German Labor Laws: An Easy Guide for US Companies
With its GDP ranking first in the European Union and fourth in the world, Germany is an economic powerhouse. If your US-based company is ready to expand there, read on for the critical German labor laws you need to know.
Updated on August 30, 2022
German Labor Laws: An intro 🇩🇪Thanks to the collaborative relationship between German trade unions and work councils, German employees are highly productive and sought after.The country itself also has an ideal geographical location (i.e., the time difference is manageable for US-based employers!) and political clout within the European Union, which makes expanding to Germany attractive to US-based companies.However, before you embark on the energizing challenge of hiring and working with German-based talent, you have to look at how Germany's employment system differs from the United States (see next section).Like the case in Australia, Germany has no unified labor code. Instead, it relies on federal statutes, court decisions, and different industrial practices.In this easy-to-understand guide, we'll give you an overview of the following employment laws, which govern company-worker relationships in Germany:
- German Civil Code (Bürgerliches Gesetzbuch),
- Act on the Implementation of Measures of Occupational Safety and Health to Encourage Improvements in the Safety and Health Protection of Workers at Work (Arbeitsschutzgesetz),
- Occupational Health Insurance (German only: Gesetzliche Unfallversicherung),
- Federal Data Protection Act (Bundesdatenschutzgesetz),
- Hours of Work Act (Arbeitszeitgesetz),
- Part-time and Fixed-Term Work Act (Teilzeit- und Befristungsgesetz),
- Act Regulating a General Minimum Wage (Mindestlohngesetz),
- Employee Leasing Act (Arbeitnehmerüberlassungsgesetz),
- Act Regulating Vacation Leaves (Mindesturlaubsgesetz für Arbeitnehmer),
- Continued Remuneration Act (Entgeltfortzahlungsgesetz)
- Maternity Protection Act (Gesetz zum Schutz von Müttern bei der Arbeit, in der Ausbildung und im Studium),
- Paid Parental Leave Act (Gesetz zum Elterngeld und zur Elternzeit),
- Protection Against Wrongful Termination Act (Kündigungsschutzgesetz),
- Works Constitution Act (Betriebsverfassungsgesetz),
- Codetermination act (Gesetz über die Mitbestimmung der Arbeitnehmer),
- Collective Agreements Act (Tarifvertragsgesetz), and
- Equal Opportunities Act (Gleichbehandlungsgesetz).
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German Civil Code (Bürgerliches Gesetzbuch)Drafted in 1881, ratified in 1896, and enacted on January 1, 1900, the Bürgerliches Gesetzbuch (BGB) was designed to unify and override the "often conflicting customs and codes of the various German territories" at the time.It was divided into five parts and sets out the following:
- Book 1: General part (covering things like residence and personal rights),
- Book 2: Law of obligation,
- Book 3: Law of property,
- Book 4: Family law, and
- Book 5: Law of succession.
Act on the Implementation of Measures of Occupational Safety and Health to Encourage Improvements in the Safety and Health Protection of Workers at Work (Arbeitsschutzgesetz)The Arbeitsschutzgesetz (ArbSchG) is a German employment law that seeks to protect the health of all employees through occupational health and safety measures.Note: The Act doesn't apply to seafarers, miners, and domestic workers employed by private households.
Occupational Health Insurance (German only: Gesetzliche Unfallversicherung)The Gesetzliche Unfallversicherung found in the seventh book of the Sozialgesetzbuch (SGB VII) covers the following:
- Arbeitsunfall: Accidents in the workplace,
- Wegeunfall: Accidents on the way to and back from work, and
- Berufskrankheiten: Certain occupational diseases.
Federal Data Protection Act (Bundesdatenschutzgesetz)The Bundesdatenschutzgesetz (BDSG) was created to protect sensitive employee information that’s gathered to form part of a filing system, either manually or electronically.
Hours of Work Act (German only: Arbeitszeitgesetz)Designed to safeguard the health and security of workers in Germany and the Exclusive Economic Zone (EEZ), the Arbeitszeitgesetz (ArbZG) regulates the following:
- An employee's hours of work,
- Rest breaks in between and during work hours,
- Night work,
- Shift work,
- Dangerous work,
- Working on Sundays and holidays, and
- Leave entitlements.
