As a responsible employee, the topic of holiday provisions can make you break out in a sweat at the end of the year. After all, juggling legal requirements, individual employee entitlements and the desire for efficient, accurate accounting takes up a lot of time! In this blog article, we take a deep dive into the world of holiday provisions and focus specifically on the needs of financial employees.
Table of contents - What you can expect:
Calculate holiday provisions: Methods
Automatic calculation of holiday provisions
Release provisions for holidays
The term holiday accrual refers to a preventative measure whereby unused holiday days within a financial year (remaining holiday) are recognised and reported in your annual balance sheet up to the balance sheet date.
If your employees have not used up their full annual holiday entitlement in the current financial year, but would like to carry it over to the following year, you will have a fulfilment backlog.
If your employees have not yet submitted - i.e. planned - their remaining holiday for the new year, this is a so-called "uncertain liability". This in turn is subject to the Obligation to recognise provisions in accordance with § 249 HGB and requires the creation of holiday provisions.
The larger your company, the more complex the calculation of holiday provisions for each individual employee. For this reason, case law permits the Calculation of holiday provisions (section 252 HGB) either as an individual calculation or as an average calculation. With the individual calculation, you determine the holiday accrual for each individual employee separately.
Although this method provides precise results, it is extremely labour-intensive and time-consuming for a large number of employees. In such cases, the calculation of averages is an alternative. Here, all employees are considered as a group, which considerably reduces the amount of work involved. However, caution is advised in the case of strongly fluctuating salary structures, as there is a risk of over- or undervaluation!
With the individual calculation, you enter the hourly wage and the Working time model of each individual employee. Holiday days that your employees have not taken are converted into working hours on the basis of the working time model.
These working hours are then valued at the gross hourly wage of the respective employee. Your employer's social security contributions are also added. In this way, you can assign a monetary value - the relevant holiday pay - to each accrual. The individual calculation is therefore very precise, but also very time-consuming. Due to the high administrative effort involved, this method is more suitable for companies with a manageable number of employees.
Practical example: Individual calculation of holiday provisions
According to her employment contract, Klara Schneider receives an annual gross salary of 40,000 euros from her employer. Her employer also pays a Christmas bonus of 2,500 euros. To calculate the relevant holiday pay, the employer's contribution to social insurance and other ancillary wage costs are also taken into account, resulting in the following calculation:
Mrs Schneider is employed full-time by her employer and works five days a week. If public holidays are deducted, this results in a total of 248 days actually worked per year. Mrs Schneider still has six days of leave remaining. This results in the following calculation for the individual holiday accrual:
The passive holiday provision - i.e. the provision amount - for Mrs Schneider would be EUR 1,161. The employer's finance department is obliged to state this provision amount in the tax balance sheet.
The company Alleskönner GmbH has four employees and does not want to carry out an individual calculation of the holiday accrual for each employee. To calculate the relevant holiday pay, the finance department has to add together the annual gross wages, the Christmas bonus and the employer's social security contributions for all employees. This results in the following calculation:
In order to obtain the actual annual working days of the four employees, the finance department of Alleskönner GmbH multiplies the working days per week by 52. Less the public holidays per year, this results in a value of 996 actual working days.
Practical example: Average calculation of holiday provisions for 4 employees
The finance department of Alleskönner GmbH recognises the amount of EUR 7,783 accordingly in the tax balance sheet.
Now you can't see the wood for the trees, can you? Depending on the size of your company, calculating the remaining holiday days and holiday accruals is more or less time-consuming. So that you don't have to spend your valuable time on manual calculations, we have a solution that supports you in calculating holiday provisions. With the ZEP add-on modules Overtime, Absences & Holidays and Prices & Receipts you not only save time, but also nerves when preparing your annual accounts.
Because: With the Prices & Receipts module (additionally bookable for ZEP Compact & already included in ZEP Professional), you can define an internal hourly rate for each employee that is used to calculate the relevant holiday pay. And thanks to the Overtime, Absences & Leave module, remaining leave days and all public holidays for your federal state are accurately mapped. Simply enter all the required parameters, such as annual leave, gross wages, etc., in the corresponding modules and you can - with the combination of both modules - take care of the holiday provisions for each employee individually at the touch of a button.
To do this, proceed as follows in your ZEP:
As you can see, you can access the desired analysis with just a few clicks, select the reset period individually and simply export the data so that it can be easily transferred to your annual balance sheet. A little ZEP hack: You can also have this analysis sent to you automatically (in ZEP "Run in background") at a set interval.
Provisions for leave are reversed when the uncertain liability that led to their creation no longer exists. There are various methods for correctly cancelling provisions. The four main methods, which are applied depending on the situation, are listed below:
| 1. Amount of the holiday provision corresponds to the expense paid out | The provision corresponds to the actual expense. There is no additional accounting adjustment as the expense is correctly recognised. |
| 2. holiday accrual was greater than the payout | The difference between the provision and the actual expense is recognised as other operating income, which leads to an improvement in the operating result. |
| 3. provision for the holiday was too low | The difference between the provision and the actual expense is recognised as an additional expense, which leads to a deterioration in the operating result. |
| 4. provision is not required | The entire amount of the provision is recognised as other operating income, which leads to an improvement in the operating result. |
Please note that employees are not simply entitled to payment of unused holiday days. Financial compensation is only possible if the employment relationship is terminated by the employer. In addition, the entitlement to Remaining leaveif this is not taken by 31 March of the following year.
The correct calculation and management of holiday provisions are crucial for an accurate annual balance sheet. Whether by detailed individual calculation or simplified average calculation, the method should match the size of the company.
Using ZEP can simplify this process considerably: Save time and minimise errors with the modules for automated calculation and management of holiday provisions. Make sure that provisions are reversed correctly to ensure an error-free annual balance sheet and avoid financial surprises.
Holiday provisions are generally calculated at the end of the year in order to correctly reflect employees' unused holiday days in the annual balance sheet. This ensures that the company's financial obligations are fully recognised.
The German Commercial Code obliges you to § SECTION 249 HGB to create holiday provisions for your employees' outstanding holidays, while § 5 (1) EstG The German Commercial Code defines the authoritative principle for these provisions. Holiday provisions secure your employees' entitlements to untaken holidays and provide you as an employer with a clear overview of future expenses, which makes personnel planning and financial calculations easier. This not only protects employees' rights, but also helps you to better plan financial burdens and keep track of holiday days.
Yes, companies in Germany are obliged to set aside holiday provisions if employees are unable to use all of their annual leave, in accordance with § Section 7 of the Federal Holiday Act (BUrlG). These provisions are based on holiday pay and the remaining days of holiday, as holiday should be taken in the current year and can only be carried forward to the new year under certain conditions. The amount of the provisions takes into account gross pay, non-wage labour costs and possible special benefits.
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