Leave of absence in Germany: Everything you need to know!

A leave of absence (Freistellung) is a common practice in which an employee is either revocably or irrevocably released from their work obligations while the employment relationship still exists. This leave of absence can be either paid or unpaid, depending on the respective agreements. It is often used to avoid tension in the workplace or to make the transition easier for the employee.

Key points at a glance:

• Types of leave: Leaves of absence after resignation can be revocable (return possible) or irrevocable (no return possible) and are often paid, but not required by law.
• Unilateral vs. mutual leave: Unilateral leaves are granted without the employee’s consent, while mutual leaves are agreed upon as part of a termination agreement.
• Leave and time off: Leave entitlements and time off may be treated differently depending on the type of leave; written rules are important.
• Company property and secondary employment: The use of company property and taking on secondary employment during the leave depend on the contractual provisions.
• Sickness and unemployment benefits: If you fall ill during your leave of absence, you must report it; the leave of absence has no effect on the amount of your unemployment benefits, but it may trigger blocking periods.
• Ineffective leave: If the leave of absence is ineffective, you may be entitled to continued employment. Legal advice can help you enforce your rights.

General information on leave of absence

A leave of absence often occurs in connection with the termination of an employment relationship, regardless of whether the termination was for personal, behavioural or operational reasons. In the case of a revocable leave of absence, the employer can call the employee back to work if necessary. An irrevocable leave of absence, on the other hand, permanently releases the employee from their work obligation. Usually, the duration of the leave corresponds to the notice period, unless it is a dismissal without notice or for cause, in which case a leave of absence is not possible. This article explains the different types of leave, what their differences are and what needs to be considered with regard to vacation, company cars, secondary employment and more.

Revocable or irrevocable leave of absence

In the field of employment, leave of absence can be granted as either revocable or irrevocable:

• In the case of a revocable leave of absence, the employer reserves the right to request that the employee return to work at any time. This often applies to periods such as leave of absence or suspension until the end of the notice period. A revocable exemption cannot be granted while taking into account outstanding holiday and compensatory time off claims.
  • Remaining holiday: If there is still remaining holiday entitlement on the last working day, this must generally be paid out. Even if the employee is released during the notice period, the remaining holiday does not automatically expire, unless this is expressly stipulated, e.g. in the termination agreement.
• An irrevocable exemption on the other hand precludes the possibility of the employee returning to his or her workplace. In this form of exemption, the employer cannot ask the exempt employee to resume work, especially if the exemption is explicitly granted with regard to outstanding holiday entitlements.

Accordingly, the exemption is generally revocable at any time if the employer does not explicitly declare its irrevocability.

Unilateral vs. mutual leave of absence

A leave of absence can either be declared unilaterally by the employer or agreed by mutual consent between the employer and employee:

Unilateral leave of absence by the employer

In the case of a unilateral leave of absence, the employer decides to release the employee from the obligation to work without the employee’s consent. This form of leave of absence is often used after a termination. This is particularly the case if conflicts in the workplace are to be avoided or the employee’s access to confidential information is to be prevented.

Important: The employer can only enforce such a release if they can present important and legitimate reasons. These reasons must outweigh the employee’s interest in continued employment in order to be legally valid. In other words, the unilateral exemption must be justified by an objective reason under employment law in order to be upheld. Objective reasons could be risk of betrayal of secrets, suspicion of breach of duty, loss of trust or competition violations. The employer usually remains obliged to continue paying the salary and to pay the social security contributions if it is a paid exemption.

Continued payment of wages in the event of unlawful exemption and default of acceptance

An employer is in ‘default of acceptance’ if they issue an unlawful exemption and thus unjustifiably do not accept the employee’s work performance. This may be the case in particular during an ongoing legal dispute if the employee contests the termination or demands continued employment. In such a case, the employee is entitled to continued payment of wages in accordance with § 615 BGB, even if he does not actually work. This means that the employer is still obliged to pay the contractually agreed salary, even if he does not accept the employee’s work performance. Accordingly, the employee is to be treated during this time as if he had duly provided his work performance, including the continued payment of salary and social security contributions. However, a prerequisite for default of acceptance is that the employee is willing and able to provide his work performance. In addition, the employee must notify the employer that he is ready to work.

Mutually agreed exemption

Mutual leave of absence, on the other hand, is agreed by mutual consent between the employer and employee. This form of leave often takes place within the framework of a termination agreement in which both sides agree on the modalities of the termination of the employment relationship, including a possible leave of absence.

The conditions can be made more flexible in the case of a mutually agreed leave of absence. For example, the employer and employee can agree on an irrevocable leave of absence in which any remaining leave is taken into account. Alternatively, they can also agree on a revocable leave of absence in which the employee can be called back to work under certain circumstances.

Form of leave of absence after termination

A leave of absence does not necessarily have to be in writing. However, it is advantageous for the employee to receive written consent for the leave of absence from the employer. An informal letter would be sufficient in this case. As a rule, the employer can write the letter of resignation and the leave of absence in a single letter. It is also possible to include a provision for a leave of absence in the event of termination in the employment contract. Ideally, this should also include a provision regarding holiday and time off in lieu.

Impact of leave of absence on unemployment benefit

A leave of absence can affect your entitlement to and calculation of unemployment benefit. There are important points to consider, especially in the case of an irrevocable leave of absence that is agreed until the end of the notice period.