Part-time and Fixed-Term Work Act (German only: Teilzeit- und Befristungsgesetz)The Teilzeit- und Befristungsgesetz (TzBfG) aims to support part-time work, regulate fixed-term contracts, and prevent the discrimination that can sometimes be levied against part-time and fixed-term workers.
Act Regulating a General Minimum Wage (Mindestlohngesetz)The Mindestlohngesetz (MiLoG) covers the national minimum wage in Germany in its four sections:
- Division 1: Setting of the general minimum wage,
- Division 2: Enforcement under civil law,
- Division 3: Control and enforcement by governmental agencies, and
- Division 4: Final provisions.
Employee Leasing Act (Arbeitnehmerüberlassungsgesetz)The Arbeitnehmerüberlassungsgesetz (AÜG) covers temporary agency work and sets out the need for a permit, including the conditions an employer needs to meet to secure and keep that permit. It also seeks to protect the employee in question and gives strict guidelines on the legalities of temporary work.
Act Regulating Vacation Leaves (German only: Mindesturlaubsgesetz für Arbeitnehmer)True to its name, the Mindesturlaubsgesetz legislates the minimum leave entitlements of German workers (i.e., 24 days if working six days a week, provided those days are not Sundays or recognized public holidays).It also specifies a waiting period of six months before an employee can avail of their leave entitlement.
Continued Remuneration Act (German only: Entgeltfortzahlungsgesetz)The Entgeltfortzahlungsgesetz is the legislation that covers the continued remuneration of German workers during public holidays as well as in the event of illness.
Maternity Protection Act (Gesetz zum Schutz von Müttern bei der Arbeit, in der Ausbildung und im Studium)The Gesetz zum Schutz von Müttern bei der Arbeit, in der Ausbildung und im Studium (MuSchG) seeks to protect mothers in the workplace, while training, and while studying at university.Although it contains strict provisions (e.g., employers cannot allow pregnant and breastfeeding mothers to work between 8:00 PM and 6:00 AM), the MuSchG also offers exceptions so long as certain conditions are met.For example, German workers may continue to work, train, or study while pregnant or breastfeeding but they must expressly state their desire to do these things. They cannot be forced to do them.
Paid Parental Leave Act (German only: Gesetz zum Elterngeld und zur Elternzeit)Also called the Bundeselterngeld- und Elternzeitgesetz (BEEG), the Paid Parental Leave Act sets out the entitlement of all German workers with parental responsibilities.Under German law, this right is not gender-specific.
Protection Against Wrongful Termination Act (German only: Kündigungsschutzgesetz)Termination in Germany is not taken lightly and is tightly regulated by the Kündigungsschutzgesetz (KSchG). It begins by describing when wrongful termination occurs and also sets out conditions that must be met for a lawful termination to take place.
Works Constitution Act (Betriebsverfassungsgesetz)The Betriebsverfassungsgesetz (BetrVG) is a German federal law that gives German employees the legal right to form a works council, an organization that represents workers in a way that complements trade unions and employers' associations.
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Codetermination Act (German only: Gesetz über die Mitbestimmung der Arbeitnehmer)The Gesetz über die Mitbestimmung der Arbeitnehmer (MitbestG) governs the right of German employees to install their representatives in their company's Supervisory Board. It applies to companies with more than 2,000 employees and have the following legal forms:
- Joint-stock companies,
- Partnerships limited by shares,
- Limited liability companies, or
- Acquisition and economic cooperatives.
Collective Agreements Act (Tarifvertragsgesetz)The Tarifvertragsgesetz (TVG) came into force in 1949 and is still in effect today, enshrining the right of German workers to collective bargaining and contributing to the "institutionalization of class conflict."It contains the fundamental provisions that regulate how Germans can bargain and remains relatively unchanged from its original form.
