Employment contract - review & draft in german practice

Content, law, form, invalid clauses under german law

The employment contract is the legal basis of an employment relationship in Germany. Appropriate care is required when formulating the individual clauses of the employment contract. Due to the large number of different employment relationships and circumstances, there has long been no "standard employment contract" that contains the right provisions for all employers and employees in Germany. Nevertheless, you will find the most important information on this page:

What is an employment contract under german law?

According to german law, an employment contract is concluded between the employee and the employer. With the contract, the employee agrees on the one hand to perform the promised work and the employer agrees on the other hand to pay the agreed remuneration. In addition, secondary obligations are established between the contracting parties in Germany that go beyond the main obligations (work for remuneration), especially the employee's duty of loyalty and the employer's duty of care.

Form of the employment contract in Germany

Although an agreement between employer and employee can also be made verbally in Germany, a written employment contract documents and sets out which regulations are to be observed with regard to this relationship. In the event of a dispute, the written contract plays a decisive role in german practice.

According to the Verification Act (§ 2 NachwG), german employees are entitled to written documentation of the essential terms and conditions of employment applicable to them and can therefore demand an employment contract. Exceptionally, a formal requirement can also be established by a company agreement or a collective agreement.

What many people do not know: Various agreements in the geramn employment contract may only be made in writing, such as the limitation of the employment relationship.

Necessary components of the employment contract under german law

Although the parties in Germany are largely free to conclude an employment contract, certain minimum contents must be observed. In german practice, these include regulations on the type and scope of employment, working hours and holidays, remuneration and the possibility of termination. These include:

1. Name and address of the employee & employer
2. Beginning and duration of the employment relationship
3. Type of work (brief summary of activities)
4. Remuneration/compensation: Amount, composition (supplements, allowances, bonuses, special payments, if applicable) and due date.
5. Place of work
6. Periods of notice
7. Regulations on working time
8. Holiday entitlement, sick leave
9. If applicable, references to collective bargaining regulations (collective agreements, service or company agreements).

If, on the other hand, the employment contract does not contain any agreements on working hours, breaks, holidays or notice periods, the relevant statutory provisions apply in Germany.

Duration of the employment relationship: Temporary vs. permanent in Germany

In principle, an open-ended employment contract is better than a fixed-term one - for example, special regulations apply to protection against dismissal. Nevertheless, a fixed-term employment contract is often offered first in german practice.

In principle, a fixed-term contract can be valid for a maximum of 2 years and must be agreed in writing according to german law. If it is not, the employment contract is valid without the time limit.

Furthermore, the limitation of an employment contract in Germany is only permissible if there is an objective reason for the limitation, for example, if it is only a temporary replacement of another employee on parental leave or the work in question is only for a certain period of time. In addition, there are special cases such as fixed-term contracts for older employees in Germany.

Special case under german law: Probationary period

As an employee, you only have a probationary period if this has been expressly agreed in the employment contract. If there is no such provision in your employment contract, the employment relationship is concluded without a probationary period in Germany.

During the probationary period in Germany, the employer and the employee can generally separate with only two weeks' notice. After that, it is often more difficult for employers to give notice, because after six months the German Dismissal Protection Act applies.

A "second" probationary period is generally inadmissible in Germany and only effective in exceptional cases, such as when a former trainee is taken on as a full-time employee or when the second job covers a different field of activity.

Activity: What performance do I owe under the employment contract in Germany?

In principle, the employee only owes the activity described in the employment contract. In german practice, this means: the more precise the description, the more likely the employee is to be able to refuse tasks later on if they do not correspond to his assignment or his qualifications. If there is no specification in the employment contract, the job advertisement can be used.

In principle, employees in Germany do not owe any specific success within the scope of their work. They must only do everything within their abilities to maintain a workload that corresponds to the average of other employees. Only if the employer can prove that an employee has worked below average for a longer period of time despite warnings and discussions is dismissal conceivable - in german practice high demands are made on these points.

At most, the employer in Germany can indirectly influence the employee's success through additional incentives, such as performance-based bonus payments.

Wages: minimum wage, bonuses, benefits in kind & Co under german law

First and foremost, in Germany the wage should be specified in the employment contract. The agreed remuneration must not fall below the statutory minimum wage limit of currently 9.82 EUR gross (as of April 2022) per hour. The same applies to collective agreements in german practice. The minimum wage serves to secure the subsistence level of workers without them having to rely on supplementary state benefits such as Hartz IV or unemployment benefit II.

As a rule in german practice, the employer will enter a "fixed" monthly wage in the employment contract, i.e. the employee receives the same wage every month, regardless of how many working days there are in the month. In addition, the employer may provide other benefits to employees. These include:

• Bonuses,
• Christmas bonus,
• holiday pay,
• bonuses and variable compensation components and
• benefits in kind.

