1 Legal framework
1.1 Are there statutory sources of labour and employment law?
A plethora of statutory sources exist in Germany. Furthermore, case law plays an important role. Both statutory law and case law are constantly developing, which is why it is important to always keep up to date. The most relevant statutory sources include:
- the Civil Code;
- the Termination Protection Act;
- the Act on Continued Payment of Remuneration in Case of Illness;
- the Federal Vacation Act; and
- the Works Constitution Act.
Statutory laws apply nationwide; however, public holidays are regulated at state level and thus differ between states.
1.2 Is there a contractual system that operates in parallel, or in addition to, the statutory sources?
There is a contractual system in parallel in which the parties agree on the employment conditions of the individual employment relationship. Employment conditions can generally be freely agreed, with some notable limitations.
First, statutory law sets minimum standards in certain areas, meaning that the parties cannot agree on conditions that are less favourable for the employee than the statutory law (the so-called 'principle of favourability'). For example, statutory law provides for 20 days' vacation per year. The parties may agree that the employee is entitled to more, but not less than 20 days. In addition to statutory law, collective bargaining agreements set minimum standards for employment conditions (but only if they are applicable to the specific employment relationship). Furthermore, works council agreements (ie, agreements between the company and the works council) may regulate employment conditions and benefits (eg, bonuses) for the employees in the establishment.
Second, employment contracts are generally considered as general terms and conditions. There are strict rules in statutory law, which are continually developed by case law, regarding the validity of clauses in such general terms and conditions. For example, the clause:
- must be clear and understandable for an average person;
- must not be surprising; and
- must not put the employee at a disproportionate disadvantage contrary to the principles of good faith and fair dealing.
There is constantly new case law on clauses in employment contracts, which means that a clause that is considered valid today could be deemed invalid in the future. In view of this, it is recommended to update contract templates at least once a year.
1.3 Are employment contracts commonly used at all levels? If so, what types of contracts are used and how are they created? Must they be in writing must they include specific information? Are implied clauses allowed?
Employment contracts are commonly used at all levels.
Essentially there are two types of contracts:
- contracts for employees to whom a collective bargaining agreement applies; and
- contracts for employees to whom no such agreement applies.
If a collective bargaining agreement applies, the employment contract is usually shorter, since many employment conditions are regulated in the collective bargaining agreement.
Employment contracts are created by the employer; there are no specific government-approved forms or the like.
The Act on the Evidence of Essential Working Conditions regulates the minimum information to be included in the employment contract.
Since 1 January 2025, employment contracts can be concluded in text form (eg, DocuSign). The employee must be able to access, store and print the employment contract; and the employer must request the employee to provide proof of receipt. The employee can demand that the essential contractual terms be provided to them in written form (wet ink), although this is very rare.
If the contract remains silent on a particular issue, the statutory rules will apply. For example, if the contract does not explicitly specify which notice periods will apply, the statutory notice periods will apply automatically. Thus, implied clauses are allowed.
2 Employment rights and representations
2.1 What, if any, are the rights to parental leave, at either a national or local level?
Both parents are eligible for parental leave according to the Parental Benefits and Parental Leave Act.
2.2 How long does it last and what benefits are given during this time?
Parental leave can be taken by the father or mother alone or by both parents together. It is limited to three years for each child. The parental leave may be split into three periods. A part of the parental leave of up to 24 months may be taken between the child's third birthday and eighth birthday. The employer cannot reject a request for parental leave.
During parental leave, employees do not receive remuneration from the employer (unless they work part time during the parental leave). They may receive parental benefits from the government for a maximum period of 12 months (in some cases 14 months). The parental benefits amount to 67% of the employee's net income before the child was born. The minimum amount is €300 per month and the maximum amount is €1,800 per month. Employees with a very high income are not eligible to receive parental benefits.
During parental leave, the employee may work part time for their employer. Provided that there are at least 15 employees in the establishment and the employment relationship has existed for at least six months, the employee has a legal claim to work part time, which can be rejected by the employer only for urgent operational reasons. Such reasons are very rare in practice.
2.3 Are trade unions recognised and what rights do they have?
Trade unions are recognised and particularly active in certain industries, such as the metal and chemical industries, as well as the public sector. Trade unions have, for example, the right to:
- access a site/plant in order to recruit members;
- initiate works council elections in an establishment; and
- call members to strike in order to put pressure on the employer during collective bargaining negotiations.
