up Urlaubsgeld and Weihnachtsgeld
Both are one-off payments governed by collective agreements, but they have different calculation bases, triggers, and pro-rata rules. Paying one instead of the other — or paying both when only one is required — is a compliance error.
5. Ignoring the collective agreement
Employers who are not party to a collective agreement but whose employees are bound by one (through extension or reference in the employment contract) still owe the Urlaubsgeld. The obligation follows the employee’s coverage, not the employer’s direct membership.
For more German context, see our guide to German annual leave entitlements and German public holiday rights.
A leave management system that tracks collective agreement rules, applies pro-rata calculations automatically, and reminds you to process Urlaubsgeld before each leave period starts keeps the most common German holiday allowance errors out of your payroll.
Frequently asked questions
Is Urlaubsgeld a legal right in Germany?
No. The Bundesurlaubsgesetz requires employers to pay regular salary during leave (Urlaubsentgelt), but it does not mandate a separate holiday allowance. The obligation to pay Urlaubsgeld comes from collective agreements, employment contracts, or established company practice.
How much Urlaubsgeld do I owe?
The amount depends on the applicable collective agreement. Common figures range from 45% to 100% of monthly gross salary. If no collective agreement applies, check the employment contract — it may specify a fixed amount or percentage.
Is Urlaubsgeld tax-free?
No. Urlaubsgeld is subject to income tax and all social security contributions (health, pension, unemployment, and nursing care insurance). It is processed through the standard payroll run.
Do part-time employees receive Urlaubsgeld?
Yes, if the collective agreement or contract grants it. Most agreements require a proportional (pro-rata) calculation based on hours worked or months employed during the leave year.
What happens if I don’t pay Urlaubsgeld?
If a collective agreement or contract requires the payment and you fail to pay, the employee can claim the amount through a labour court (Arbeitsgericht). Continued non-payment may also constitute grounds for the employee to claim constructive dismissal (außerordentliche Kündigung).
Sources
- Bundesurlaubsgesetz (BUrlG) — Federal Holiday Act
- IG Metall — Tarifvertrag Urlaubsgeld
- ver.di — TVöD / TV-L
- Bundesministerium für Arbeit und Soziales
Last updated: 26 July 2026. This article is general guidance, not legal advice. Collective agreement terms change annually — confirm current figures with the applicable Tarifvertrag and check with a specialist employment lawyer.