The German labor laws to consider as part of your global expansion

October 26, 2021

German labor laws

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:

  1. Pension insurance
  2. Health insurance
  3. Unemployment insurance
  4. Nursing care insurance
  5. Accident insurance
  6. Maternity insurance
  7. 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.

 
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