Employment Law in Germany — Complete Guide for Foreign Employers

Written Employment Contracts and the Nachweisgesetz

The Nachweisgesetz (NachwG, amended August 2022) obliges employers to document all essential terms in writing and hand them to the employee on the first day of work. Failure carries a fine up to €2,000 per violation under NachwG §4. A compliant contract must state: job title and duties, place of work, start date, probationary period (max 6 months, BGB §622(3)), agreed gross salary, working hours, holiday entitlement, and any applicable Tarifvertrag. Verbal agreements are enforceable but create substantial litigation risk before German labour courts.

• NachwG §2: all key terms in writing by day 1 — fine up to €2,000 per breach
• Probezeit: maximum 6 months under BGB §622(3)
• Fixed-term contracts: objective justification required after 2 years or repeat use (TzBfG §14)
• Minimum holiday: 20 working days per year on a 5-day week (BUrlG §3)
• Working time: max 8 h/day under ArbZG §3; extendable to 10 h if 6-month average ≤8 h

Minimum Wage — Mindestlohn and MiLoG

Germany's statutory minimum wage (Mindestlohn) under the Mindestlohngesetz (MiLoG) is €12.82 per hour gross from 1 January 2025. The Mindestlohnkommission reviews the rate at least every 2 years and submits binding proposals to the federal government. All workers in Germany are entitled to the Mindestlohn regardless of nationality or employer location — foreign employers posting workers to Germany must also comply under the AEntG. Sectors with higher allgemeinverbindlich Tarifvertrag rates always take precedence over the statutory floor.

Working Time Rules — ArbZG

The Arbeitszeitgesetz (ArbZG) sets binding limits on working time. Employees may work a maximum of 8 hours per day (ArbZG §3), extendable to 10 hours if the average over 6 calendar months does not exceed 8 hours. Mandatory rest breaks apply: at least 30 minutes for a 6–9 hour shift and 45 minutes for shifts over 9 hours (ArbZG §4). A minimum rest of 11 consecutive hours must follow each working day (ArbZG §5). Sunday work is generally prohibited (ArbZG §9) with narrow exceptions for essential services and hospitality. Violations carry fines up to €15,000.

• Max 8 h/day, extendable to 10 h/day with 6-month averaging (ArbZG §3)
• Break: 30 min for 6–9 h; 45 min for >9 h (ArbZG §4)
• 11 hours minimum rest between shifts (ArbZG §5)
• Sunday and public holiday work prohibited except in listed exempt industries (ArbZG §9)
• Night workers (23:00–06:00): average max 8 h/night; regular health checks required (ArbZG §6)

Annual Leave — Bundesurlaubsgesetz (BUrlG)

The Bundesurlaubsgesetz (BUrlG §3) guarantees every employee a minimum of 20 working days of paid holiday per year (5-day week), equivalent to 24 days on a 6-day week. Market practice in most German industries is 28–30 days, often set by Tarifvertrag. Leave must generally be taken within the calendar year; carry-over to 31 March of the following year is permitted only for operational or personal reasons. Employees who fall sick during approved leave may reclaim those days with a medical certificate (BUrlG §9). Long-term sick employees continue to accrue full holiday entitlement.

• Statutory minimum: 20 working days (5-day week) under BUrlG §3
• Market norm: 28–30 days — typically set by Tarifvertrag
• Carry-over: permitted only for valid reasons; forfeited after 31 March following year
• Sick during holiday: sick days do not count as holiday — requires Arbeitsunfähigkeitsbescheinigung (BUrlG §9)
• Full entitlement from month 7; pro-rated accrual in first 6 months

Kündigungsschutz — Dismissal Protection under KSchG

The Kündigungsschutzgesetz (KSchG) applies once an employee has completed 6 months of continuous employment (Wartezeit, KSchG §1(1)) in a business with more than 10 full-time equivalent employees (KSchG §23(1)). Once active, dismissal is valid only on three grounds: betriebsbedingte Kündigung (operational necessity), verhaltensbedingte Kündigung (misconduct — usually requires a prior Abmahnung), or personenbedingte Kündigung (personal incapacity such as long-term illness). Invalid dismissals can result in reinstatement orders or substantial severance agreed in Arbeitsgericht proceedings.

