Germany Employment Contracts

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German Employment Contracts

A successful business largely depends on its employees. By creating working contracts that include the right terms and benefits there will be no misconception and the perfect work-life balance can be created. At Bradford Jacobs, this is our aim, and we support companies in over a hundred countries with creating compliant and balanced labor contracts. Our team in Germany keeps track of the German laws and regulations on a daily basis to be duly aware of updates that can be implemented in working contracts. By using our PEO and EOR service we can provide compliant labor contracts for employees in Germany including local benefits. To support your plans, we made this guide including the basics of employment contracts in Germany. After reading this guide you will know everything about social security, notice periods, and the average working hours.

How Do You Hire Germany Employees?

If a foreign company is looking to hire resident employees as part of their expansion into Germany, they must comply with the recruitment regulations concerning tax, social security contributions, employment law, as well as collaborate with or adhere to any collective bargaining, trade unions, or work council agreements. In Germany, employment agreements are determined in written employment contracts, which is mandatory by law. There are two main types of employment contracts that are practiced – the indefinite contract, and the fixed-term contract. However, the indefinite contract is the standard contract type.

National employment legislation, collective agreements, and works council agreements are the main sources of employment law in Germany, which govern employment conditions, benefits, and health and safety regulations. The conditions performed vary according to the industry and sector. To be fully aware of what you can and cannot apply to your employment practices in Germany, it is important for the employer to know the existing labor laws and employee entitlements, as well as collaborate with the appropriate local employment organizations.

In Germany, an employment contract is required by law to be concluded in writing, and this must be given to the employee no later than one month after the commencement of their employment. All employment contracts must contain the following:

  • Name and address of the employer and the employee
  • Information about the commencement date of employment
  • Anticipated duration of employment (for fixed-term contracts only)
  • The place of work
  • A job description
  • The composition and amount of the employee’s salary
  • The working hours
  • The duration of annual leave

The notice period

A reference to any collective bargaining agreements, works or services agreements that are applicable to the employment relationship (if there are any) Also, to avoid any miscommunications or disputes, a version of this contract must be translated to German. There are two types of contracts that are applied in Germany:

Indefinite employment contract – the standard type of employment contract in Germany, and as a general rule, employment contracts are entered into for an unlimited period. Termination of this contract requires a notice period and a set of dismissal policies.

Fixed-term employment contract – Fixed-term contracts are possible, as long as the employment term is agreed upon in writing before the employment relationship commences. Fixed-term relationships must be justified on objective grounds – such as a temporary increase in workload, or a substitution of an employee on parental leave.

A fixed-term contract is limited to a maximum of two years, and ends automatically, without a written notice at the end of its term.

Any changes to the employment contract must be made with the consent of both the employee and employer. If the employer wishes to amend the employment terms, they must discuss and agree to the changes with the employee before doing so.

Collective Agreements

Collective bargaining and agreements in Germany are practiced, but their influence in employment varies according to the sector. This mainly occurs at industry level between individual trade unions and employers’ organizations. Collective agreements, however, also provide for greater flexibility at company level. There is more than one kind of collective agreement, depending on the issue being covered. Agreements covering pay last at least one year, and sometimes over two years or more – depending on the industry/sector. Collective agreements covering other issues normally last over five years, whilst others are valid until one side wishes to change the terms.

2018 figures from the Institute of Employment Research (IAB) shows that almost half (46%) of employees in Germany were covered by industry-level agreements, with another 8% of employees covered by company-level agreements.

What Laws About Employment Exist in Germany?

German employment law does not have a single code, but it is based on federal legislation, case law, collective bargaining, trades union and work councils’ agreements and individual contracts between employers and employees. Therefore, companies must be aware where agreements apply, rather than legislation.

In employment, certain forms of legislation must be followed, which include:

National Minimum Wage: The German national minimum wage, by law, is €9.50 an hour for employees. Any contract or work agreement for any amount below that may be invalid. Many industries and sectors set their own minimum wages based on collective agreements within their sectors understanding these agreements isn’t always easy.

Working Hours & Overtime: The standard working time in Germany is between 36-40 hours. Overtime is only required to be done if there is a provision in the employment agreement or the collective bargaining agreement which gives the employer the right to ask for it.

Rest Days & Breaks: In a workday, employees are entitled to a rest period of least 11 hours. Most employees are also not to work on a Sunday. In cases where they are needed, however, another rest day must be given as compensation within 2 weeks of the day being worked. Employees must have at least 15 Sundays off in a calendar year.

Health and Safety: In Germany, the employer is responsible for the health and safety of their employees in the workplace. They are obliged to appoint occupational physicians as well as health and safety specialists. When present, the physicians and specialists must collaborate with the works council to carry out their tasks.

Annual Leave: Employees who work five-day weeks are entitled to at a pro-rota of 20 days of annual leave, whilst employees working six-day weeks are entitled to at least 24 days of annual leave.

Sick Leave: In the case of illness, employees in Germany are entitled to receive sick pay of up to 100% per cent of their salary for a period of six weeks. If the incapacity for work continues for more than 3 days, employees must submit proof of incapacity for work with a medical certificate.

Maternity Leave: Pregnant employees in Germany are entitled to six weeks of paid leave prior to the child’s birth, as well as 8 weeks of paid leave after birth. For premature or multiple births, the employee is entitled to 12 weeks of paid leave. All leave types are compensated at the employee’s full pay. Maternity leave in Germany is compensated by the employer and reimbursed by the Health Insurance company.

Paternity Leave: There is no leave benefit that is specific to fathers, although either parent can take advantage of parental leave.

Parental Leave: Parental Leave in Germany is 36 months and may be divided between the parents as they see fit. The eight weeks of maternity leave after labor are also counted as part of this leave. In the mother’s case, however, the parental leave starts after her maternity leave stops.

Parental leave must be requested in writing and submitted to their employer at least seven weeks before its start.

During this time, parents may choose to work part-time for up to 30 hours per week. At least 12 months of parental leave must be taken within the first three years after labor, and the rest can be taken until the child reaches the age of eight.

Probation: The employer and employee may agree upon a probation period, but it is limited by law to a maximum duration of 6 months.

Termination Notice: A dismissal notice must be given in writing, as well as be signed by the employer’s authorized representative. Severance payments are not mandatory if a justified reason is made, as well as a proper notice is given during employment termination.

Severance Pay: Severance payments are mandatory for termination caused by operational changes. In these cases, employers must give a half-month of the employee’s regular wage for every year that the employee has worked in the company.