Expanding into
Germany

Employment contracts in Germany are either indefinite or for a fixed term. Fixed-term contracts may not normally be for more than two years, and may be extended or renewed up to two times, provided that the original contracts and all extensions and renewals combined do not exceed the two year limit. If there is a justification for a longer term, it may be possible for the fixed-term contract to be for more than two years. In particular, start-up businesses may hire employees on fixed-term contracts of up to four years without any justification. Fixed-term contracts must be in writing. An indefinite employment contract may be oral or written, but the written form is strongly recommended. At minimum, a written contract should state:

• Identities and addresses of the parties
• Date the employee will begin work
• Term of the contract if it is for a fixed term
• Workplace
• A clause stating that the employee may be transferred or relocated if this is a possibility
• Brief job description
• Amount of the employee’s salary and any other components of the employee’s compensation
• Intervals at which the employee will be paid
• Employee’s working hours
• Amount of annual leave the employee is entitled to
• Notice periods for the termination of the employment relationship
• Length of the probation period if there will be one.
• Probation periods may not be longer than six months
• What collective agreement, company agreement, or other agreement applies to the contract

If there is no written contract, the employer must disclose this information to the employee in writing within one month of the employee’s first day of work.

The standard workweek is five days, eight hours per day, although a six day workweek is possible. An employee may not work more than 48 hours in one week. Daily hours can be extended to 10 hours per day, provided that the employee does not work an average of more than 40 hours per week over a 24 week period. Overtime is normally compensated with paid time off or with a higher hourly rate, but the exact rules for a given employer are normally set by contract or collective agreement. Board members and some management level employees are often not paid overtime. Workers in industries that must operate every day (e.g. hospitality, hospital services, power generation) can be scheduled to work on Sundays and holidays, but other workers normally do not work on these days. Employees who, for an extraordinary reason, work on a Sunday or holiday when they normally do not are usually compensated with a paid day off, which they must be granted within two weeks. Work at night (between 11 p.m. and 6 a.m.) is normally compensated with either a higher rate of pay or compensatory time off. A collective agreement or contract may specify precisely how night work is compensated.

Employees receive six weeks of sick leave at full pay, paid by the employer. If the employee is unable to work for longer than six weeks, they can receive a payment from social security or from their private insurance. The social security payment is normally 70% of the employee’s normal pay and is capped at 90% of the employee’s net income. The employee can collect this payment for a maximum of 78 weeks. The employee must provide a doctor’s note no later than the third day of illness.

After notifying her employer of her pregnancy, a female employee is entitled to begin her maternity leave six weeks before the expected date of birth. The expectant mother may choose to keep working during these six weeks, but she must explicitly indicate that she has chosen to work, and she may choose to stop working and go on maternity leave at any time. Pregnant women may work no more than 8.5 hours per day, and may not work overtime, on Sundays or holidays, or at night. After the birth, the mother receives eight weeks of leave, or 12 weeks if her child is disabled or if she gives birth to multiple children. She may not work during this time under any circumstances. During maternity leave, the mother is paid a maternity benefit based on her average earnings over the last three months that she worked. If she is insured by the state health insurance system, she can receive a daily stipend from the government. Either parent may take an unpaid parental leave until the child is up to three years old, and up to 24 months of this time may be taken later, up until the child’s eighth birthday. Adoptive parents are not entitled to maternity leave, but have the same rights to parental leave as biological parents, beginning on the day the adoptive parent(s) gain(s) custody of the child.

The minimum wage in Germany changes often. Bonuses are common and there are many different types. Many employees receive Christmas bonuses. Employers often pay a holiday bonus for employees who will soon be leaving for a vacation, as well.

Employees whose work week is normally five days are entitled to 20 days of paid vacation per year. Employees who work six days per week are entitled to 24 days per year. Young workers are entitled to more vacation. Employees with severe disabilities receive five additional vacation days. Employees become entitled to the full vacation allowance after six months of employment. Prior to this, the employee accrues 1/12th of the total allowance per month. In practice, the allowance is often set by collective agreement, contract, or the employer’s own policy, and many employers allow 25 to 30 days of annual leave for all employees. Employees must submit a written request for vacation time. The employer must grant the request unless the employee is urgently needed at work at the requested time for business reasons, or if another employee who has requested vacation at the same time must be given priority for social reasons. Vacation not used in the calendar year for which it is granted is normally forfeited, although it may be carried forward until the end of March of the following year if the employee was not able to use it for business or personal reasons. The employee must be paid for unused vacation time when the employment relationship ends.

• New Year’s
• Good Friday
• Easter Monday
• Labor Day
• Ascension
• Whit Monday
• Day of German Unity
• Christmas
• Boxing Day

Germany has universal healthcare.

The rules regarding how and when an employer may terminate an employee vary somewhat based on the size of the employer. Employers with more than 10 employees may only terminate an employee who has worked for more than six months if the employee’s termination is socially justifiable, which generally means the termination is due to a personal reason, due to conduct in violation of the employment agreement, or due to business reasons. Employees with 10 or fewer employees must still ensure that terminating an employee does not violate anti-discrimination laws or other applicable laws or policies. The employer must be able to support all terminations with evidence, and be prepared to make the case that only termination, as opposed to a lesser measure, was appropriate under the circumstances. All notices of termination must be in writing, and must be signed by hand by an authorized representative of the employer. The notice period depends on the length of time the employee has worked for the employer. If an employee’s breach of their employment obligations was very severe (e.g. the employee committed a crime against the employer), the employer may terminate the employee immediately, with no notice. The dismissal must be carried out within two weeks of the employer’s discovery of the event(s) which is/are the reason for the dismissal. For employees on a probation period, the notice period is normally two weeks, although special rules apply to board members and management level employees. An employee who wishes to quit must provide written notice to the employer. The notice period in most cases is four weeks, regardless of how long the employee has worked for the employer. Severance pay is only required in a few situations.