Vacation entitlements in Germany: The role of collective bargaining and works councils

The Federal Vacation Act stipulates a minimum entitlement of four weeks’ vacation, yet the average entitlement in Germany is considerably higher, at approximately 28 days. The present study examines the factors that influence the amount of vacation entitlement at firm level, with a particular focus on the relationship with the dual system of interest representation. The analysis is based on firm data from the IAB-Job Vacancy Survey 2023, with a linear ordinary least square regression being utilised to identify the determinants of the amount of vacation entitlement. Collective bargaining coverage plays a decisive role: On average, firms with collective agreements have 1.3 days more vacation entitlements and firms oriented towards collective agreements have 0.8 days more vacation entitlements than firms that are not bound by collective agreements. Furthermore, a positive correlation is identified between the existence of a works council and vacation entitlements. The ‘works council premium’ is equivalent to 0.8 days. In particular, firms that are not bound by collective agreements benefit from the existence of a works council in the form of more vacation entitlements. In East Germany, the average vacation entitlement is significantly lower than that in West Germany, especially in firms that are not bound by collective agreements. Higher wage levels are associated with greater vacation entitlements; this correlation is less pronounced in firms with collective bargaining agreements. Longer full-time working hours are associated with fewer vacation entitlements, a trend that is more pronounced in firms without a works council. The results show that the dual system of interest representation in Germany is central to the amount of vacation entitlements at firm level and safeguards better working conditions in Germany.