KNOWLEDGE BASE Employment Law
Employment Law In Germany
Related employment laws
There are a number of employments laws that you must be aware of before you hire employees in Germany. There is not one consolidated code in which to find employment law in Germany. The major sources of employment law are federal legislation, collective bargaining agreements, work agreements, and case law. The employment relationship is defined by the German Civil Code (available in English), the Works Constitution Act (Betriebsverfassungsgesetz—available in English), and the Act on Collective Agreements. In addition, there are a number of statutory provisions and regulations that set out the rights and obligations of employers and employees. Some of these rights and obligations include: minimum wage requirements, working hour requirements, holiday, sick, and maternity/paternity leave minimums, health and safety regulations, and protections for employees from unfair dismissal and discrimination.
The Federal Employment Agency acts through ten regional competent offices (Regionaldirektionen), which preside over 156 employment agencies (Arbeitsagenturen) with over 600 local employment offices (Geschäftsstellen).
In general, your responsibilities as an employer depend on the type worker you hire. German law distinguishes between:
- employees working under an employment contract, and
- non-employees, which includes a company’s statutory representatives (e.g., managing directors of limited liability companies and members of the management board of a stock company) and independent contractors working under a service contract.
An employee is a person who works for another (an employer) who cannot determine the place and time of his assigned work and is subject to his employer’s instructions. Employees can be employed full-time, part-time, for job-sharing purposes, or as leased employees, on the basis of an unlimited contract or a contract for a fixed-term. All employees are entitled to the same protections, regardless of the type of employee.
Independent contractors are generally not entitled to statutory employee protection rights, therefore, the determination of whether a person is considered an employee or an independent contractor is very important. In practice, this determination can be difficult because it is made by looking at all of the factors surrounding the relationship, such factors include:
- whether the individual is obligated to perform duties in person;
- whether the employer controls the individual’s performance, working hours, and work location;
- whether the individual is integrated into the employer’s working organization; and
- whether the individual is financially dependent on the employer.
You cannot, by contract, negate an employment relationship when it does in fact exist. Meaning, you cannot stipulate by contract that an individual is only an independent contractor, to get around the statutory protections offered to employees, if all factors considered, make the individual an employee. If you do, you could be obligated to pay arrears taxes and social security contributions and could face fines and criminal prosecution.
Employment Protection Rights
In general, German statutory employee protection rights only apply to employees, including executive staff below the level of the company’s statutory representatives, mentioned above. These company statutory representatives do benefit from some employment rights, but contractual deviations are generally more permissible. There are several subsets of employees, including: workers, trainees, and executive staff. While some special regulations exist and may apply to these employees, they are all generally entitled to most employment rights and protections.
In Germany, there is no requirement that an employment contract be in writing, however, you must at least provide your employees with a signed “term sheet,” detailing the most important aspects of the employments, including:
- the start date;
- the place of work;
- the employee’s position or role;
- renumeration information;
- holiday entitlement information;
- notice period details; and
- a reference to any applicable collective bargaining agreement(s).
This term sheet must be given to your employee within one month of commencement of employment with you.
Failure to provide a “term sheet” could lead to a claim for damages by your employee.
Certain employment matters must be in writing in order to be valid and enforceable, this includes: fixed-term employment contracts and post contractual non-compete agreements/covenants).
In Germany, it is normal practice to provide a detailed employment in contract.
There are certain implied terms in all employment relationships in Germany, these implied terms include:
- minimum notice period requirements;
- regulations on working hours and occupational health and safety;
- paid holiday leave;
- continued payment in the case of illness; and
- minimum wage.
There are also implied duties in all employments relationships, for example, confidentiality obligations and an employee’s obligation to orderly handle an employer’s property.
There are two types of collective agreements in Germany:
- Collective Bargaining Agreements (CBA): agreements between an employer or an employer’s association and a trade union; and
- Works Agreements: agreements between an employer and the Works Council.
CBA are binding on the parties and all members within the scope of application, but membership is voluntary. The German government can declare a CBA generally binding on all employers and employees in certain industries. A CBA may be applicable to non-members through a reference clause in an employment contract.
Works Agreements are binding on employers, the Work Council, and employees (except executive staff) within the scope of their application.
CBA and Works Agreements provide employees with rights and duties that overrule less favorable contractual provisions.
Minimum Benefits and Rights:
Germany only recently passed its first statutory minimum wage. As of January 1, 2015, the nation minimum wage is €8.50. There are specific exceptions during a transition period through December 31, 2016. Hourly earnings less than €8.50 are permitted in certain industries through the transition period.
People under 18 years of age and apprentices are permanently exempted from the national minimum wage regulations. Furthermore, the national minimum wage does not apply to people doing a compulsory or voluntary internship of up to three months as part of their education, studies, or training. However, a person doing a voluntary internship longer than 3 months is entitled to minimum wage after the first three months. Long-term unemployed people, who have been registered with the Federal Employment Agency or a Job Center for more than one year, are only entitled to receive the national minimum wage after 6 months on the job.
