Holiday fund procedures

Where generally binding collective agreements foresee that common institutions of the parties to the collective agreement handle the procedures related to benefits to which employees are entitled in connection with their annual leave (holiday pay fund, Urlaubskasse), employers who engage workers in the construction sector in Germany must comply with the relevant collective agreements and make contributions to the holiday fund, as stipulated in Art. 8 (1) of the German Posted Workers Act (Arbeitnehmer-Entsendegesetz - AEntG). The same obligation applies to agencies supplying temporary workers to construction firms.

Both the mainstream construction industry and the scaffolding trade have introduced a holiday pay fund procedure. Holiday payments for the mainstream construction sector are managed by SOKA-BAU, while the relevant procedure for the scaffolding sector is managed by SOKA-GERÜSTBAU. SOKA-BAU and SOKA-GERÜSTBAU are joint institutions of the parties to the collective agreement.

The Posted Workers Act does not require a foreign-domiciled employer to participate in this funding scheme if:

• that employer would then be under an obligation to make contributions to a similar institution in Germany and the employer's home country at the same time, and
• the relevant procedure for Germany fails to stipulate that any holiday benefits to be provided by the employer in compliance with relevant laws, collective or individual agreements will count towards the amounts payable into the fund.

Where an employer continues to make contributions to a similar institution in the country from which his employees are posted, then that institution shall issue a certificate confirming to the German holiday fund that it does indeed continue to receive contributions for each of the employees during their posting to Germany. In this case, the German holiday fund will release the employer from obligatory participation in the German holiday pay funding scheme.

You may consult SOKA-BAU and SOKA-GERÜSTBAU to find out whether a comparable institution exists.

The holiday fund procedure also applies to employers who engage in activity within the framework of bilateral government agreements.

Contributions to these holiday funds are proportional contributions serving to secure holiday entitlements based on labour legislation. They do not constitute social security contributions.

The collective agreement regulating the social fund financing procedures obliges employers in the mainstream construction industry domiciled in Germany or abroad to make contributions to SOKA-BAU. As stipulated in the relevant collective agreement for the scaffolding trade, employers in that sector - whether domiciled in Germany or registered abroad - must make their contributions to SOKA-GERÜSTBAU instead.

Both SOKA-BAU and SOKA-GERÜSTBAU publish information about the holiday fund procedure on their respective websites. Employers may direct any questions regarding the holiday fund procedure via email to SOKA-BAU or SOKA-GERÜSTBAU.