Civil law. Member of the European Union (EU) and required to implement relevant EU Directives. The official currency is the Euro (EUR). The official language is German.

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A foreign company can engage employees in Germany without local corporate presence, subject to doing business and corporate tax considerations. For employment and payroll purposes, registrations with tax and social security authorities are required.

Employee earnings are subject to withholdings for social security (up to a ceiling of EUR7,300 gross per month for the states of the former West Germany and a ceiling of EUR7,100 for the states of the former East Germany; about 40 percent borne equally by employer and employee) and wage tax (from 14 percent to 45 percent) to be completed through payroll.

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Required

Immigration compliance. For certain employment positions (eg, public services, education sector, medical sector and security services), statement of good standing (Führungszeugnis) from the Federal Central Register (Bundeszentralregister).

Permissible

Requiring a credit reference check or a statement of good standing is only permissible for roles justifying interest in such information and is subject to proportionality requirements.

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Free movement of employees for all countries of the European Economic Area (EAA) – the EU, Iceland, Liechtenstein, Norway – and Switzerland. All other nationals require a residence and work permit. Nationals of, inter alia, the US, the UK, Israel and Japan and skilled workers enjoy favorable immigration treatment and have access to fast-track procedures.

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Employment contracts

Written employment agreements are common but not mandatory, except in the case of fixed-term contracts. The employer must provide a written statement of the core working conditions within various deadlines depending on the particular contract condition (partly no later than the first day of work and partly within 1 week or 1 month of commencement of employment). This must be signed wet ink. Alternatively, the employment agreement can be signed wet ink.

Probationary periods

Permissible, subject to proportionality, for a term of up to 6 months. Statutory dismissal protection will start after 6 months only.

Policies

No mandatory policy requirements. If a works council exists, works agreements will largely replace policies. Without a works council, policies are common, but they are subject to standard contract term provisions, which means they cannot be changed unilaterally to the detriment of the workforce.

Third-party approval

No requirement to lodge employment contract or policies with or receive approval from any third party.

However, if established, the works council has the right to object to the employment in certain cases.

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No statutory requirements. Employees are often open to English agreements or policies. In case of litigation, the courts will request official translations.

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Employees entitled to minimum employment rights

All.

Working hours

On average, 48 work hours per week in any 6-month period; working time on a workday may not exceed 10 hours. Uninterrupted minimum break of 11 hours after every workday. Work on Sundays and official holidays requires special permission. Working hours must be recorded by the employer.

Overtime

No overtime rate set forth by statute – instead, subject to contractual agreement, which is largely regulated by standard contract term provisions. The agreement must be fair; any provision incorporating overtime into overall wages must be related to a defined amount of overtime.

Wages

As of October 1, 2022, the legal minimum wage is EUR12 gross per working hour. Generally, these rules also apply to trainees, except those undergoing compulsory practical training. A few more exceptions are made for arrangements regarding apprentices, volunteers and former long-term unemployed workers. Furthermore, there are also industry-specific minimum wages (eg, in the construction sector).

Vacation

Four weeks per year plus local public holidays (between 9 and 12 days, depending on the state). Additional vacation entitlements beyond the legal minimum vacation entitlement may be agreed in the employment contract or collective agreement.

Sick leave & pay

Statutory sick leave and pay provisions allow for up to 6 weeks of employer-paid sick leave, followed by 72 weeks of sick allowance paid through the public health fund. Sick allowance is based on the earned income within the previous 12 months and amounts to 70 percent of such. It is calculated per calendar day and is limited to the statutory maximum of EUR116.38 per day (year 2023).

Maternity/parental leave & pay

In Germany, a distinction must be made between maternity protection and parental leave. Maternity protection serves to protect the mother from health risks in connection with childbirth. Parental leave, on the other hand, is available to both parents. The maternity protection period is 6 weeks before birth and 8 weeks after the birth. During these periods, employment is prohibited. The mother can only waive the periods of protection before childbirth. Parental leave paid by the state for 12 months – 14 months if the other parent takes at least 2 months – with a 65-percent net payment rate (ie, Basic Parental Allowance). Further 24 months of unpaid parental leave are possible with full protection within the workplace and the right  to return to work. Parental Allowance Plus is available for twice as long as Basic Parental Allowance. The employee can choose either 1 month in which the employee receives Basic Parental Allowance or 2 months in which the employee receives Parental Allowance Plus. If the employee does not work after their child’s birth, Parental Allowance Plus is half the amount of Basic Parental Allowance.

Other leave/time off work

According to the German Civil Code, employees may also be entitled to temporary leave for other purposes, such as the death of close relatives, a doctor’s visit, or illness and care of family members, among others.

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Statutory protection exists against unlawful discrimination and harassment based on race or ethnic origin, gender, religion or belief, disability, age or sexual orientation.

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Expected to come into force in the first half of 2023, the Whistleblower Protection Act will require companies with more than 50 employees to provide local reporting channels for reports of breaches of national and EU laws. The law provides for a list of administrative offenses for violations. The parliament has not yet enacted the draft bill.

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No benefits required beyond those covered under social insurance contributions. Employers are required to provide all employees with an option to enroll in a deferred salary pension insurance plan with the administration costs borne by the employer.