However, these are basically voluntary additional benefits in Germany provided by the employer.

A bonus or premium would represent a benefit granted by the employer in addition to the basic salary, which is regularly linked to individual performance of the individual employee and/or to the performance or results of the company or a department. If the employer is not legally obliged to pay a bonus, it is a voluntary benefit under german law. If, on the other hand, the employee is entitled to a regular bonus or premium payment, it is usually paid once a year in german practice. As a basis for calculating the amount of the payment, the criteria set out in the employment contract must always be observed in Germany.

Likewise, there is no general right to a Christmas bonus. Employees in Germany can only look forward to this special payment if it is stipulated in the employment contract, a company agreement or a collective agreement. The situation is similar with holiday pay. An employee can only invoke this if it is stipulated in the employment contract, there is a collective agreement and a collective agreement applies, or there is a company practice because holiday pay is usually paid in the company.

In addition, the employment contract in Germany may stipulate that the employee is entitled to benefits in kind such as vouchers, petrol vouchers, goods vouchers, petrol vouchers or similar.

Place of work under german law: commuting, home office, abroad

In Germany, the place of work is generally determined by the employer. The place of work describes the place where employees are predominantly required to carry out their work. In most cases, this is the employer's business or premises.

If the place of work was not specifically defined in the employment contract, the employer is free to determine the employee's place of work at his or her own discretion within the framework of his or her right of direction under german law. However, it is also possible in german practice that the employee is allowed to change work locations in the employment contract. For example, an option for home office, mobile working or workation can be agreed in the employment contract. More specific regulations on the place of work may result from a company agreement, an applicable collective agreement or directly from a statutory provision.

However, employees in Germany currently do not (yet) have a right or even a claim to home office and co.

Notice of termination: Legal & contractual notice periods under german law

The periods of notice should not be forgotten in Germany. It is advisable to take these into account when drawing up the employment contract. The agreed notice period can be either a statutory or a contractual notice period.

The statutory notice period for employment relationships is regulated in Section 622 (1) of the German Civil Code (BGB). According to this, the employment relationship of a worker or a salaried employee in Germany can be terminated for the first time with a notice period of four weeks to the 15th or to the end of a calendar month. In the event that an employment contract does not contain any information on the notice period or refers to the law, the statutory notice period of four weeks to the 15th or to the end of a calendar month applies. The longer the employee works for the company, the longer the notice period in german practice.

However, a contractual and thus individual notice period can also be agreed upon in Germany. This can occur especially if the statutory notice periods do not meet the specific needs of the contracting parties. An employer regularly has the interest in binding employees firmly to him from the beginning. In such cases, longer notice periods are particularly appropriate in german practice. Employers and employees are in principle free to agree in the employment contract on notice periods that deviate from the statutory provisions, provided that they do not thereby fall short of the statutory notice periods. Consequently, contractual notice periods in Germany can only apply if they are more favourable to the employee, i.e. longer. Furthermore, collective agreements may contain provisions deviating from the statutory notice periods.

Regulations on working time in the employment contract in Germany

Usually in Germany, the employment contract states an exact number of hours per week, but sometimes also a number of hours that applies to the whole month. A precise distribution of working hours over the individual days is often not prescribed in the employment contract. The resulting flexibility manifests itself in german practice, for example, in a flexitime arrangement or trust-based working, so that german employees can decide for themselves when they start or finish work during the day.

Regardless of whether the employee in Germany is to work full-time, part-time, on a 450 EUR basis or in marginal employment, corresponding regulations and special features should be laid down in the contract. In addition, provisions should be made on overtime, confidential work and time recording.

Working hours - requirements in the German Working Hours Act

In order to ensure the protection and rights of employees in Germany, all regulations on working time are subject to the German Working Time Act (ArbZG). In principle, there is contractual freedom in the structuring of working time regulations in Germany. Employers may therefore specify working hours in the employment contract and determine the work to be performed by the employee per day or per week - provided they do not violate any directive of the German Working Hours Act. The Working Hours Act thus sets the framework for the various working time models in german practice.

For example, § 3 of the German Working Hours Act sets a maximum limit for daily working hours and restricts this flexibility on the employee's part. According to this, the working day of employees in Germany may not exceed 8 hours. An exception is made for 10 hours a day if the average working day does not exceed 8 hours within a period of 6 months or 24 weeks. The german law defines working time as the time from the beginning to the end of work, excluding rest breaks (section 2 (1) ArbZG).