Notice Periods — BGB §622

Statutory notice periods under BGB §622 begin at 4 weeks to the 15th or end of a calendar month for the basic case, and increase with tenure. During probation (max 6 months), either party may give 2 weeks' notice. Employee notice to the employer stays at 4 weeks regardless of tenure. Tarifverträge and individual contracts may extend but not reduce statutory minimums. The notice period determines the payment obligation even where the employee is released from duty (Freistellung).

Social Security Contributions for Employers

Every employer hiring in Germany must register and remit social insurance contributions monthly. Total employer-side contributions run approximately 20–21% of gross salary. Contributions apply only on wages up to the Beitragsbemessungsgrenze (BBG): approximately €7,450/month (pension/unemployment, West 2025) and €5,175/month (health/care). Above the BBG, no further contributions are owed. Accident insurance (Berufsgenossenschaft) is separate, employer-funded at a sector-specific rate — typically 0.4–1.0% for office/IT; up to 4% for construction.

Works Councils — Betriebsrat and Co-Determination

Under BetrVG §1, any workplace with 5 or more permanent employees may elect a Betriebsrat (works council). The employer cannot prevent or delay elections — attempting to do so is a criminal offence under BetrVG §119. Once elected, the Betriebsrat has binding co-determination rights over: working time arrangements (§87 No.2), technical monitoring systems (§87 No.6), hiring decisions (§99), and all individual dismissals (§102). A dismissal without prior Betriebsrat consultation is void. At companies with 500+ employees, one-third of supervisory board seats go to employee representatives under the Drittelbeteiligungsgesetz.

• Betriebsrat elections cannot be blocked by employer — BetrVG §119 criminalises obstruction
• Dismissal without §102 Betriebsrat consultation is void regardless of substantive grounds
• Technical monitoring (GPS, time-recording, CCTV): mandatory Betriebsrat agreement under §87 No.6
• 500+ employees: Drittelbeteiligungsgesetz — 1/3 supervisory board seats to employees
• 2,000+ employees: Mitbestimmungsgesetz — parity (50/50) supervisory board representation

Collective Bargaining — Tarifvertrag

Tarifverträge (collective agreements) between trade unions (Gewerkschaften) and employer associations set binding minimum standards for pay, hours, and conditions. Employers and employees who are members of the contracting parties are directly bound (Tarifbindung). The federal government may declare a Tarifvertrag allgemeinverbindlich under TVG §5, extending its terms to all employers in the sector including non-members. Key sectors with declared-binding agreements include construction (BRTV-Bau) and building cleaning. Collectively agreed rates above the Mindestlohn always take precedence over the statutory floor.

• Tarifvertrag: concluded between Gewerkschaft and Arbeitgeberverband or individual employer (Haustarifvertrag)
• Tarifbindung: direct application to all members on both sides of the agreement
• Allgemeinverbindlicherklärung (TVG §5): extends terms to entire sector — posted workers included
• Günstigkeitsprinzip: works council agreement (Betriebsvereinbarung) cannot undercut a Tarifvertrag
• Check applicable Tarifvertrag at BMAS Tarifregister before setting any pay scales

Posted Workers and the AEntG

Foreign companies sending employees to work in Germany must comply with the Arbeitnehmer-Entsendegesetz (AEntG). Posted workers are entitled to the German Mindestlohn, statutory holiday entitlement, and any sector-specific allgemeinverbindlich Tarifvertrag rates from day one. Employers must register the posting with the Bundeszentralamt für Steuern online portal before work begins and retain wage records at the German worksite for 2 years. The Finanzkontrolle Schwarzarbeit (FKS) of the Zoll conducts unannounced worksite inspections. Fines for AEntG violations reach €500,000 and personal liability of the principal contractor is triggered where subcontractors fail to comply under AEntG §14.