Employment Contract

In Germany, the employment contract is classified as a service contract (German: Dienstvertrag). An employee who promises service is obliged to perform the services promised, and the other party is obliged to grant the agreed remuneration (see § 611et seq. BGB)

Moreover, the employment contract is focused on the performance of the employee in a defined working time and not on the result. In contrast, another type of contract is the contract for work (German: Werkvertrag). This contract is about a specific result, which is usually provided once, for example, the repair of a car.

Contents:

• Form of Employment Contract
  • Verbal vs. Writing
  • Permanent vs. Fixed-Term
  • Fixed Working Hours vs. On-Call
• Component of Employment Contract
• Types of Employment Contracts
  • Standard
  • Minijob
  • Working Student / Internship
  • Apprenticeship
  • Temp Agency
  • Self-employed

Form of Employment Contract

Verbal vs. Writing

An employee is entitled to proof of the essential conditions of the employment relationship according to § 2 NachwG. Therefore, the employment contract must be concluded in writing and both parties receive a signed copy.

An employer can prepare the employment contract only in German, as long as the company is located in Germany. It is the employee's responsibility to translate and understand the contract rightly (BAG – 5 AZR 252/12 (B)) even though the company language is not German.

Permanent vs. Fixed-Term

A contract can be agreed upon for an indefinite period of time (permanent; German: unbefristeter Vertrag) or for a fixed-term (German: befristeter Arbeitsvertrag).

According to § 14 et seq TzBfG, the fixed-term contract is either for a specific period of time (German: Kalenderbefristung) or for specific reasons (German: Zweckbefristung).

Nb: a start-up company (within the first 4 years) can use a fixed-term contract for a specific period of time up to 4 years.

Fixed Working Hours vs. On-Call

An employment contract usually specifies a fixed number of working hours per week. For a full-time position, the average working hours are 40 hours per week. However, the working hours may also depend on the workload and the employer's unilateral instructions (on-call work).

The conditions for on-call work are regulated in § 12 TzBfG, including:

• The daily and weekly minimum or maximum working hours
  • the minimum working time may not be exceeded by more than 25%, and
  • the maximum working time may not be undercut by more than 20%.
  • If it is not specified, the weekly working time of 20 hours prescribed by law shall be deemed to be agreed and the daily working time of at least 3 consecutive hours
• The employee is obliged to perform work only if there are at least four days between the call to perform work and the start of work.
  • The employee is, of course, allowed to commence work even if he/she has been given shorter notice.
• The employee is entitled to paid (public) holiday or sick leave.

Component of Employment Contract

An employment contract gives details of the rights and obligations of the employer and employee. It must include at least the following components in writing (see § 2 NachwG):

(to be issued no later than the first day of work)

• Name and address
• Remuneration (incl. bonuses and special payments) and payment due dates according to § 614 BGB (The agreed remuneration can be paid after employees bring the service, for example at the end of the month or the first week of the following month.)
• Working time

(to be issued no later than the seventh calendar day after the agreed start of the employment relationship)

• Start date and duration of employment
• Probation or trial periods (if agreed)
• Overtime regulation (if agreed)

(to be issued no later than one month after the agreed start of the employment relationship)

• Place(s) of work
• Job description
• Annual paid vacation
• Condition of contract termination A contract has a maximum of four to six months of probation which has two weeks notice periods. After the probationary period, the employment relationship can be terminated as agreed in the contract or based on § 622 BGB. Alternatively, both parties can agree to a dissolution of the employment contract (German: Aufhebungsvertrag) to end the contract earlier than the legal or agreed notice period.
• General information about applied collective agreements (if applicable)
• Company pension insurance (German: Betriebliche Altervorsorge; if applicable)

Additional:

• Paid sick leave according to the § 5 EntFG
• Obligation to maintain secrecy
• Additional benefits (e.g. company car, mobile phone, apartment)
• Contractual penalty

If any details have not been defined in the contract, then the general laws automatically apply. For example, the minimum annual paid vacation based on § 3 BUrlG or the notice periods based on § 626 BGB.

Types of Employment Contracts

1. Standard Contract

By a standard contract, I mean a contract with basic conditions (e.g. regular tax and insurance deductions, vacation, sickness) without further restrictions and additional regulations (e.g. BBiG applies additionally to trainees or MiLoG for minijobs) or benefits (e.g. less salary deduction for minijobs or students) for a specific group.

