The Importance of the Employment Contract
The employment contract is very important 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 amount of holidays they are entitled to and states whether the work is for a defined period of time or whether it is of an indefinite duration. Furthermore the contract could outline aspects such as confidentiality, data protection and non-competition clauses. It should also provide the guidelines when it comes to the notice periods required. Here we’ll examine some of these aspects of the employment contract in greater detail.
Duration of Employment Contract
One of the first things that an employment contract will outline is whether it is for a fixed term or for 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, the majority of 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 can only last for a duration of two years. There are some exceptions to this rule laid out in the Part-Time and Fixed-Term Contracts Act a number 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 as well. 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 of time.
Salary Obligations Under Employment Contract
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 of course vary depending on the nature of the work, the seniority of the position and a variety of other factors, but it has to be above the national minimum wage. It should be noted, when working in Germany, that a significant amount of the wage is required for taxes and health insurance among other requirements. Bare this in mind, as the amount received in the bank account will be significantly differently to what is signed up for in the employment contract!
A further clause within the contract can outline the bonuses that an employee can receive whilst working as well as 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.
- That 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 just 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 to perform in an area of the enterprise that they are not contractually obliged to. However, it should also be noted that it is not a good strategy as an employee to seek to limit your job description too much. Should an employee do this they lay themselves open to the possibility of 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 some degree of leeway.
Holidays and Annual Leave Requirements
Annual leave is an important part of starting any job and in Germany it is carefully regulated through the Bundesurlaubsgesetz (BUrlG). Annual leave is a legal requirement under the terms of the Act (§ 1 BUrlG). A worker’s employment contract should outline the amount of leave that the employee is entitled to. During annual leave, the worker is deemed to be not at work and thus is not be expected to perform employment duties (§ 8 BUrlG).
The minimum requirement for those working a 5 day per week working week (of around 40 hours) is 20 days annual leave. For those working 6 days per week there is a minimum of 24 days and thus, leave can be increased but not reduced below these amounts. There are times when the employer can refuse to provide leave to an employee on certain dates. The reasons which can be given include that there are not enough staff working on a certain day, that particular employee is required for the task at hand that day and others.
Should the employment contract be for a contract of indefinite duration, then it may include terms concerning the timeframe allowed for relating to notice periods. The timeframes provided should adhere to the law as laid down in § 622 BGB / German Civil Code which provides the statutory minimums for notice periods. Exceptions can be provided for if they are in order with collective agreements, however collective agreements are by their nature designed to protect employees. Otherwise, workers in the probationary period of their employment are also subject to reduced statutory minimums when it comes to notice periods. For more information about notice periods in Germany please visit our page on the topic as it outlines the requirements in more detail and provides more on topics such as extraordinary dismissal.
Confidentiality and Non-Competitive Clauses
The employment contract does not only place requirements on the employer but there are also obligations on the side of the employee. The most obvious obligation is of course to give your time and skills to work on the behalf of the employer. Although this appears pretty obvious it is still regulated for in law under § 611 German Civil Code/BGB. However, the obligations on the part of the employee that are arguably most important to be aware of are those of confidentiality and trust.
Confidentiality: During the course of employment, it is likely that employees will learn important information about the company/employer. Such information can range from the internal finances of the business, the inner-working practices of the company, their customer lists and relationships between the enterprise and its customers. In certain professions, an employee will learn private information relating to customers and clients of the business and once again confidentiality plays a big role. For such professions it is vital that confidentiality clauses are placed in the employment contract and that both parties know the consequences for breach of the protocol.
Non-Competitive Clauses: It is not unheard of for employees to work in other fields as well on the side of their main job. For example, a worker from France working in Germany as a pharmacist may teach French night classes in order to make some extra money on the side. Generally, employers do not have major problems with this development when the second job is unrelated to the first. However, when the employee looks for a second job in the same field as their main work, they may come into difficulties. Usually, the employment contract will prevent the employee from working for their company’s competitor in any form and even if there is no specific clause the employer may have grounds for taking disciplinary action.
In some cases, a non-competition clause can even prevent the employee for working for a competitor following the conclusion of their employment. There are some requirements that go along with such a clause such as the fact that they are limited to a maximum of two years following the conclusion of the employment relationship.
Invalid Elements of the Employment Contract
Employment contracts are important legal documents and are thus carefully regulated for. There are a number of legislative acts that play a role in determining what is and what is not legal in a contract. Amongst the legislative acts which have a role to play in the regulating of employment contracts are the following:
It is ingrained into the German Constitution that people should be treated equally and that there should not be discrimination based on gender, race, religion and disability etc. Obviously this does not extend to all workers being given the same wage on this basis alone (experience, qualifications and other factors play a role) but they should not experience discrimination on this front. Otherwise, employment contract elements that do not allow for maternity leave or discriminate against workers because of it, that do not provide for annual leave, that provide below the minimum amount of notice and those that force workers to work excessive unpaid overtime hours are all illegal. Additionally, allowance for the misuse of employees’ personal data and information can also be deemed as invalid.
There are numerous ways that an employment contract can be deemed invalid and illegal and therefore it is useful at times to avail of legal assistance in their drafting to ensure that they follow all required legislation. If you are an employee who is unsure about the legality of the terms of your employment contract, then it might be worth contacting a legal professional. Similarly, if you are involved in a business and require assistance drafting employment contracts again look no further for employment law assistance.