The purpose of the law is to ensure the safety and health protection of employees in the organisation of working time, to improve the framework conditions for flexible working hours, and to protect Sundays and state-recognised public holidays as days of rest from work and spiritual upliftment for employees in Germany.

Time recording at the workplace under german law

In Germany, the boss only wants to pay for what the employee has actually done. The employee, in turn, only wants to do what he or she is paid for. In this sense, time recording benefits both parties to the employment relationship. It provides transparency and enables a certain degree of control under german law.

Since a ruling by the European Court of Justice in May 2019, employers have been obliged to record the total working time of employees. Until then, only overtime worked had to be documented in Germany.

Overtime under german law - compensation in the employment contract?

The must-haves of the employment contract in Germany regularly include provisions on overtime worked.

If the employment contract does not contain any provision on the handling of overtime, employees in Germany - with the exception of emergency situations - are generally not required to work overtime. Under certain circumstances, they may even refuse to work overtime that would exceed the contractually agreed working hours (according to the Regional Labour Court of Rheinland-Pfalz, judgement of 15 December 2011 - 2 Sa 559/11).

If employees nevertheless work overtime (voluntarily), they are entitled to compensation under german law: According to the overtime regulation in section 3 ArbZG, this results in a claim for statutory compensatory time off. Nevertheless, compensation in financial form is also permissible in german practice, so that employees can also have their overtime paid out.

However, the employer in Germany is free to contractually determine whether and to what extent overtime is to be worked by the employee and in what form it is to be paid. Many employment contracts provide for the so-called "compensation" of overtime - but this is often invalid under german law.

Statutory break regulations in Germany

In addition to the maximum working hours, the German Working Hours Act also regulates the minimum duration of breaks for employees during the working day. Accordingly under german law, an employee may not, in principle, work for more than six hours at a stretch without a break. The duration of the break is determined in advance and the employee's work must be interrupted for that length of time.

In this context, the duration of the breaks in german practice depends on the total working time. For example, anyone who has to work more than six and up to nine hours is entitled to a break of at least 30 minutes. On the other hand, those who work more than nine hours a day in Germany are entitled to a break of at least 45 minutes.

Special case: trust-based working time in Germany

The employer can offer employees different working time models under geman law. From fixed working hours, to flexitime (core working hours with flexible start and end), to trust-based working (employees are largely free to decide when they work), everything is possible in german practice.

If trust-based working time is agreed, employees can organise their working time largely independently and on their own responsibility. The only specification that the employer makes with trust-based working time is the volume of weekly or monthly working time - but not the start and end. The working time model gets its name from the fact that the focus is less on controlling working hours and more on trusting that the agreed tasks will be completed. When exactly employees fulfil their tasks is then largely left up to them in german practice.

There is no statutory anchoring of trust-based working time in german law, which is why a corresponding regulation in the employment contract is advisable in Germany.

Working on Sundays and public holidays, extra pay in Germany

Whether and under what conditions work must be done on Sundays and public holidays in Germany should also be regulated in the employment contract - this also includes determining a possible payable Sunday or public holiday surcharge.

Section 9 of the German Working Hours Act stipulates that employees may not work on Sundays and public holidays from 0 a.m. to midnight. The situation may be different in german companies whose employees regularly work in different shifts (early shift, day shift, late shift, night shift, etc.). There, the beginning or end of the Sunday and public holiday rest period can be brought forward or back by up to six hours pursuant to german law if the business is idle for the 24 hours following the beginning of the rest period.

Holidays, sickness during holidays under german law

How much holiday is an employee in Germany entitled to? Every employee is entitled to a certain amount of time to recover from work - namely the holiday days. The majority of employees work five days a week and accordingly have two days of weekend to recuperate.

In addition to this, dependent employees are entitled by geramn law to four weeks' recreational leave. In principle, every employee in Germany is entitled to at least the number of holiday days specified in the German Federal Holiday Act (Bundesurlaubsgesetz). In german practice, employers are free to agree on a different, higher holiday entitlement within the employment contract. Similarly, more days of leave may result from the provisions of an applicable collective agreement in Germany. The only thing to bear in mind is that the number of days must not fall short of the requirements of the German Federal Leave Act (Bundesurlaubsgesetz).

If an employee becomes ill while on leave, he or she can under germa law, in principle, "get back" his or her leave days for the duration of the illness by means of a medical certificate. They are then available again later in the year without being used up. The idea behind this is that a holiday is supposed to be for recuperation, and someone who is sick in bed does not normally recuperate. The german law does not stipulate when the sick person must notify the boss that he or she is sick while on leave. A medical certificate can therefore only be submitted after returning from leave. All days that have been documented as sick days by a medical certificate no longer count as days of leave in Germany. However, the proof by a medical certificate must already be provided for the first day of illness - unlike in the case of illness outside of leave.

