Instead of setting the number of days employees can take as leave each year, in Germany there is a new trend towards offering ‘trust-based leave’ – where the employee decides how much leave to take. But how can this be reconciled with the law on annual leave and what factors should employers take into account in putting a trust-based system in place?
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Employees can agree on the basis of individual employment contracts that annual paid leave will be longer than the legal minimum, but it is not possible to agree that any kind of annual paid leave will be transferred to a time point later than the first quarter of the following calendar year. Otherwise, the employer is obliged by law to pay the employee for the remaining leave time s/he did not receive. Employees are entitled to 100% payment of the untaken paid annual leave days.