Christmas bonus after a termination: A guide for employees in Germany

For many people, the Christmas bonus is not just an ‘extra’ – it is also mentally an integral part of their annual income, and often firmly planned well in advance. But what happens to the Christmas bonus after a termination? In the following article, we will clarify these and other questions and provide tips on the most important aspects that employees should consider in such a situation.

When are you entitled to a Christmas bonus?

Christmas bonuses are special payments that many employers make to their employees in addition to their regular salary. However, there is no legal entitlement to a Christmas bonus, so the entitlement and amount usually depend on individual agreements in the employment contract, collective agreement or company agreement.

Special case: company practice

An entitlement to a Christmas bonus can also arise from regular payments of Christmas bonuses (company practice). This is usually the case after three years. Employees can then rely on this in the future and are therefore entitled to it. It is therefore not necessary to put the company practice in writing in the employment contract. Rather, it arises solely from the employer’s conduct.

Voluntary nature of the Christmas bonus

The employer may, however, declare that the Christmas bonus is voluntary. A reservation of the voluntary status of the Christmas bonus means that the employer emphasises that the payment of this additional amount is voluntary. In doing so, the employer reserves the right not to pay the Christmas bonus in the future, even if it has been paid regularly in the past. This prevents the creation of an entitlement based on company practice where employees can expect a Christmas bonus every year.

What happens to the Christmas bonus after a termination?

Generally speaking, the entitlement to a Christmas bonus when you resign depends on the contractual agreements. This could appear in the employment contract as follows, for example:

‘The employee receives additional remuneration in addition to the monthly salary in the form of a 13th monthly salary, which is paid out with the November salary. In the event of joining or leaving during the year, the 13th monthly salary is calculated and paid out pro rata based on the actual length of employment.’ For example, if the contractually agreed payment of a Christmas bonus of €3,000 is agreed and the employee leaves on 30 June, there is an entitlement to 6/12 of the Christmas bonus, i.e. €1,500.’

Christmas bonus if there is no contractual provision

If there is no such regulation, the payment depends on the ‘purpose of the Christmas bonus’. If the aim of the payment is to reward employees with this additional remuneration, it is referred to as remuneration character. In the event of termination within the year, there is then an entitlement to a pro-rata Christmas bonus. For example, if the contract is terminated on 31 August, there is an entitlement to 8/12 of the Christmas bonus. This is also the case if both the service is to be remunerated and loyalty to the company is to be rewarded (mixed form). The situation is different, however, if the Christmas bonus is intended solely to reward loyalty to the company (reward character). In this case, there is no entitlement to a Christmas bonus if the employee resigns during the year. The employer could have formulated this in the employment contract as follows: ‘The payment of the Christmas bonus serves to recognise the employee’s loyalty to the company to date.’

In addition, some contracts contain key date provisions. These stipulate that the Christmas bonus should only be paid if the employment relationship still exists on a specific key date – usually 31 December. When assessing this, it is again important to distinguish between the character of the Christmas bonus. If the sole purpose of the Christmas bonus is to reward loyalty to the company, then such a cut-off date regulation is valid. However, if the bonus is considered remuneration or a hybrid of the two, the situation is different. In this case, there is again an entitlement to a pro-rata Christmas bonus.

Do I have to pay back Christmas bonuses that have already been paid out if I resign?

Many employment contracts contain repayment clauses. These stipulate that Christmas bonuses that have already been paid out must be repaid if the employee resigns within a certain period of time. Such a clause could read as follows:

‘The Christmas bonus must be repaid if the employment relationship ends before 31 March of the following year due to the employee giving notice for a reason for which the employer is not responsible, or due to the employer terminating the contract for personal or behavioural reasons. The conclusion of a termination agreement is equated with a termination.’

Here, too, a distinction must be made according to the character of the Christmas bonus. While such a regulation is inadmissible if the Christmas bonus is a form of remuneration or a hybrid, the facts of the case must be examined more closely if it is a form of reward. In the case of small payments of up to €100, there is generally no obligation to repay. For higher amounts that are less than one month’s salary, a repayment obligation can be contractually stipulated by 31 March of the following year. For a Christmas bonus that amounts to more than one month’s salary, it is even possible to contractually stipulate the repayment date as 30 June of the following year.

Enforcing entitlement to Christmas bonus when terminating

In order to enforce a possible claim for Christmas bonus, employees should first check their employment contract for provisions regarding Christmas bonus. If you do not find what you are looking for there, you can also check the applicable collective agreements and company agreements, which may contain additional provisions regarding Christmas bonus. In addition, any time limits for asserting the claim must be observed. These include contractually agreed cut-off periods or limitation periods. Furthermore, employees should collect relevant documents such as payslips. It is also advisable to assert the claim for a Christmas bonus in writing to the employer in order to clearly document this. Employees can also contact their trade union, which can support them in legal matters. However, it can often be helpful to seek advice from a specialist lawyer to clarify and, if necessary, enforce your claim to a Christmas bonus.

Summary: Christmas bonus after a dismissal

When you are dismissed, the question often arises as to whether you are entitled to a Christmas bonus. The entitlement can depend on various factors, such as the employment contract, the collective agreement or the company agreement. If there is no contractual regulation, the entitlement to a Christmas bonus after termination depends on the purpose of the Christmas bonus by the employer (remuneration character, reward character and mixed form). Often, employees have a pro-rata entitlement to a Christmas bonus if they resign during the year. If the Christmas bonus has already been paid out, there may be an obligation to repay it. However, this only comes into question if the purpose of the Christmas bonus is to reward loyalty to the company. The same applies to the so-called cut-off date regulation. Overall, employees should be aware that they may be entitled to their 13th salary despite having given notice. It is therefore advisable to seek legal advice to clarify and enforce your claim to a Christmas bonus.