The Employment Contract in Germany

German Employment Lawyers

The Employment Contract in Germany

German Employment Lawyers

First comes the application, followed by the interview and then the employment contract if everything goes according to plan. The conclusion of the contract often raises questions. What should the employment contract stipulate, what may it specify, and what has no place in an employment contract in Germany?

In order to provide the necessary clarity here, the German law firm Schlun & Elseven offers both employees and employers competent legal assistance. Regardless of whether it is a question of drafting an employment contract that complies with the law, the proper termination of an employment relationship or any other matter relevant to employment law – our team is always at your side with its outstanding expertise and many years of experience.

Dr Thomas Bichat and Mr Jens Schmidt guarantee you the support you need as an employee, manager or board member to always be on the safe side in terms of German employment law.

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The Importance of the Employment Contract

The employment contract is crucial as it outlines the relationship between the employee and the employer. It provides information on vital aspects of a person’s working life from their salary to the number of holidays they are entitled to and states whether the work is for a defined period or indefinite duration. Furthermore, the contract could outline confidentiality, data protection and non-competition clauses. It should also provide the guidelines for the notice periods required. Here we’ll examine some of these aspects of the employment contract in greater detail.

When does an “Employment Contract” exist in German Law?

By definition, an employment contract exists if the parties have agreed that particular work performance is to be rendered by the employee in return for a payment from the employer.

Legally, the employment contract is not subject to any formal requirements, i.e. employment contracts can even be concluded orally. However, it is recommended, and usually the rule, that they should be set out in writing.

Which Content Requirements must a German Employment Contract meet?

Although there is no mandatory legal regulation here either which prescribes which elements the agreement to be concluded must contain, it is advisable in the light of legal certainty to include the following essential points:

  • the job description,
  • the amount of remuneration (including shareholdings, allowances, bonuses, special payments) and its due date,
  • the start of the employment relationship,
  • a possible limitation of the employment relationship,
  • working hours,
  • the holiday periods,
  • the place of work,
  • data protection provisions,
  • private car/phone/internet use,
  • flexitime,
  • non-competition obligations,
  • the periods of notice,
  • general references to the collective agreement/company or service agreement.

Employers usually use their standardised employment contracts.

Duration of Employment

One of the first things that an employment contract will outline is if it is for a fixed term or an indefinite duration (Befristete und unbefristete Arbeitsverträge). A fixed-term contract can be provided for a set time limit or until a goal is achieved. Once this occurs, the employment relationship can be ended without the requirement for notice. In Germany, most contracts are unlimited in duration as they provide more certainty for both the employer and the employee. Generally, fixed-term contracts can be renewed a maximum of three times and only last for two years. There are some exceptions to this rule laid out in the Part-Time and Fixed-Term Contracts Act, several of which refer to newer (start-up) companies.

Fixed-term contracts can suit an employer when they know that they have a specific short-term goal they wish to reach and have no requirement for the employee following this achievement. It is possible that the employer could instead employ a temporary agency worker for this purpose. It can also benefit the employer when there is a degree of financial instability in the company, and they can only foresee needing the employee for a short period.

Salary Obligations

For the work performed by the employee, there is, of course, the obligation for them to receive financial remuneration in the form of a wage or salary. The amount paid will vary depending on the nature of the work, the seniority of the position and a variety of other factors. Still, it has to be above the national minimum wage.

When working in Germany, it should be noted that a significant amount of the salary is required for taxes and health insurance, among other requirements.
A further clause within the contract can outline the bonuses an employee can receive whilst working and the overtime rate. Other aspects of this obligation to be aware of include:

  • The need for the employer to pay on time. This requirement is there even if the employer is ill.
  • The employer is responsible for ensuring that the necessary deductions are being paid correctly.
  • The payslips provided allow the employee to check that the correct deductions are being made.

It is very beneficial for employees to check their payslips to make sure that they are being paid the right amount and that the employer is making the correct deductions.

Nature of Work

The employment contract will also act as a means of outlining the tasks expected of the employee. Within this description is a breakdown of what is expected of the employee by their employer. Consequently, the employer cannot demand their employee perform in an area of the enterprise that they are not contractually obliged. However, it should also be noted that it is not a good strategy for an employee to limit your job description too much. Should employees do this, they may  face future redundancy should their strict job description be deviated from within the enterprise. This is why it is beneficial to have a job description with leeway.