As a matter of principle, companies and their staff are free to negotiate employment agreements. These agreements may be put down in writing or be concluded orally. In order to ensure that evidence of the employment relationship exists, it is recommended that a written employment agreement be concluded. Should the employment agreement not have been concluded in writing, the employer is under obligation to lay down the material terms of employment in writing at the latest one month following the commencement of the employment relationship.
The agreement may be written in any language; however, a German translation definitely will be required should any disputes be brought before a court.
The employment agreement should stipulate the material terms of employment:
- Commencement and (prospective) duration of the employment relationship;
- Place of employment;
- Brief job description;
- Composition, amount and payment date of the wages/ salary;
- Agreed working hours;
- Duration of annual recreational leave;
- Period of notice for termination;
- Applicable collective wage agreements, operating agreements or company agreements;
- If the employment is for a fixed term, this must always be agreed in writing. Should the parties fail to do so, the employment agreement shall be deemed to have been concluded for an unlimited period of time.
Limitations on the parties freedom of contract
In framing an individual employment agreement, the parties must comply with:
- Statute Law
various legal provisions that govern the minimum rights of employees (e.g. The Continued Remuneration Act, The Labour Protection Act).
- Collective Bargaining Law
applies directly and compulsorily to any employee who is a member of a collective bargaining union;
and to any employer who concludes a collective bargaining agreement himself or herself, or who is a member of an employers’ association that has agreed collective bargaining agreements on his or her behalf.
- Bargaining agreements
apply, as a rule, directly and compulsorily to employees of a company whose works ccommittee has concluded one or several of such agreements with the employer.
The parties entering into an employment contract may agree upon a trial period of up to six months. During the probation period, the statutory period of notice for terminating the employment relationship is two weeks.
Employees working hours may not exceed eight hours per day and 48 hours per week. They may be extended to up to ten hours per day provided the hours worked additionally are balanced out by free time within maximum six months. As a rule, weekly working hours of 35 to 40 hours have been agreed upon in most of the collective wage agreements currently in force.
For six hours of working time, breaks totaling 30 minutes are to be granted; for nine hours of working time, the total break time must amount to 45 minutes. Each individual break must be at least 15 minutes long. The daily rest period between the end of work and the start of work the next day is eleven hours.
German labor law stipulates that employees are entitled to four weeks of vacation in which their wages / salaries continue to be paid. Some collective wage agreements provide for vacation entitlements of up to six weeks time.
Termination of the employment relationship
Any notice of termination, whether issued by the employer or by the employee, must be made in writing in order and is to be served to the other party. Should the terminating party fail to comply with this requirement as to the written form, the notice of termination is invalid.
The statutory notice period for employees is four weeks prior to either the 15th or the last day of the next month.
The statutory notice period for employers depends on how long the employee to be terminated has been working for the company.
If the employee has worked for the company for:
- up to 2 years, the notice period is four weeks prior to either the 15th or the last day of the next month;
- 2 to 4 years, the notice period is one month prior to the last day of the next month;
- 5 to 7 years, the notice period is two months prior to the last day of the next month;
- 8 to 9 years, the notice period is three months prior to the last day of the next month;
- 10 to 11 years, the notice period is four months prior to the last day of the next month;
- 12 to 14 years, the notice period is five months prior to the last day of the next month;
- 15 to 19 years, the notice period is six months prior to the last day of the next month;
- 20 years or longer, the notice period is seven months prior to the last day of the next month.
Collective bargaining agreements often designate a longer period of notice.
Reasons for terminating an employment agreement
In companies employing more than ten employees, any employee whose contract has been terminated may institute proceedings before the Labor Court against such termination within three weeks of having received the notice of termination, on the grounds that it violates the principles of social considerations stipulated by German labor law. The termination of an employment relationship on operational grounds or due to the personal circumstances of the employees is permitted. Employees are not entitled to claim compensation.