• Until 2018, the period of leave was not included by the employment office in the calculation period for unemployment benefit. The amount of unemployment benefit was based on the salary of the last twelve months before the leave of absence. This meant that the period of leave was not taken into account when calculating the unemployment benefit.
• However, since 2018, a new regulation has been in force. Leave of absence after a termination no longer affects the amount of unemployment benefit. The full salary for the last twelve months before the leave of absence serves as the assessment basis. Whether or not you worked during the leave of absence is irrelevant.

However, there is one important exception regarding the waiting period for unemployment benefit. If an employee is irrevocably released from their duties under a termination agreement, the waiting period of usually twelve weeks begins at the start of the release from duties. This is because the ‘employment relationship’ ends even though the ‘employment contract’ formally still exists.

An example: an employee concludes a termination agreement without good cause and is irrevocably released from work for twelve weeks. This period of release from work is then considered a waiting period. After this waiting period has expired, the employee can apply for unemployment benefit I directly without having to accept additional waiting periods.

FAQ: Leave of absence after termination

Am I entitled to paid time off after giving notice?

There is no legal entitlement to leave of absence after termination. However, it is quite common for employers, especially of senior employees, to grant paid leave until the end of the employment contract. As a rule, employees are obliged to continue their work until the end of the notice period. Leave of absence initiated by employees after termination is rare and usually occurs without salary payments. However, employees can be released from work to look for a new job, such as for job interviews or appointments at the employment agency, § 629 BGB.

Employers often offer a leave of absence to prevent dismissed employees from gaining access to confidential information or company data. In addition, they fear that dismissed employees could negatively influence the working atmosphere through reduced work performance or discussions with colleagues about the legality of the dismissal.

The advantage of paid leave for employees is that they continue to receive their salary despite the termination of the employment relationship, without having to work. While employees have no general right to time off, employers are obliged to release them for job-seeking activities such as job interviews, work trials or appointments at the employment agency.

Will my holiday or compensatory time off be taken into account in the event of an exemption?

• Revocable exemption: Leave entitlement may not be offset, as the employee must continue to expect a possible return. The remaining leave can be claimed after the notice period.
• Irrevocable leave: It is possible to count holiday entitlement, but only if the employer expressly states this. If no such statement is made, the holiday entitlement remains in force and must be paid out after the employment relationship has ended.
• Time off in lieu: This can be counted towards either type of leave, but only if the employer expressly states this. Otherwise, overtime must be paid out.

Am I allowed to continue using company property such as a company car when I am released from my duties?

Whether you are allowed to continue to use company property such as a company car during the leave depends on various factors and in particular on the contractual provisions. In the case of a mutually agreed leave, this can be included directly in the agreement. If there are no provisions and in particular in the case of a unilateral leave, the following should be noted: If work equipment was provided exclusively for business purposes, the employer may generally demand its return at the beginning of the leave. However, if the private use of work equipment is contractually permitted, it is generally permissible to keep it during the exemption period, as it is considered part of the income. Therefore, check your employment contract clauses and company car agreements and, if in doubt, seek legal advice.

What should I do if I fall ill during my leave?

If you fall ill during your leave of absence, you should report this to your employer immediately and submit a certificate of incapacity to work, as you would if you were still in active employment. If you are on paid leave, you will continue to receive your salary from your employer for the first six weeks, after which your health insurance fund will pay sick pay. If you are on unpaid leave, you are not entitled to continued remuneration; in this case, you must contact your health insurance fund directly.

Am I allowed to take on a sideline or other employment during my leave?

During the period of leave, it is generally possible to take on a second job, but this depends on the type of leave and the contractual arrangements. If you are on leave at your employer’s request, you can take on a new job, but the additional income may be offset against the original compensation claim (Section 615, sentence 2 of the German Civil Code (BGB)). In the case of a mutually agreed leave of absence, such a deduction may be excluded, unless there is a specific contractual provision to the contrary.

Employees should ensure that they make clear agreements with their employer to avoid additional income being offset against their regular salary. It is advisable to discuss the details of their leave of absence agreement with the works council (if any) to avoid potential disadvantages of a leave of absence. Please also note that in the case of a revocable leave of absence, the employer can recall you at any time and that secondary employment may only be permitted with the employer’s consent.

Does my non-competition clause also apply during the exemption?

Yes, the non-competition clause remains in force even during a leave of absence, as a leave of absence does not terminate the employment relationship. This means that you may not take up employment with a competitor in order to comply with the non-competition clause until the expiry of the notice period. A post-contractual non-competition clause, which applies for a period after the employment relationship has ended, also remains valid. If you are irrevocably released from your duties, you can take on secondary employment as long as it does not violate the non-competition clause. However, if you are revocably released from your duties, you must be especially careful, as you may receive a request to resume work at any time. You should therefore carefully review the terms of your release and any contractual provisions to ensure that you are complying with all obligations.

Am I entitled to continued employment if the exemption is ineffective?

If a release from work duties is invalid, you are generally entitled to continued employment if the release does not meet the legal requirements or there are no valid reasons for it. A release can be considered invalid if the employment contract or collective agreement does not provide for (valid) corresponding provisions for unilateral releases, if the termination is invalid or if the release is granted without good cause, such as the loss of trust, a lack of work orders or the risk of disclosing secrets.
If you have a particular interest in continuing to be employed during the exemption period, for example in order to retain your knowledge in a rapidly developing industry, you may be able to enforce this claim by means of an injunction. If you are unsure about the validity of the exemption or how to assert your claim to continued employment, you should seek legal advice in order to protect your rights.