Employment Laws In Germany

Contractual Agreements 

Contractual agreements in Germany serve as essential legal instruments for defining the terms of employment and preserving the rights of both employees and employers. It contains detailed information related to

• Name and address of the employer and employee
• Time limit
• Inception of contract
• Remuneration
• Job Description and 
• Place of work, among others. 

Types of Employment Contracts in Germany

Germany labor law specifies two types of employment contracts. They are namely,

Fixed-Term Contracts

• These types of contracts specify a predetermined end date or duration of the employment relationship.
• The maximum limit up to which an employee can be hired in a fixed-term contract is two years. 

Open-Ended Contracts

• This type of contract has no specified end date and provides ongoing employment. 
• In general, employment contracts in Germany are valid for an unlimited period. 

Obligations and Rights for Both Parties

In Germany, both employers and employees are required to comply with all relevant laws and regulations. This includes working hours, wages, vacation entitlements, and occupational safety. Failure to comply may lead to serious legal consequences for both parties. 

Additionally, employers are also required to be aware of all the common HR compliance mistakes. This will help them to successfully navigate through the complex legal landscape of Germany.

Working Hours and Overtime 

Working hours and overtime are usually governed by the Working Hours Act, Maternity Protection Act, and Young Workers Protection Act in Germany. It includes

Regular Working Hours

• The standard work week in Germany is usually 48 hours per week.
• In some cases, it can be extended up to 60 hours with the employee's consent. 

Overtime Regulations and Compensation

• Employees get additional compensation for overtime work, which amounts to 25% more than their normal hourly rate.
• Employees receive the full amount of overtime compensation without having to bear any income tax on it. 
• Instead of monetary compensation, employees can avail of compensatory time-off (CTO).

Minimum Wage and Compensation 

Labor laws of Germany lay down specific regulations related to minimum wage and compensation to ensure fair wages for employees. Full-time employees of this country are paid in the official currency of Germany, which is Euro (EUR, €).

The Minimum Wage Rate in 2024

• Employers have to pay their employees a minimum wage of €12 per hour.
• This equates to €2,080 per month for a full-time employee working 40 hours per week.
• However, it is common in Germany to review the minimum wage and increase  once every two years.

Factors Affecting Wage Determination

Wage determination in Germany is a complex process shaped by a multitude of economic and social factors. They include:

• Economic Conditions

Wage levels in Germany are influenced by overall economic growth and productivity levels. Higher productivity often translates to higher wages as companies can afford to pay more to their employees.

• Supply and Demand

Wages are influenced by the balance between the supply of and demand for labor in various sectors and occupations. Shortages of skilled employees in certain industries may drive up wages in those sectors.

• Industry Differences

Wage levels can also vary significantly across industries based on factors such as profitability, competitiveness, and demands for goods and services.

Employee Benefits and Social Security 

Here are a few employee benefits and social security requirements outlined in employment laws in Germany:

Statutory Benefits

Public Health Insurance

• Employment laws in Germany mandate public health insurance for all residents.
• Gesetzliche Krankenversicherung, referred to as GKV, is the most common type of health insurance in this country.

Private Health Insurance

• Employers are not legally required to provide compulsory private health insurance to employees in Germany.

Additional Perks and Benefits

13th Month Pay

• It is not legally mandatory for employers to provide 13th-month pay or Christmas bonuses to employees.
• It is still a common practice across various industries and usually amounts to one month’s pay.

Social Security Contributions and Requirements

Here’s an overview of the social security contributions in Germany.

Pension Insurance

• All employees are required to participate in the public pension plan, thereby ensuring comprehensive retirement coverage. 
• The pension rate is currently estimated at 18.6% of an individual’s salary.
• Both employers and employees are required to contribute 9.3% each for the same.

Vacations and Paid Time Off 

 Let’s take a look at different public holidays and paid time off, as prescribed under the labor laws of Germany. 

Annual Leave Entitlement

• In Germany, employees with a 5-day work week get 20 days of paid annual leave.
• However, most companies in Germany provide 25 days of annual leave to their employees.