General Act on Equal Treatment (Allgemeines Gleichbehandlungsgesetz)Germany's Allgemeines Gleichbehandlungsgesetz (AGG) is designed to prevent or stop discrimination based on the protected attributes of race or ethnic origin, gender, religion or belief, disability, age, or sexual orientation.Germany prohibits the following types of discrimination:
- Direct discrimination involves treating one person less favorably than another because of one of the abovementioned attributes.
- Indirect discrimination happens when a neutral policy, criterion, or practice that, based on the protected characteristics above, disadvantages a group of people when implemented.
- Victimization (or retaliation in the US) occurs when an employee experiences negative consequences based on their response to the discrimination of others (e.g., reporting a manager for discrimination).
German labor laws vs. American employment laws: The different mandatory benefits 🆚You can probably see from the list of labor laws above that German legislation is very different from American legislation. In this section, we'll look at the following things that drive home just how different they can be:
- Employment contracts,
- Working hours,
- National minimum wage,
- Health insurance,
- Vacation leave,
- Sick leave,
- Maternity leave / Parental leave, and
- Wrongful termination.
Employment contractsWhile an employment contract is not required in the US, this is not the case in Germany. In fact, German employment law requires companies to provide a German worker with a written summary of their employment relationship. They must send this within one month after an employee’s first day at work, and it must contain the following key elements:
- The employer's name and address,
- The employee's names and addresses,
- The employee's start date,
- The job description (including alternative job assignments, if applicable),
- The place of work,
- The weekly hours of work,
- The duration of the probationary period,
- Details of pay (including the amount, the method, and the date payment is given),
- Leave and benefit entitlements,
- The required notice period,
- Reference to all applicable collective agreements, and
- Length of service if the worker is not on a permanent employment contract.
Working hoursThe German workweek, unlike its American counterpart, is tightly regulated. For example, the Hours of Work Act stipulates that no one can work on Sundays and public holidays.Also, Germans can only work five or six days a week for a maximum of 48 hours and no more than eight hours daily.If a German worker works between six to nine hours, they are entitled to a 30-minute rest break. If their working hours for the day go beyond nine hours, they must be given a 45-minute break after the first six hours.
Rest period in between workIn between work, Germans must be allowed a minimum of 11 consecutive (i.e., uninterrupted) hours of rest. If it is interrupted due to business reasons, the 11 hours will start back from zero.
Night workWorking at night has a cap of eight hours per working day.On-call work that requires an individual to go to their place of work to complete their duties is classed as working time, and the employee may be entitled to financial compensation (e.g., overtime pay).On the other hand, on-call work that requires an individual to be on standby (but doesn't have to go to their place of work) does not count as working time.
Exceptions to working hours prohibitions and stipulationsIt's sometimes possible for a German worker to keep working on a Sunday or public holiday provided they have prior approval and/or they fall under the transportation or food and beverage industries.Work on Sundays and public holidays must be compensated with corresponding time off within the next two weeks (for Sundays) and eight weeks (for public holidays). Sometimes, this compensation can be in the form of supplemental pay.German workers can also sometimes work up to ten hours a day, so long as their average work time within the most recent six-month period does not exceed eight hours a day.
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National minimum wageAt the time of writing, the national minimum wage in Germany is set at €9.82, but it will rise to €12 in October 2022. This figure is reviewed and adjusted every two years to account for inflation.The national minimum wage is a legal obligation in Germany, and any employment contract or contractor agreement that pays below this amount can be considered invalid.In fact, workers can claim the difference between their actual pay and the national minimum wage from their employers. In the case of subcontractors, they can also claim from their direct employer and the main contracting company.Violating the Minimum Wage Act can command a financial penalty of up to €500,000.
BonusesIn Germany, the national minimum wage can be accompanied by discretionary or contractual bonus payments.
Exceptions to the National Minimum WageThe national minimum wage doesn't apply to trainees, apprentices, volunteers, interns who have not completed any vocational training, and those who were classed as long-term unemployed immediately before their start date at work.Note: These exceptions are not absolute and must be assessed on a case-by-case basis by a qualified legal practitioner.
