Proactive management of holiday entitlements recommended

According to the Austrian Holiday Act, employees are entitled to five weeks of paid holiday leave for each working year. As a rule, the use of holiday leave requires an individual agreement.

In principle, the holiday agreement must be made in such a way that the holiday can be taken by the end of the holiday year in which the entitlement arose. However, carryover to subsequent holiday years is permitted without restriction as long as the holiday entitlement has not already expired. According to the law, a holiday entitlement expires two years after the end of the holiday year in which it arose. However, the European Court of Justice allows an expiry of the minimum holiday entitlement of four weeks under EU law only to a very limited extent. Accordingly, the expiry of the limitation period requires, in particular, that the employer specifically and transparently — and if necessary, formally — requests its employees to take their leave before the limitation period expires and expressly informs the employees in advance that the holiday entitlement will otherwise expire. The employer bears the burden of proof that it has complied with its duty to request and inform. In this respect, neither a reference in the employment contract nor an explicit notice at the beginning of the employment relationship is sufficient.  

Employers should therefore keep an eye on individual holiday entitlements and manage holiday entitlements in a target-oriented manner. If necessary, employers must expressly invite their employees to take their holiday entitlements, pointing out that they will otherwise expire. These requests should be properly documented. Otherwise, the accumulation of holiday over the years harbours a considerable financial risk for employers.

Caution with holiday advances

The holiday entitlement arises from the date of joining for the first six months in proportion to the length of employment completed (so-called "waiting period"). After six months of employment, the holiday entitlement for the first year of employment is accrued in full. From the second year of employment, the employee is entitled to all-holiday entitlement from the beginning of the working year. If the employment relationship ends, employees are entitled to financial compensation for outstanding holiday entitlements in the form of a pro-rated holiday pay.

If an employee has already consumed the full annual leave but then leaves the company during the year, the question arises as to whether the excess leave taken can be reimbursed. However, employees only have to reimburse the proportion of annual leave taken in excess of the aliquot amount if the employment relationship ends due to their unjustified early resignation or justified immediate termination by the employer. Thus, a claim for reimbursement by the employer is excluded in the far more frequent cases of regular termination.

It becomes even more difficult in the case of a "holiday advance", i.e. when employees want to take additional holiday days from the next holiday year in advance. Although this request is not rejected outright, it is strongly recommended that an explicit "set-off agreement" is concluded. Otherwise, it must be assumed that the employer grants the employee additional holiday leave in excess of the statutory minimum holiday entitlement. Such an agreement can therefore at least prevent the employee from ultimately receiving more holiday than they are entitled to by law. The effect of a set-off agreement is that the early holiday can be credited to the next entitlement (i.e., deducted from it).

In turn, it becomes problematic if the employee leaves the company before reaching the next holiday year. Initially, the employer is only entitled to a financial repayment if a set-off agreement has been concluded. In addition, however, even an agreed set-off is only permissible if the employment relationship ends by mutual agreement, unjustified early resignation by the employee or justified immediate termination by the employer.

Recommendations

• Keep track of individual holiday entitlements.
• Remember to inform employees in advance about the impending expiry of their holiday entitlements and request that they take their holiday leave.
• Make sure you have written proof that the employee has been informed of a possible expiry and that they have been permitted to take their holiday leave.
• Think of alternative solutions to avoid the advance use of the holiday leave (e.g., unpaid leave).
• Make a written agreement each time leave is taken, according to which the future leave credit (for the next leave year) is reduced by the days taken in advance.
• When approving holiday requests, take the holiday days accruing during a notice period into account.

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