Trade union members can choose to be represented by a trade union representative in an individual lawsuit with their employer (at the first court level only).
2.4 How are data protection rules applied in the workforce and how does this affect employees' privacy rights?
Employee data protection is governed by the General Data Protection Regulation (GDPR) and the Federal Data Protection Act, which set out strict rules on data collection, processing and storage.
For example:
- employers must have a legal basis for processing personal data (eg, contract fulfilment, legal obligations, or consent);
- the data collection must be necessary and proportionate for employment purposes;
- employee consent is required for processing beyond contractual obligations and must be voluntary and revocable;
- employers must implement security measures to prevent unauthorised access;
- monitoring (eg, emails, closed-circuit television) is allowed only if legally justified and proportionate; covert surveillance is mostly prohibited; and
- employees have rights to access, rectify, erase and restrict their data under the GDPR.
Specific requirements must be met for transferring data:
- to third parties (including within a group of companies); and
- outside of the European Union (eg, to the United States).
The legal framework protects employees from excessive data collection and unjustified surveillance. Employees can challenge unlawful data use and demand deletion. Data subject access requests are a tool commonly used by employees (and their attorneys) if they want to put pressure on the employer – for example, in negotiations about severances.
Employers face severe fines for violations of data protection laws (up to €20 million or 4% of annual turnover).
2.5 Are contingent worker arrangements specifically regulated?
There are no specific regulations for independent contractors/freelancers. They usually provide their work based on a service agreement which can be negotiated freely between the parties. When engaging contractors/freelancers, a risk of misclassification arises if the individual is 'on paper' hired as a contractor/freelancer, but in fact is subject to the instructions of the employer and integrated into the employer's organisation (ie, in fact works like an employee). Misclassification is highly risky for the employer:
- The misclassified individual may claim employee rights (eg, termination protection, vacation, continued payment of remuneration in case of illness); and
- The employer:
-
- may be held liable for social security contributions (both employee's and employer's shares) plus late payment fines; and
- may face sanctions for an administrative or even criminal offence.
Temporary agency work is regulated (rather strictly) by the Act on Employee Leasing. Employee leasing is permitted only if the lessor (ie, the temp agency) has a valid employee leasing licence. If no such licence is in place, the employee leasing is deemed illegal and both the lessor and the lessee may be held liable for an administrative offence. Furthermore, the temp agency worker will be deemed to be an employee of the lessee. A temp agency worker must not perform work for the same lessee for more than 18 consecutive months.
Employer of record (EOR) arrangements, which have become popular in recent years, usually constitute employee leasing under German law. This means that:
- the EOR provider must have an employee leasing licence; and
- the arrangement works only for a period of 18 months maximum.
3 Employment benefits
3.1 Is there a national minimum wage that must be adhered to?
There is a national minimum wage which applies to all employees regardless of level or industry, provided that they are at least 18 years of age. The minimum wage is regulated in the Minimum Wage Act. As from 1 January 2025, the minimum wage amounts to €12.82 per hour. It is reviewed and increased from time to time by the Minimum Wage Commission.
3.2 Is there an entitlement to payment for overtime?
Employees are principally entitled to payment for overtime at their normal pay rate (although collective bargaining agreements may provide for deviating rules).
Employment contracts often provide that overtime is covered by the employee's regular remuneration:
- A clause that provides that all overtime is covered is valid only in case of 'high earners' – that is, employees whose remuneration exceeds the contribution threshold in the statutory pension insurance (in 2025, the contribution threshold is €8,050 gross per month/€96,600 gross per year; the thresholds are adapted each year).
- For employees who are not 'high earners', case law suggests that a provision according to which overtime of up to 10% of the employee's regular working time shall be covered by the fixed remuneration is valid. Overtime beyond this threshold must be remunerated additionally. The employment contract may provide that instead of additional remuneration, the employee receives time off in lieu.
3.3 Is there an entitlement to annual leave? If so, what is the minimum that employees are entitled to receive?
The minimum annual leave entitlement for all employees in Germany (and everywhere in the European Union) is 20 days based on a five-day working week (ie, four weeks). It is, however, customary to grant additional leave. Most employees in Germany have 30 days' vacation per year (ie, 20 days of statutory minimum vacation plus 10 days of additional vacation). Employees are entitled to the statutory holidays at their place of work in addition to vacation.