2. Minijob (German: geringfügige Beschäftigung)

Minijob is a part-time job either within a certain earnings limit (520-Euro-Minijobs) or within certain time limits (German: kurzfristige Minijobs). Not only companies can use this employment contract. A private household can also employ a Minijob as a babysitter, helper in the household (cooking, cleaning, ironing), gardener, etc. A household gain more benefits to pay less tax than companies. Furthermore, Minijob can apply for an exemption from the pension insurance.

Since 2015 German government initiates the minimum wage and regulate this on MiLoG. This regulation protects employees from earning wages fairly. Furthermore, to avoid illegal employment, a company / private household has to keep records of the worked hours.

Resource: Act Regulating a General Minimum Wage (Mindestlohngesetz – MiLoG) and BMAS

3. Working Student (German: Werkstudent) or Internship (German: freiwilliges Praktikum / Pflichtpraktikum)

The university students who are enrolled as active students can have a part-time job (max. 20 h/w) to earn money or to complete a study-related internship. During the official lecture-free period (vacations), students may work up to 40 hours per week. Foreign students are subject to the additional restriction that they may only work up to 240 half-days (i.e. 4 hours) or 120 days (i.e. 8 hours) per year.

Working student and internship contracts are always limited in time and tied to student status. Therefore, the contract should be concluded in writing. Working students and interns are also entitled to the minimum wage and paid vacation. An exception to this applies if an internship is voluntarily shorter than three months or if a compulsory internship is prescribed by the university.

Owing to the student's status, the employer and the student benefit from lower taxes and social security. However, if the student works more than the allowed hours per week, he/she will lose his/her student status. Also, the employer and the employee must pay taxes as regular employees.

4. Apprenticeship (German: berufliche Ausbildung)

Most apprenticeships in Germany are based on the dual system, in which apprentices work in a company and complete the practical part of their training there, while also attending a vocational school, where the theoretical part of the training takes place. During the apprenticeship period, the apprentice is entitled to the minimum remuneration in accordance with Section § 17 BBiG and receives a certificate of qualification for the job (e.g. educator, caregiver) or a Bachelor's certificate at the end of the training.

In addition, there are also full-time school-based apprenticeships lasting several years that qualify apprentices for a job. This usually required a 6-month mandatory internship in a company.

The apprenticeship contract has a 1-4 month probationary period without notice period (§ 20 BBiG). After the probationary period, only apprentices can terminate the contract properly with a notice period of 4 weeks (German: ordentliche Kündigung). The employer can only terminate the contract for serious reasons, e.g. theft or criminal proceedings (German: außerordentliche Kündigung) (§ 22 BBiG).

5. Temp agency (German: Arbeitnehmerüberlassung/Zeitarbeit)

In the case of short-term needs of the workforce (e.g. high demand for product/service, sick leave), a temp agency can lend its employee (German: Leiharbeitnehmer) to the company for a limited period of time in return for remuneration on an hourly rate.

The company has the right to give instructions to the temp employee based on the agreement with the temp agency (i.e. agreed task/position, weekly working hours). The temp employee has to deliver work performance to the company. However, only the temp agency has contractual obligations to the temp employee (e.g. remuneration, paid sick leave vacation).

The relationship between a temp agency, a company and a temp employee is regulated on Arbeitnehmerüberlassungsgesetz (AÜG).

6. Self-employed

In Germany, self-employed can be differentiated between freelancers (German: Freiberufler, Übungsleiter) and tradespeople (German: Gewerbetreibenden). This distinction has important implications for business registration and tax purposes. Freelancer usually uses their own name and tradespeople use a business name. Both offer their service to the employer, either themselves (freelancers) or themselves and/or their employees (tradespeople).

According to the § 18 EStG freelance jobs is including doctors, educators, translators, architects, tax advisors, etc. (the complete list of those professions). Anyone else is considered a tradesperson. Besides, a freelancer who works part-time (less than 1/3 of a full-time position) in a public or non-profit organization (e.g. educator, lecturer, sports coach) gains the extra benefit of tax-free up to 3,000 €/year according to the § 3 No. 26 EStG.

(Last reviewed: 20 December 2022)