Sick note & sick leave under german law

What must the employee in Germany pay attention to when he is ill? What rights and obligations affect him or her under german law? The legal basis for this is found in the German Continuation of Remuneration Act (EFZG).

1. Notification of illness in Germany

If an employee in Germany becomes ill and cannot come to work, he or she is first obliged under § 5 EFZG to report sick to the employer promptly. The form in which this must be done is not specified by german law, so a phone call is often sufficient. Promptly means that the employee must comply with this obligation as soon as it is reasonably possible for him or her. Whether this can be the case before the visit to the doctor or only after a diagnosed illness is to be determined in each individual case. In principle, however, it is permissible in Germany to ask third parties (e.g. family, friends, colleagues) to call on behalf of the sick person at work. Anyone who forgets to call in sick at work can risk a warning or, in the case of persistent, repeated violations, even dismissal under german law.

In german practice, it is usually agreed in the employment contract by when and in what form the boss would like to receive a sick note.

2. Sick leave in Germany

In addition, the sick employee must have his or her incapacity for work certified by a doctor in Germany. The so-called certificate of incapacity for work (AU) must then be submitted to the employer. Many employment contracts contain provisions that waive the requirement for a certificate after one day of absence due to illness. Other employers require a certificate right from the very beginning.

If you cannot get an appointment with a doctor immediately, you can, in exceptional cases, take sick leave retroactively - but only for up to 3 days and only if the doctor allows retroactive sick leave in individual cases due to the circumstances.

Continued payment of remuneration in the event of illness & sickness benefit in Germany

The most important question is often whether the employee is entitled to continued payment of remuneration under german law in the event of prolonged illness.

According to the German Law on Continued Payment of Remuneration (EFZG), employees are generally entitled to continued payment of remuneration in the event of illness for which they are not at fault. However, this only applies for a period of six weeks. During this time, the employee in Germany continues to receive his or her salary in full. In principle, the employment contract can extend this period. There may also be deviations from collective agreements. in german practice

If the illness lasts longer than six weeks, the health insurance fund regularly pays sick pay in Germany.

Excursus: What are you allowed to do in Germany when you are too sick to work?

Example: A person who works in a production hall, operates machines every day and then breaks his arm can no longer do his job as usual if he needs both arms for it. But does he have to stay at home in bed as long as he is on sick leave according to german law and is not allowed to do anything during this time?

If his incapacity for work is medically proven in Germany, he does not have to stay in bed permanently until he recovers. However, he must make sure that he fulfils his duty of care if he does leave the bed or the couch. In this case, the patient in Germany must refrain from all activities that could hinder the recovery process.

Which things the sick person is allowed to do in german practice and which things he or she is not allowed to do therefore depends on the type of illness in question. Anyone caught disregarding the duty of consideration is liable to a warning under german law. To stay with the example of our production worker: Would he be allowed to have dinner together with friends in the evening? Probably so. But what if they want to kick a few balls in the garden afterwards? If he plays along, he endangers the healing process of his arm if it is hit or jostled. And if you stand in the goal with a broken arm, you can't help yourself.

Ineffective clauses in the employment contract under german law

In practice, many employment contracts contain common formulations that are ineffective in Germany. Here is a list of the most popular invalid clauses in german employment contracts:

1. Lump-sum compensation for overtime - this is only possible if a maximum number is specifically agreed.
2. Post-contractual non-competition clauses - these only apply if appropriate compensation continues to be paid after termination of the contract.
3. Confidentiality clauses vis-à-vis colleagues - do not apply. For the purpose of enforcing the principle of equal treatment in the payment of wages, you are allowed to talk to your colleagues about your salary.
4. Blanket transfer clauses - these are only effective if the employee's personal interests are sufficiently taken into account.
5. Expiry clauses for claims - do not apply to claims under the Minimum Wage Act and are invalid with regard to a written form clause for contracts from 2016.
6. Notice periods that fall short of the statutory notice provisions.

Furthermore, many clauses are invalid in individual cases under german law.

Our topics and competences as lawyers in the area of employment contracts in Germany

Our certified specialists for german labour law and lawyers in Berlin, Hamburg, Munich, Cologne, Frankfurt and Hanover will be happy to advise you on all aspects of employment contracts in Germany, including the following main topics:

• Permanent and fixed-term employment contracts
• Trial employment contracts
• Temporary employment relationships (lender, hirer, temporary worker)
• Job sharing
• Part-time work, marginal employment
• Training contract
• Service contract / contract for work
• Managing director contract

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