3.4 Is there a requirement to provide sick leave? If so, what is the minimum that employees are entitled to receive?
Employees who are unable to work due to illness are entitled to continued payment of remuneration for a period of six weeks. If they are still unable to work due to illness for more than six weeks, they will receive sickness benefits from their health insurance provider. If the employee is unable to work more than once in a calendar year due to different kinds of illnesses, the employer must continue the remuneration payments in each case of illness for up to six weeks. However, if the inability to work is based on the same illness, the employer will only have to pay once for a six-week period, unless:
- there is a period of at least six months between two periods of absence based on the same illness; or
- a period of 12 months from the beginning of the first period of absence based on the same illness has expired.
3.5 Is there a statutory retirement age? If so, what is it?
The regular retirement age for all employees born in 1966 or later is 67 years. For employees born before 1966, the regular retirement age is slightly lower depending on their year of birth (eg, 66 years and six months for employees born in 1963). This is because the regular retirement age has been increased gradually from 65 to 67 since 2012.
There are several options to retire early (eg, for employees with disabilities).
Employment contracts do not end automatically when an employee reaches the regular retirement age. Rather, this needs to be explicitly agreed in the contract. It is possible to employ employees beyond their regular retirement age (usually for a fixed term).
4 Discrimination and harassment
4.1 What actions are classified as unlawfully discriminatory?
The General Equal Treatment Act prohibits direct and indirect discrimination as well as harassment on the following grounds:
- race;
- ethnic origin;
- gender;
- religion or belief;
- disability;
- age; and
- sexual identity.
4.2 Are there specified groups or classifications entitled to protection?
The General Equal Treatment Act applies to all employees as well as job applicants and applicants whose employment relationship has ended.
4.3 What protections are employed against discrimination in the workforce?
Employers must take appropriate measures to prevent discrimination, such as:
- conducting anti-discrimination training and awareness programmes;
- establishing internal complaint mechanisms; and
- implementing clear company policies against discrimination.
Employees have the right to file complaints with a designated body within the company if they feel discriminated against. The employer must investigate and assess the situation and, if necessary, take suitable measures to prevent further discrimination/harassment.
Possible measures include:
- mediation or conflict resolution;
- disciplinary actions against the offender (eg, warning, reassignment or termination); and
- policy changes or additional training to prevent future discrimination.
Employees may not be disadvantaged or dismissed for opposing discrimination or filing a complaint.
If the employer fails to protect the employee from continuing discrimination, the employee may have the right to refuse to work without losing their salary, provided that they have made a prior complaint.
4.4 How is a discrimination claim processed?
Employees who feel discriminated against may file a claim with a labour court seeking specific remedies, such as compensation for damages.
Generally, an employee who files a claim with a labour court bears the burden of proving that they have been discriminated against. However, in a discrimination lawsuit, if an employee can show indications of discrimination, the burden of proof shifts to the employer – that is, the employer must prove that the employee has not been discriminated against. If the employer fails to prove this, the employee wins the claim. For example, a job ad that is not neutral (eg, with regard to the gender or age of the preferred applicant) will be seen as an indication of discrimination.
Discrimination claims are relatively rare in Germany. Most cases deal with discrimination based on gender, followed by age discrimination.
4.5 What remedies are available?
Victims of discrimination or harassment in the workplace can claim the following:
- 'material damages' – compensation for financial loss (eg, lost wages, missed promotion, therapy costs);
- 'non-material damages' (pain and suffering) – compensation for emotional distress, typically ranging from €1,000 to €10,000; and
- a cease and desist order.
4.6 What protections and remedies are available against harassment, bullying and retaliation/victimisation?
Harassment is considered discrimination if it relates to one of the characteristics that are protected under the General Equal Treatment Act. Sexual harassment is explicitly prohibited and employers are obliged to prevent and stop it.
While bullying is not directly regulated by the General Equal Treatment Act or other statutory law, it can be addressed through:
- the Works Constitution Act – employers and works councils must ensure a workplace free from discrimination and bullying; and
- the Civil Code – employers have a duty of care to protect employees' wellbeing; victims may claim damages and request a cease and desist order.
The requirements for successfully filing claims for bullying are very high. The employee bears the burden of proving that they have been bullied.
Employees who file a complaint about harassment or discrimination may not punished or disadvantaged for doing so. Retaliation (eg, dismissal, demotion, exclusion from promotions) is illegal.