Public Holidays and Special Leaves

Sick Leave

• Employees working five days a week are entitled to six weeks of annual paid sick leave in Germany.
• Employees who work for six days a week get eight weeks of paid sick leave in a year.
• In order to avail of these benefits, employees must provide a doctor’s certificate.

Maternity Leave

• Female employees in Germany are provided with 14 weeks of paid maternity leave. 
• The leave begins 6 weeks before delivery and 8 weeks after childbirth.

Paternity Leave

• Germany labor law mandates two weeks of paid paternity leave to male employees.
• Employees also get to avail SPP (Statutory Paternity Protection) for up to two weeks after childbirth. The minimum amount is 67% of the employee’s previous salary.

Parental Leave

• A total number of 36 months of parental leave is granted to employees in Germany.
• Parents are required to utilize a minimum of 12 months of parental leave during the child's first three years. Any remaining leave, subject to the employer's approval, can be taken anytime between the child's third and eighth birthday.

Care Leave

• Employees can take two weeks of unpaid leave in Germany.

Special Leave

Carry Forward of Leaves

• Leaves can only be carried forward until the end of March of the next year.
• Employees can carry over unused annual leave into the following year, although the maximum duration is six days. Any yearly leave above six days that are not used within the year will be canceled.

Termination and Severance in Germany

In Germany, termination of employment contracts is subject to strict legal regulations designed to protect the rights of employees and employers. 

Probation Period

• Labor laws of Germany allow a maximum probationary period of 6 months in temporary contracts.

Grounds for Termination

Below are some of the possible scenarios for termination of employment in Germany.

Grounds for Termination During Probation Period

• Role Misfit
• Poor Performance
• Persistent lateness
• Bad Behavior

Grounds for Termination Due to Poor Performance

• Unsatisfactory performance even after undergoing PIP
• Absent from work due to illness/absconding

Grounds for Termination with Cause

• Attacks on fellow employees or executives
• Committing a criminal offense against the employer
• Sentenced to imprisonment by a court judgment
• Reveals technological or business secrets
• Commits willful acts to cause harm to employers

Grounds for Termination Due to Business Redundancy

• Cash crunch
• Reorganization
• Shutting down operations in the region

Notice Period and Severance pay

• Labor laws dictate that the statutory minimum notice period during probation is two weeks.
• The guideline for the notice period after probation is one month.

If an employee has been terminated due to business needs or urgent operational reasons, he is entitled to severance pay. It amounts to half a month’s salary for each year of tenure.

Discrimination and Equal Opportunity 

In Germany, discrimination and equal opportunities are important principles enshrined in the German labor law. The goal is to promote fairness, diversity, and inclusivity in the workplace. 

Prohibitions against Workplace Discrimination

• The principle of equality is highlighted in Basic Rights (Article 3).
• It prevents any form of discrimination based on sex, religion, disability, and political beliefs, among others.

Health and Safety Regulations

• The guidelines for safety standards and employee well-being are highlighted in the Occupational Safety and Health Act. 
• Under this act, it is mandatory for every employer to assess and mitigate psychological and physical health hazards in the workplace.

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FAQs

Q1: What is the new law for workers in Germany?

Ans: The shortage of skilled labor is one of the biggest challenges to Germany's economic growth. To deal with this, the government recently introduced an ‘opportunity card.’ With the help of the same, foreigners without a pre-arranged job can come to Germany to seek employment for a period of one year.

Q2: What is the employment law in Germany 2024?

Ans: Employment law in Germany is comprehensive and is designed to protect the rights of both employees and employers. It comprises several key aspects, such as standard working hours, paid leave policies, minimum wage requirements, and social security contributions. 

Q3: What is the notice period for employees in Germany?

Ans: According to the labor law in Germany, the statutory minimum notice period during probation is 2 weeks. After the probation period, the statutory guidelines for a notice period for employees is one month. 

Q4: What are the employee benefits in Germany?

Ans: Labor laws of Germany offer several employee benefits to enhance employee well-being and ensure a competitive work environment. It includes health insurance, paid leave, sick leave, and overtime benefits.