A national minimum wage commission will meet every two years to discuss any adjustments to the minimum wage.
It is common in various industries in German to reward employees with a bonus. Bonuses can be paid on a non-contractual or contractual basis or based on a CBA or Works Agreement. In general, when devising a bonus scheme, you are free to decide on the type and extent of bonuses, as long as bonuses are given in a non-discriminatory manner.
In Germany, normal bonuses types include:
- contractual or discretionary bonuses;
- performance related bonuses based on individual, team, division, company, or group results;
- loyalty bonuses; and
- profit sharing bonuses.
Hours of Work
The protection of working time is governed by the Working Time Act (Arbeitszeitgesetz (ArbZG)), the Maternity Protection Act, and the Young workers Protection Act. Daily working hours may not exceed eight hours. This maximum can be extended to up to ten hours, if you provide your employee time off in such a way that his average work day (Monday through Saturday) is no more than eight hours over a 24-week period.
Generally, with specific exceptions, working on Sundays and public holidays is prohibited. Furthermore, there are special rules for certain groups of employees, such as minors (under 18) and pregnant employees. CBAs can include exemptions to these mandatory work day maximums.
Holiday and Vacation
Under the Federal Holiday Act (Bundesurlaubsgesetz), employees who work six days per week are entitled to a minimum of 24 days of paid vacation (holiday). That minimum is reduced proportionately based on an employee’s work week. Full holiday entitlement is attained after six months of employment.
In Germany it is common for employees working a five-day work week to receive 25-30 paid vacation days.
Your employees are also entitled to paid public holidays, which cannot be counted against their minimum vacation days. There are nine federal public holidays and many states have their own public holidays.
After work, you must provide your employees with an uninterrupted rest period of at least 11 hours. If your employees’ work day is more than 6 hours, but less than 9 hours, you must give your employees a 30 minute break. For work days longer than 9 hours, you must give your employees
Sick Pay and Leave
Employees are entitled to both sick leave and sick pay in Germany. Employees are relieved of their work obligations if they are unable to work due to physical or mental incapacity. Your employee must notify you of his incapacity and the estimated duration without delay. If his incapacity is expected to last longer than 3 days, he must submit a medical certificate.
Employees are entitled to sick pay equal to their regular pay for up to six weeks, provided they have been employed for four weeks. Employees are also entitled to paid time off to go to medical appointments when is it not possible to schedule the appointments outside their regular working hours, e.g., the doctor’s office is only open during the employee’s working hours or it is an emergency.
Maternity, Paternity, Adoption, and Parental Rights
Females employees must not work:
- for six weeks prior to delivery, unless they are willing to do so; and
- for eight weeks, or in the case of a premature birth or multiple childbirth, 12 weeks after delivery.
During maternity leave, your employees are entitled to continued pay. Dismissal during this time and up to four months after delivery is restricted and subject to the competent agency’s approval.
Unless other arrangements have been agreed to through a CBA or an internal company policy, a male employee is only entitled to one paid day off for the birth of his child.
Both parents are entitled to parental leave until their child turns three. Parents can claim this leave for each child, even if the time period overlaps. A 12-month period may be transferred to another time period up until a child turns eight. This applies to adoptive and foster parents. Parents are not entitled to employer paid remuneration during this leave period. However, for up to 12 months, the mother or father is entitled to public benefits of 67% of his or her most recent net salary, with a minimum of €300 per month and a maximum of €1,800 per month. Dismissal during this time is restricted and subject to the competent agency’s approval. At the end of the parental leave period, employees are entitled to return to their former, or an equivalent, position.
Employees are also entitled to short-term paid leave when care is unexpectedly needed for dependants or close family members. Employees can claim leave to care for a sick child if either:
- the child is under the age of 12 or disabled; or
- a medical certificate confirms the need for care and the employee is the only person able to provide the care.
This leave cannot exceed ten days (single parents are entitled to 20 days) per year, per child. Employees are entitled to unpaid long-term care leave for up to six months to take care of close relative (this includes children (foster, adopted, grand), parents, parents-in-law, spouses and partners in registered partnerships).
Employer Health and Safety Obligations
As an employer, you are required to adopt measures necessary to ensure the health and safety of your employees, as set out in the Labour Safety Act (Arbeitsschutzgesetz), and more specifically, statutory rulings, including:
- implementing the required health and safety measures for the workplace;
- regularly monitoring the effectiveness of your health and safety policies;
- conducting risk management assessments; and
- ensuring your employees are provided with instructions on health and safety at work.
For companies with more than 20 employees, you are required to appoint a safety officer.
If you breach health and safety laws, fines may be imposed. If an employee is injured or dies in a work accident caused by your non-compliance with health and safety regulations, you could face a claim for damages. In some cases, you could even be held criminally liable.
Termination of Employment
Employee Protection Against Dismissal
The Protection Against Unfair Dismissal (Kündigungsschutzgesetz) governs ordinary dismissals. The Act applies:
- once an employee has been employed for six months; and
- when the operational entity employs more than ten employees.