Health insuranceIn Germany, workers are covered either by state or private health insurance. The former is compulsory unless the German worker earns €64,350.00 a year or €5,362.50 a month (amount valid for 2021).If they exceed this threshold, they can continue as a voluntary member or avail of private insurance.The state health insurance is financed by a combination of federal subsidy, employer contributions, and pension insurance contributions.To see all social security contributions at a glance, check out this post by Die Techniker Krankenkasse.
Vacation leave (or annual leave)The minimum vacation entitlement in Germany is 20 fully paid working days per year if the employee works five days a week and 24 working days if the employee works six days a week.However, because of collective bargaining and work council agreements, Germans often enjoy a more generous vacation term, with 25 to 30 working days being quite common.The full annual leave entitlement excludes Sundays and doesn't start until after the German worker has been with a company for six months.Unlike in the US, Germans are encouraged and expected to take vacation leaves.
Holiday leaveGermany celebrates the following national holidays:
- New Year,
- Good Friday,
- Easter Monday,
- Labor Day,
- Whit Monday,
- Corpus Christi,
- Assumption Day,
- Day of German Unity,
- Reformation Day,
- All Saints' Day,
- Penance Day,
- Christmas, and
- St. Stephen's Day.
Sick leaveAccording to the Entgeltfortzahlungsgesetz, if an employee were to get sick through no fault of their own, they are entitled to receive sick pay from their employer for the first six weeks (equivalent to their monthly pay).After six weeks, they are entitled to receive a sickness allowance of 70% of their regular pay for a maximum of 78 weeks.To be eligible for paid sick leave, German workers must notify their employers immediately and present a medical certificate within three days of notification. Employers may not be required to pay for sick leave if they don't receive a valid medical certificate.
Maternity leave and parental leaveLike many other European countries (and unlike the US), Germany provides employed parents paid parental leave before and after the birth of their child.Also, a pregnant employee cannot be asked to work in the six weeks (12 weeks in the case of premature or multiple births) immediately before their due date unless they want to do so. They're also not allowed to work within the first eight weeks after their child's birth.Afterward, parents with German employment contracts are entitled to a three-year parental leave, during which the employer must ensure that the job is available.
Wrongful terminationTerminating employees in Germany can be difficult, often impacted by work agreements or collective bargaining agreements.While four weeks is the minimum statutory notice period, this increases based on an employee's length of employment (see below), with companies sometimes having to wait up to seven months before they can legally let the employee go:
- Two years: 1-month notice period taking effect at the end of a month,
- Five years: 2-month notice period taking effect at the end of a month,
- Eight years: 3-month notice period taking effect at the end of a month,
- Ten years: 4-month notice period taking effect at the end of a month,
- 12 years: 5-month notice period taking effect at the end of a month,
- 15 years: 6-month notice period taking effect at the end of a month, and
- 20 years: 7-month notice period taking effect at the end of a month.
Exceptions to giving notice periodsGerman labor laws protect both employees and employers. If an employee is found to have committed a significant breach of contract, they can be terminated immediately.In such cases, an employer must serve a notice of termination within two weeks of the breach.
The information contained in this site is provided for informational purposes only, and should not be construed as legal advice on any subject matter.
Frequently Asked Questions (FAQ) about German employment laws ❓❓❓
Does Germany have labor laws?Yes!
What are my rights as an employee in Germany?As an employee in Germany, your rights are governed by different statutes (see above). At the very least, you are entitled to:
- A written summary containing essential information about your employment,
- Regular working hours,
- A minimum wage that takes inflation into account,
- Health insurance,
- Vacation leave,
- Sick leave,
- Maternity/parental leave, and
- Protection from wrongful termination.
Is it illegal to work on Sunday in Germany?Yes, with certain exceptions. For example, if you're in the transport or service industry, then you could be asked to work on a Sunday.
Can you be fired for no reason in Germany?No! Unlike in the US, Germany does not recognize at-will employment. Termination is strictly regulated, and immediate dismissal rarely happens (see section above on Wrongful Termination).
Pilot helps you understand and comply with labor laws in Germany. 👍Hiring abroad can be intimidating, especially if you have to contend with strict and complex employment laws. You'll want to ensure that you have expert advice to assist compliance.As an employer of record with experience in hiring and paying team members in Germany, we can help!
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