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Covered by the EU-wide General Data Protection Regulation (Datenschutzgrundverordnung, or GDPR) entered into force in May 2018 and the complementing Federal Data Protection Act. Processing of personal data is generally unlawful except as listed by the Act and the General Data Protection Regulation, a works council agreement or free and individual consent. Appointment of data protection officers is required if 20 or more individuals deal with automated processing of personal data, if processing operations are subject to data protection impact assessment or in the case of business processing of personal data for specific purposes. Special rules apply to data transfer outside the EEA. Significant restrictions on monitoring email and internet use exist.

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Automatic transfer of employment under the EU Acquired Rights Directive/Germany's transfer of business (Section 613a of the Civil Code) rules in case of an asset deal or service provision change. Employees shall receive detailed written information prior to the transfer and may object to the transfer within 1 month after receipt thereof.

There is a duty to inform and consult with the works council. Significant restrictions on changing terms and conditions following a transfer exist. Any dismissal connected to the transfer would be unfair; dismissals for other reasons are possible.

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Works council: The elected works council plays a major role in the everyday lives of larger German businesses. By law, employees in every business of at least 5 employees may form a works council at their own initiative. The works council has information, consultation and co-determination rights in the area of hiring, positioning and dismissals, internal organization of the business, restructuring and personal planning, among others. Employer and works council shall form works agreements to regulate the affairs of the business, except working time and remuneration, which are reserved for collective agreements with a trade union. Works councils may not call industrial action.

Co-determination on supervisory board level: Companies with a regular workforce over 500 employees in Germany establish a supervisory board with 1/3 elected employee representation and a fairly limited scope of duties. If the regular workforce in Germany exceeds 2,000, 1/2 of the members of the supervisory board are elected employee representatives with a fixed list of duties. The chairman of the supervisory board is, by law, always nominated from the shareholder's side and has a casting vote, ensuring control by the business owners.

Trade unions: 18 percent of the German workforce are members of a trade union. Trade unions are prevalent in certain sectors (eg, manufacturing, building, transport and the public sector). Trade unions deal with employer associations or individual employers. Once represented businesses agree on a collective agreement, they are widely used by other businesses as reference. Formation of collective labor organizations is a constitutional freedom, as is the right to avoid them.

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Grounds

In a business with up to 10 employees, there is no dismissal protection, and termination can generally occur for any reason. For businesses with more than 10 employees, dismissal protection exists unless dismissal is justified by compelling operational reasons, conduct-related reasons for particular types of misconduct or personal reasons (eg, the inability to work due to health or new job requirements).

Employees subject to termination laws

Employees with less than 6 months' seniority do not have general dismissal protection. This does not apply to special dismissal protection in connection with parental leave, maternity leave, works council membership or discrimination.

Restricted or prohibited terminations

These include pregnant employees, mothers during maternity leave, employees on parental leave, works council members, candidates during elections, data protection officers and severely disabled employees.

Third-party approval for termination/termination documents

The works council, if established, must be consulted regarding each termination. Dismissal of disabled employees, pregnant employees or employees on maternity or parental leave may be permitted by specific authorities.

Collective redundancies require consultation with the works council about a restructuring agreement and a social plan, whereby consent is only mandatory for the social plan; in case of a tie, the employer's decision on the restructuring plan prevails.

Mass layoff rules

Yes, strict information and consultation rules apply where 6 or more employees in a business between 20 and 59 employees are to be made redundant within 30 days; in larger businesses, the threshold is 10 percent or more than 25 individuals; in businesses with 500 or more employees, the threshold is at least 30 employees. The employer must file an application with the Federal Employment Agency; failure to comply will render all notices and agreed terminations invalid.

Notice

4 weeks' statutory notice effective to the 15th or the end of a calendar month; after 2 years of employment, 1 month effective to the end of a calendar month; with a sliding scale of up to 7 months' notice after 20 years of service. Not required for terminations for very serious misconduct.

Statutory right to pay in lieu of notice or garden leave

No statutory right to pay in lieu of notice. The right to garden leave depends on contract terms and merits of the case, applying a weighting of interests between both parties.

Severance

No statutory severance. A valid dismissal will end the employment without compensation, unless it is part of a collective restructuring covered by a social plan agreed with the works council. Invalid dismissal will lead to enforced reinstatement by the labor courts, unless the parties settle the dispute. Settlements are standard; the general formula is between 1/2 and 1.5 times an employee’s monthly salary per year of service. There is no maximum threshold on settlements.

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Must be in writing. Those that protect the employer's legitimate business interests may be enforced if reasonable. Garden leave is common for senior employees.

Non-competes

Typically no longer than 6 to 12 months, with a statutory maximum of 2 years. Compensation of 50 percent of the employee's wages is required during the non-compete period.

Customer non-solicits

Permissible in narrow circumstances.

Employee non-solicits

Permissible only if related to illegal poaching; an agreement not to hire employees from a certain business is not enforceable.

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Enforceable; subject to legal review if, for instance, employees were not given time to consider.

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Discrimination

Injunction to continue or repeat discriminating actions. Compensation is capped at 3 times an employee’s monthly salary if discrimination is related to the recruitment process. Uncapped compensation in all other cases, based on the claimant's financial loss and injury to feelings. German courts tend to award limited compensation; awards of EUR30,000 have been observed, but they are an extreme exception.

Unfair dismissal

Reinstatement. Therefore, most cases are settled.

Failure to inform & consult

The works council may bring legal action, which can result in administrative fines of up to EUR10,000 if the employer fails to inform and consult with the works council regarding certain matters.

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Significant frequent violation of works council information and consultation rights may lead to criminal charges; however, this rarely occurs.

Last modified 30 Mar 2023