5 Dismissals and terminations
5.1 Must a valid reason be given to lawfully terminate an employment contract?
If the Termination Protection Act is applicable, a 'socially justifying reason' is required to terminate the employment relationship on the employer's side. The Termination Protection Act is applicable if:
- there are more than 10 regularly employed employees in the establishment; and
- the employment relationship of the individual to be terminated has existed for more than six months.
The required socially justifying reason can be person related, conduct related or related to operational reasons:
- A person-related reason exists if the individual is no longer capable of doing their job. The most common case is permanent absence based on illness.
- A conduct-related reason exists in case of gross misconduct of the employee. Generally, a notice of termination will be considered justified only if the employer has issued a warning letter for similar misconduct beforehand. In severe cases:
-
- a notice may be issued without prior warning; or
- the employer may even issue an extraordinary notice, which terminates the employment relationship with immediate effect.
- Operational reasons exist if the position is made redundant. If there are comparable employees and not all of them are to be dismissed, the employer must conduct a 'social selection', taking into account the employees':
-
- age;
- years of service;
- obligation to provide maintenance to dependants; and
- severe disability.
Certain groups of employees (eg, pregnant and severely disabled employees) enjoy special termination protection in addition to the general protection under the Termination Protection Act. Employees can enjoy special termination protection irrespective of the number of employees in the establishment.
5.2 Is a minimum notice period required?
The notice periods to be observed by the employer are those under the employment agreement or under the statutory rules of the Civil Code, whichever notice period is longer.
The statutory minimum notice periods depend on the length of service of the employee. The 'basic' statutory notice period to be observed by both the employer and the employee is four weeks to the 15th or to the end of a calendar month. During an agreed probationary period (maximum first six months of employment), the notice period can be shortened to two weeks.
After longer periods of service, the following schedule applies according to statutory law to a notice of termination given by the employer
| After X years of service ... | the notice period is ... |
|---|---|
| 2 years | 1 month to the end of a calendar month |
| 5 years | 2 months to the end of a calendar month |
| 8 years | 3 months to the end of a calendar month |
| 10 years | 4 months to the end of a calendar month |
| 12 years | 5 months to the end of a calendar month |
| 15 years | 6 months to the end of a calendar month |
| 20 years | 7 months to the end of a calendar month |
Employment contracts may provide for longer, but not shorter notice periods. Thus, the statutory notice periods serve as minimum periods. Collective bargaining agreements may provide for shorter or longer notice periods.
5.3 What rights do employees have when arguing unfair dismissal?
Employees who challenge a dismissal by filing a termination protection claim with a labour court must apply for the notice of termination to be held invalid by the court:
- If the court finds the notice of termination to be valid, the employment relationship ends after the notice period has expired.
- If the notice is found to be invalid, the employee must be reinstated in their position and is entitled to backpay (ie, the remuneration that they would have received between the end of the notice period and the reinstatement).
Irrespective of whether the notice is valid or invalid, the court will not award a severance payment. However, the court should foster the settlement of the case. Settlements usually provide that the employment relationship ends and the employee receives a severance payment. The vast majority of termination protection cases are settled at first instance.
If the Termination Protection Act applies, employees will usually argue that the termination is invalid because it is not socially justified (see above). A termination can also be invalid for formal reasons – for example, because the works council has not been heard properly before the notice was issued. The employer bears the full burden of proof for the validity of the notice.
If the Termination Protection Act is not applicable, employees may still challenge a notice of termination, but usually their chances of winning are much lower than in cases where the act is applicable.
5.4 What rights, if any, are there to statutory severance pay?
There is no right to statutory severance pay under German law and the labour courts cannot generally award such payments (only in very rare circumstances).
That said, in practice, most terminations involve a severance payment. In termination protection litigation, the employer faces the risk of having to reinstate the employee if the termination proves to be invalid. In order to avoid this risk, employers are often willing to offer a severance payment.
The amount of such payment is subject to free negotiations between the parties. As a "rule of thumb", the following formula is often used to calculate a severance payment:
factor x monthly gross salary x years of service
A typical factor for a first offer would be 0.5. In cases where the Termination Protection Act does not apply, employers sometimes offer a lower factor, such as 0.25 or 0.3. If it is likely that the termination will be deemed invalid, higher factors such as 1 to 1.5 are common.
