In Germany, there are two types of employment contracts: indefinite and fixed-term. Fixed-term contracts may not exceed 2 years and are renewable up to 2 times, with exceptions for certain circumstances. For example, start-up businesses may hire employees on fixed-term contracts for up to 4 years without justification. These contracts must be in writing.Indefinite contracts may be oral or written, but it is strongly recommended to have written contracts. A written contract should include the parties' identities and addresses, start date of employment, workplace, job description, salary amount, payment intervals, working hours, annual leave entitlement, notice periods for termination, length of the probation period if applicable, and applicable collective or company agreements. Within a month of the employee's first day of work, the employer must also indicate in writing if there is no written contract. Probation periods may not exceed 6 months.
Payroll Timelines and Dates
Pay Frequency: Employee payroll is monthly, with 12 pay periods per year. Pay is distributed on the last business day of the month.Payroll Change Cutoff Dates: To meet payroll deadlines, any changes must be submitted to firstname.lastname@example.org by the cutoff date.For Germany, the payroll change cutoff date is on the last business day of the previous month (for example, changes to June payroll would need to be received no later than May 31, if May 31 is a business day).Pilot sends payroll summaries to admins at the end of the second week of the month. After that, charges are automatically debited. Payroll summaries are also available to admins in their Pilot accounts.
The regular workweek in Germany typically consists of 5 days, with 8 hours of work per day. However, it is possible for employees to work for 6 days. According to the law, employees are not allowed to work for more than 48 hours per week. Daily hours may be extended to 10 hours, as long as the average does not exceed 40 hours per week over a 24-week period. Employers may compensate for overtime with either paid time off or a higher hourly rate, but the details are often specified in the contract or collective agreement. Some management-level employees and board members may not receive overtime pay.Industries that require daily operations may schedule employees to work on Sundays and holidays, while other workers typically have these days off. If an employee works on a Sunday or holiday for a special reason, they are usually granted a paid day off within 2 weeks. Night work, which occurs between 11 p.m. and 6 a.m., is usually compensated with a higher rate of pay or compensatory time off. The details of this compensation may be specified in the contract or collective agreement.
Germany has 9 public holidays:
- New Year’s Day
- Good Friday
- Easter Monday
- Labor Day
- Whit Monday
- Day of German Unity
- Boxing Day
You can use Pilot's Remote Compensation Tool to check remote salary data in Germany by job title.The minimum wage in Germany changes frequently, and there are many different types of bonuses. Christmas bonuses are common, and employers often pay a holiday bonus to employees who are about to go on vacation.
Health Insurance Benefits
Germany offers universal healthcare coverage to all residents through either state or private insurance. Private insurance is only available to those whose annual income exceeds a minimum threshold, which is revised annually. Although public and private healthcare systems share the same medical providers, some services — such as glasses, contact lenses for most adults, and non-basic dental procedures — are not covered by state insurance.
In Germany, employees are entitled to 6 weeks of sick leave at full pay, which is paid by the employer. If the employee is unable to work for more than 6 weeks, they may receive a payment from social security or their private insurance. The social security payment is usually 70% of the employee's regular pay and is capped at 90% of their net income. The employee can receive this payment for up to 78 weeks.
Full-time employees who work 5 days per week are entitled to 20 paid vacation days per year, while those who work 6 days per week are entitled to 24 paid vacation days per year. Young employees and employees with severe disabilities are entitled to additional vacation time. The full vacation allowance is earned after 6 months of employment, and employees accrue 1/12th of the total allowance per month prior to that.Employers may allow between 25 to 30 days of annual leave for all employees, though the exact amount may vary based on collective agreement, contract, or employer policy. Employees must formally request vacation time, but employers may deny it for business reasons or if another employee has priority for social reasons. Unused vacation time is typically forfeited at the end of the year, unless it is carried over to the end of March of the following year. Employees are paid for unused vacation time when they leave their job.
Maternity / Paternity / Parental Leave
Expectant mothers in Germany are entitled to begin maternity leave 6 weeks prior to the expected date of birth. During this time, they may choose to work but are limited to no more than 8.5 hours per day and cannot work overtime, on Sundays, holidays, or at night.Following the birth, mothers receive 8 weeks of leave, or 12 weeks if the child is disabled or if they give birth to more than one child. During this time, they cannot work. Maternity benefits are based on the mother's average earnings over the last 3 months of work. Insured mothers may receive a daily stipend from the government.Either parent may take an unpaid parental leave until the child is up to three years old, which can be extended up until the child's eighth birthday for up to 24 months. Adoptive parents have the same rights to parental leave as biological parents, starting on the day they gain custody of the child.
Employment / Termination
Employers in Germany are required to have a socially justifiable reason for termination. This could be due to personal reasons, performance, misconduct, or business reasons.At Pilot, we process involuntary offboarding via Mutual Termination Agreement (MTA) as a common practice that enables an employer to terminate an employee while trying to minimize the risk of litigation and cost. It is a separation agreement including unused leave, notice period, severance, and terms negotiated between the parties in exchange for a waiver where an employee waives their right to challenge a termination as unfair or unlawful. The notice period varies based on the length of employment.It is important to note that Pilot often cannot facilitate unilateral terminations or dismissals. These types of termination are a potential source of litigation that can expose employers to increased damages and other costs. Also, the reason for these terminations may not be valid for an employer of record. The notice period varies based on the length of employment.Probationary employees have a notice period of 2 weeks, but different rules apply to board members and management-level employees.For resignations, employees must provide 4 weeks' written notice if they wish to resign.We ask that you give us as much notice as possible and involve us right from the beginning (at least 30 days) of the process so we can better support and guide you through the process. Involuntary termination can take time to negotiate with the employees to mutually agree and end on good terms. Here you can find additional information on how to terminate an employee.