Laws and Policies in Germany

Employment Contracts in Germany

Employment is governed by the German Civil Code (BGB), various labor laws, and collective bargaining agreements (Tarifverträge).

Contract Requirements

Employment contracts should be in writing and include:

• Job title and key duties
• Place of work (including remote/hybrid terms if applicable)
• Start date and duration (indefinite or fixed-term)
• Working hours
• Salary and payment frequency
• Annual leave entitlement
• Applicable collective agreement (if any)
• Notice periods
• Probation period
• Reference to key policies (e.g., works council agreements where relevant)

Types of Employment Contracts

• Unbefristeter Arbeitsvertrag (indefinite-term contract) – standard and most protective
• Befristeter Arbeitsvertrag (fixed-term contract) – allowed under the Part-Time and Fixed-Term Employment Act; must meet strict rules for renewals and total duration
• Part-time contracts
• Mini-jobs / Midi-jobs (low-income categories with special social security rules)

Probation Period

• Typically up to 6 months
• During probation, notice periods are shorter (e.g., 2 weeks) unless otherwise agreed.

An EOR ensures contracts are compliant with German law and aligned with market expectations.

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Working Hours in Germany

• Standard working time: usually 40 hours per week, often 8 hours/day, Monday to Friday.
• Working Time Act (Arbeitszeitgesetz) limits:
  • Maximum 8 hours per day, can go up to 10 hours if average over 6 months does not exceed 8.

Overtime

• Overtime rules are often defined in the employment contract or collective agreement.
• Overtime may be:
  • Paid with a premium, or
  • Compensated with time off in lieu (“Freizeitausgleich”).

Rest & Breaks

• Minimum 11 hours rest between working days.
• Breaks:
  • At least 30 minutes for shifts of 6–9 hours
  • 45 minutes for more than 9 hours
• Sunday and public holiday work is heavily restricted and usually requires special justification and compensation.

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Employee Leave in Germany

Annual Leave

The Federal Vacation Act (Bundesurlaubsgesetz) sets minimum leave:

• Legal minimum: 20 working days per year (for a 5-day week)
• In practice: many employers offer 25–30 days per year, especially for white-collar roles.

Employees gain full entitlement after 6 months of service; it accrues gradually before that.

Sick Leave

• Employees must provide a medical certificate (“Arbeitsunfähigkeitsbescheinigung”) typically from day 4 of illness (or earlier if employer requires).
• Employer pays 100% of salary for up to 6 weeks per illness.
• After 6 weeks, statutory health insurance pays a sickness benefit (reduced amount).

Maternity Leave

• Mutterschutz covers:
  • 6 weeks before birth (employee may work voluntarily)
  • 8 weeks after birth (extended to 12 weeks in special cases)
• During this period, employees receive maternity pay financed by statutory health insurance and supplemented by the employer.

Parental Leave

• Parents can take up to 3 years of parental leave per child (Elternzeit).
• They may receive parental allowance (Elterngeld) from the government based on previous earnings.

Public Holidays

Public holidays in Germany consist of:

• Nationwide holidays (e.g., New Year’s Day, Labour Day, Christmas)
• State-specific holidays (vary by Bundesland)

Employees normally receive paid days off on public holidays.

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Employee Benefits in Germany

Germany has a comprehensive social security system, financed by joint employer-employee contributions.

Statutory Social Security (approximate structure)

Contributions are split roughly 50/50 between employer and employee and cover:

• Pension insurance (Rentenversicherung)
• Health insurance (Krankenversicherung)
• Unemployment insurance (Arbeitslosenversicherung)
• Long-term care insurance (Pflegeversicherung)
• Accident insurance (normally employer-only via Berufsgenossenschaft)

Total employer social costs are typically ~20–22% of gross salary (varies with health fund, sector, and thresholds).

Common Additional Benefits

To be competitive, especially in tech and professional roles, many employers offer:

• Supplementary private health insurance
• Company pension plans (bAV)
• Meal vouchers or cafeteria subsidies
• Transportation allowance or job ticket
• Mobile phone & home office equipment
• Flexible working hours & remote work
• Training & development budgets

An EOR structures all benefits in line with German market practice and legal requirements.

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Payroll & Tax in Germany

Payroll Currency

• Salaries are paid in Euro (EUR).

Payroll Frequency

• Traditionally monthly, paid at month-end.

Employee Income Tax

• Germany uses a progressive income tax system with rates rising up to 45% for high earners, plus a solidarity surcharge and, in some regions, church tax (if applicable).
• Employers must calculate and withhold:
  • Wage tax (Lohnsteuer)
  • Solidarity surcharge (Solidaritätszuschlag, if applicable)
  • Church tax (Kirchensteuer, if applicable)

Employer Payroll Obligations

• Register employees with tax office and social insurance agencies.
• Withhold and remit income tax and employee social contributions.
• Pay employer social contributions.
• Submit monthly and annual payroll reports.

A German EOR handles all these calculations and filings, ensuring full statutory compliance.

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Employment Laws & Compliance in Germany

Key laws include:

• BGB (German Civil Code) – baseline contract law
• Kündigungsschutzgesetz (Employment Protection Act) – rules for termination
• Arbeitszeitgesetz (Working Time Act) – working hours
• Bundesurlaubsgesetz (Federal Vacation Act) – annual leave
• Nachweisgesetz (Act on Proof of Conditions) – written employment conditions
• AGG (General Equal Treatment Act) – anti-discrimination

Works Councils (Betriebsrat)

In companies with 5+ employees, workers may elect a works council, which has significant consultation and co-determination rights around:

• Working time rules
• Restructuring
• Redundancies
• Workplace policies

An EOR coordinates with any existing works council where required.

Termination Rules

Termination in Germany is strictly regulated:

• For employees in companies with >10 staff and >6 months tenure, the Employment Protection Act applies.
• Termination must be socially justified:
  • Person-related (e.g., long-term illness)
  • Behaviour-related (misconduct)
  • Business-related (redundancy/restructuring)

Notice Period

Statutory minimum notice (for employer), increases with service:

• 4 weeks to the 15th or end of a month (base)
• Extends up to 7 months for very long tenure (20+ years)

Many contracts or CBAs provide equal or longer notice periods for both parties.

Severance

There is no automatic statutory severance, but it often arises when:

• Agreed in a settlement agreement (Aufhebungsvertrag)
• Part of a social plan during restructuring
• Offered in redundancy programs

A common formula in practice is 0.5 month’s salary per year of service, but this is not mandatory law, just typical practice.

Non-Discrimination

The AGG prohibits discrimination on grounds of:

• Race or ethnic origin
• Gender
• Religion or belief
• Disability
• Age
• Sexual orientation

Employers must also comply with GDPR for all employee data.