6 Employment tribunals
6.1 How are employment-related complaints dealt with?
Any claims related to an employment relationship are dealt with at the labour courts. There are three court levels:
- (local) labour courts;
- regional labour courts; and
- the Federal Labour Court.
The local labour court is the entry level for all cases, irrespective of their subject or value.
At all court levels, two lay judges (one representing the employer's side and one representing the employee's side) sit alongside the professional judge(s) and have equal voting rights to the professional judge(s).
At the first court level, the parties need not be represented by a lawyer. Also, at the first court level, each party must pay their own lawyer's fees, irrespective of who wins or loses the case. From the second court level, the losing party must pay the winning party's lawyer's fees (as well as the court fees). Unlike in the civil courts, the plaintiff does not have to pay court fees in advance. If a case is settled, there are no court fees (for the instance in which the case is settled).
6.2 What are the procedures and timeframes for employment-related tribunals actions?
The first hearing at the labour court is a so-called 'reconciliation hearing', at which the judge tries to settle the case between the parties. The reconciliation hearing is conducted by the professional judge alone, without lay judges. If no settlement is concluded, a second (and sometimes third) hearing takes place, in which the case is discussed in detail and witnesses may be heard (although witness hearings are rare). In the time between the hearings, the parties submit briefs to the court to present their case. A settlement is possible at all stages and common in practice. Approximately 90% of all German labour court cases end with a settlement at first instance.
The timeframe depends on the court/individual judge. The reconciliation hearing is usually scheduled within two weeks of receipt of the claim by the court. Depending on the courts, the first and second instances each take about six to nine months.
All court hearings are public, which means that anyone can attend the hearing in person. Hearings are not recorded.
There is no pre-trial discovery.
7 Trends and predictions
7.1 How would you describe the current employment landscape and prevailing trends in your jurisdiction? Are any new developments anticipated in the next 12 months, including any proposed legislative reforms?
The German employment landscape has experienced significant changes and challenges, particularly in light of the premature end of the federal government elected in 2021. As a result, several proposed legislative reforms, such as an employee data protection law, have not been implemented. With the new government elections set for 23 February 2025, there is uncertainty about future policy directions.
A key trend shaping the landscape is digitalisation. While Germany is not a leader in this area, some updates have been made to the legal framework, such as the ability to conclude employment contracts electronically (since 1 January 2025). However, employment terminations, whether mutual or unilateral, still require physical signatures. Furthermore, the implementation of the AI Directive presents new challenges, particularly for employers with works councils, as they must adapt to regulations surrounding AI use in the workplace. Digitalisation and AI are also expected to impact jobs, leading to redundancies and the need for employees to acquire new skills.
The Pay Transparency Directive, adopted in 2023, requires all EU member states, including Germany, to implement measures aimed at reducing the gender pay gap. These include:
- the publication of salary ranges in job ads;
- mandatory reporting of gender pay differences by companies with more than 100 employees; and
- stronger protections for employees seeking redress for pay discrimination.
Germany must integrate these provisions into national law by June 2026. So far, the gender pay gap remains a significant issue in Germany. Employers should start preparing to fulfil their future obligations.
8 Tips and traps
8.1 What are your top tips for navigating the employment regime and what potential sticking points would you highlight?
- Use proper, customised employment contract templates, keep them up to date and be cautious what you agree in them. Once agreed, employment conditions can only be changed with the individual employee's consent.
- If the Termination Protection Act applies, poor performance constitutes a reason to terminate an employment relationship only in very rare circumstances. Use the first six months of the employment relationship (during which the act does not apply) to properly evaluate whether the employee meets the standards and is a good fit.
- Terminations of employment require wet ink signatures to be valid – that is, the employee must receive a letter with the wet ink signature of the person(s) legally authorised to terminate the employment relationship (not DocuSign, scanned signature, email attachment or the like). In particular if the authorised representatives are not located in Germany:
-
- start the process in time; and
- allow sufficient time for the logistics.
- If a works council has been established, maintain a good relationship with it. The works council has extensive co-determination rights and may make things very difficult (and costly) for the employer if it feels that it is not being taken seriously and members' rights are being disregarded.
- Germany has rather strict working time regulations. For example, employees:
-
- may not work more than 10 hours on a working day; and
- must not work on Sundays (although exceptions apply – for example, for specific industries).
- Working times must be recorded. Violations of the Working Time Act may constitute an administrative or even criminal offence.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