The Act requires that an ordinary dismissal be socially justified in order to be lawful or valid. A dismissal may be socially justified when:
- the reasons for dismissal substantially relates to the personal attributes of your employee, e.g., incapability, lack of experience, or long-term or recurring short-term illnesses;
- the reasons for dismissal relate to substantial employee misconduct, e.g., breach of contract or criminal acts;
- there are operational reasons that lead your employee’s role to cease to exist. A social criteria test must be used to determine who of several comparable employees is to be dismissed, based on age, length of employment, maintenance obligations, and severe disability.
In all cases, you must have exhausted all other reasonable alternatives first, including considering the possibility of transfer, relocation, reassignment, and further training.
An employment relationship can be terminated for cause with immediate effect if it would not be reasonable to continue employment until the expiration of the generally required notice period e.g., employee commits a severe offence, including contractual breach and criminal conduct. Notice in this case must be given within two weeks of learning the cause for dismissal.
Even when the Protection Against Unfair Dismissal does not apply, you still must not dismiss your employees in an unreasonable, discriminatory, or arbitrary manner.
The following groups of employees are specially protected against unfair dismissal:
- pregnant employees;
- employees on maternity or paternity leave;
- severely disabled employees;
- members of employees’ representative bodies;
- elderly employees (more than 55 years of age) when explicitly covered, in a CBA for example;
- employees with official functions, e.g., data protection officer; and
Dismissal Procedure Requirements
When dismissing an employee, you must provide notice in writing. You do not have to state the reasons for dismissal in your notice letter. This notice must be signed by the statutory representative of your company (e.g., a managing director) and you must provide your employee with an original copy.
Furthermore, when one exists, you must inform (approval is not required) the Works Council of the dismissal at least one week before issuing the letter to your employee. There are additional requirements that apply in the case of collective layoffs. Prior approval is required by the competent agency if your employee is:
- severely disabled;
- pregnant; or
- on maternity or paternity leave.
Your employee can challenge his dismissal by initiating proceedings for unfair dismissal before the Labour Court within three weeks of receiving his notification, otherwise, the dismissal will be deemed lawful. If dismissal is found to be invalid, the employment is not terminated and your employee is entitled to retroactive, continued remuneration and reinstatement in his former opinion.
Statutory Notice Periods
In the event of an ordinary dismissal, you are required to observe the following statutory minimum notice periods, which are determined based on your employee’s length of service:
- during probationary period (6 month maximum): two weeks;
- after or without probationary period: 4 weeks;
- after two years of service: one month;
- after 5 years of service: two months;
- after eight years of service: three months;
- after ten years of service: four months;
- after twelve years of service: five months;
- after fifteen years of service: six months; and
- after twenty years of service: seven months.
With the exception of only a probationary period length of service, your notice is effective at the end of a month.
In general, these statutory minimum notice periods only apply to employers. Employment contracts often contain the notice period that applies to an employee’s resignation.
Payment in lieu of notice is uncommon in German, as it triggers disadvantages concerning unemployment benefits.
In Germany there is no statutory obligation for you to pay severance in the case of individual dismissal, regardless of whether the dismissal is valid or not.
Redundancy (laying off) is when you dismiss an employee because you no longer need someone to do that job. Redundancy can occur as an individual or collective event. Dismissals in the case of redundancy must be justified with operational reasons. Your employees are not automatically entitled to redundancy pay, unless it is agreed upon in a Social Plan with the Works Council. The formula for calculating redundancy payments is determined by the parties through negotiation when drafting the Social Plan. There are no minimum or maximum amounts under German law.
There are generally additional requirements in the event of collective redundancy. When you plan a collective (mass) redundancy, you must notify the Labour Agency of the dismissals before giving your employees notice. When a collective redundancy comes about because of operational changes in your company and a Works Council exists, a collective consultation procedure must be performed. The Works Council must be informed and consulted about the intended change, including negotiations on a Reconcilement of Interests (Interessenausgleich (ROI)) and a Social Plan (Sozialplan (SP)). A ROI defines the method by which the redundancy will be effectuated, e.g., extent, timing, etc. The purpose of an SP is to adequately compensate your employees for the financial disadvantages arising from a redundancy. If an agreement cannot be reached between you and the Works Council, you can apply to an arbitration committee to attempt to reach an agreement.
Your employees are protected from discrimination under the Anti-Discrimination Act (Allg. Gleichbehandlungsgesetz (AGG)) and the General Act on Equal Treatment, to include:
- racial or ethnic origin,
- religion or beliefs, and
- sexual identity or orientation.
There are also a number of unwritten characteristics that are protected, including:
- political opinion,
- trade union membership,
- marital status, and
You are obligated to make reasonable efforts to attempt to stop discrimination in the workplace, this includes discrimination by you (as an employer), other superiors, colleagues, etc.
KNOWLEDGE BASE Employment Law