If Germany is part of your organization’s strategic expansion plan—and with
its strong economy and skilled workforce , why wouldn’t it be?—becoming well-versed in German labor laws will
play a critical role in your success as you begin to add workers.
Here’s an overview of what you’ll need to consider from both a regulatory and
cultural standpoint.
German labor laws
There is no singular place where the German labor laws are codified. Rather, a
conglomeration of federal statutes, court decisions and industrial practices
govern employment in Germany. There are:
Individual labor laws
- Civil Code (“Bürgerliches Gesetzbuch”)
- Part-time and Fixed-term Work Act (“Teilzeit- und Befristungsgesetz”)
- Employee Leasing Act (“Arbeitnehmerüberlassungsgesetz”)
- Holidays Act (“Urlaubsgesetz”)
- Act on Maternity Protection (“Urlaubsgesetz”)
Codetermination
- Business constitution act (“Betriebsverfassungsgesetz”)
- Codetermination act (“Mitbestimmungsgesetz”)
Trade unions
- German Trade Union Confederation (“Deutscher Gewerkschaftsbund”)
Collective bargaining
- Collective agreement act (“Tarifvertragsgesetz”)
Foreign businesses that wish to operate in Germany must take the time to do
their legal due diligence, which can be made simpler by working with an employer of record familiar with German rules and working
conditions.
For example, do you want to outsource employees to German companies?
In Germany, when employees are permanently employed, they’re subject to the
German employment laws. These regulations make it difficult to terminate an
employee’s contract for almost any reason.
But with the leasing act, “Arbeitnehmerüberlassungsgesetz,” (AUG), German
businesses can hire temporary staff for certain projects without having to
become the official employer of the contracted employee
. In
their stead, an umbrella company takes on the responsibility of managing the
contracted employee according to German laws.
So, should you lease out workers, you will need to acquire an AUG license.
You’ll also be required to abide by the 28 regulations. Failure to comply with
those regulations could result in fines as high as €500,000 or, even worse,
change the status of the hiring company, thus turning them into the employer.
Also, if contractors work for longer than 18 months, they automatically become
the end user’s official employee.
German human resource considerations
Understanding the totality of a foreign country’s labor laws can be a
monumental undertaking. To make it more palatable, we’ve broken down some of
the more essential employment requirements you need to keep in mind:
Written employment contract
In Germany, some employment contracts may be done verbally in the initial
stages of hiring. However, from a legal standpoint, there needs to be evidence
of the contract, especially since some employment contract provisions are
only enforceable if agreed upon in writing.
For this reason, every employee has the right to a written summary, which
contains the key terms and conditions of their employment. At a minimum, this
should include:
- The employer’s and the employee’s names and addresses,
- The date work commenced
- A job description
- The place of work
- The weekly hours of work
- The amount and method of payment
- Leave entitlement
- The required notice period
- Reference to applicable collective agreements
- Length of service if the employment contract is concluded for a fixed term
Additionally, there may be other items that should be considered, such as
probationary periods and alternative employee job assignments.
Workday regulations
The German workweek has stringent regulations on the number of hours that can
be worked. Workers can either go Monday through Friday or Monday through
Saturday. Additionally, no work is allowed on Sundays outside of
transportation or food and beverage industries.
For either work schedule, the Working Hours Act
stipulates that the maximum amount of hours worked in a week cannot exceed 48
hours . Similarly, the average working hours in a day may not exceed eight
hours; the exception to this is they can work up to 10 hours so long as the
average work time doesn’t exceed eight hours a day over the most recent six
months.
- Germans can’t be forced to work more than six consecutive hours without a break. A 6 to 9-hour workday requires a 30-minute break. A workday exceeding nine hours requires a 45-minute break.
- After work is done, employees must be given an 11-hour hiatus. If it’s interrupted, the 11-hour period resets.
Holidays and vacation
Germans have generous vacation and holiday compensation that they’re expected
and encouraged to take.
Employees who work six days a week are entitled to 24 working days of paid
vacation. Employees working five days a week are entitled to 20 working days
of paid vacation.
This is just the baseline vacation time. Most Germans have more because of
collective bargaining and work council agreements. Also, minors and
individuals with disabilities tend to have extra time off. For instance,
severely disabled employees claim an additional five days of vacation time.
Germany also celebrates more than a dozen holidays, depending on their state.
The national holidays that Germany observes are:
- Epiphany
- New Year
- Good Friday
- Easter Monday
- Labor Day
- Ascension
- Whit Monday
- Corpus Christi
- Assumption Day
- Day of German Unity
- Reformation Day
- All Saints’ Day
- Penance Day
- Christmas
- St. Stephen’s Day
Terminating an employee
Terminating an employee in Germany is difficult, as labor laws offer strong
protection for the worker. The specifics of termination can be impacted by
work agreements or collective bargaining agreements.
To dismiss a contracted employee, an employer must observe a statutory minimum
notice period and severance pay. The standard dismissal notice period is four
weeks, though that figure increases with seniority or depending on the
employment agreement. According to CMS Law :
The statutory notice periods are ruled by article 622 German Civil Code. The
basic notice period is four weeks effective as of either the 15th or the end
of the calendar month. It may be reduced to two weeks during a probationary
period of six months, and it extends in steps after two years of service with
the company up to seven months to the end of a calendar month (in case of
twenty years of service, whereas years of employment below the age of 26 are
disregarded).
The exception to this is dismissal for cause. If employees engage in a
significant breach of their employment contract, the employer can give a
dismissal and terminate employment immediately. That notice of termination
must be provided within two weeks
of
the underlying issue that caused the dismissal.
Sick leave
The Continuation of Remuneration Act protects employees from being sick or
injured so long as they’re not at fault. In that case, employees have the
right to receive up to 100% of their salary for six weeks.
Incapacitated employees are expected to notify their employer of injury or
illness immediately. They must also show a doctor’s note or medical
certification backing their assertion within three days of notification.
Should their sickness or injury go longer than six weeks, employees must
submit a new medical certificate. Failure to do so may free the employer from
having to provide further sick pay.
Maternity leave
Germany has strong parental leave protections. Mothers aren’t expected to work
for the six weeks before their due date or the eight weeks after the birth;
however, they can if they want to.
Maternal leave can extend up to 12 weeks for premature or multiple births. And
during this time, the employee is eligible for maternity benefits via her
health insurance.
After the child has been born, the mother has the right to parental leave
until the child is 3 years old. Up until this point, the employer must keep
the job position available.
Minimum wage
In Germany, the national minimum wage is €9.50 per hour and was updated on
July 1, 2021. This figure is adjusted every two years to account for
inflation. Currently, only apprentices and interns are exempt from minimum
wage laws.
Health insurance and social security
When it comes to health insurance and social security, both employers and
employees make equal contributions of roughly 20% of gross monthly salary to
the statutory pension insurance system. The benefits of a pension depend on
factors like the employee’s income, contract, number and amount of
contributions made.
Germany’s social security system has seven components:
- Pension insurance
- Health insurance
- Unemployment insurance
- Nursing care insurance
- Accident insurance
- Maternity insurance
- Insolvency insurance
Though extensive and detailed, this coverage is intended to keep German
workers protected no matter what occurs.
Understanding German Labor Laws
If you plan on hiring workers in Germany
, staying
in compliance with the country’s complex labor laws is no small undertaking,
particularly if you’re new to the market and don’t have a local HR team. A Germany employer of record , particularly one with in-country HR
experts , can guide you every step of the way to
help ensure all labor requirements are met.
Learn more about why a global employment partner
may be the
right choice for your HR needs in Germany.
Schedule a free consultation
Meet with one of our payroll experts to discuss your current business challenges and how our solutions can help.