Employment laws in Germany

When hiring in Germany, international employers must follow German employment laws. This is critical for helping businesses stay compliant and creating a positive experience for employees based in Germany. 

However, training a team or hiring one that specialises in employment laws in Germany just to understand and navigate local laws is expensive and complicated.

Taking expert guidance from an AuG-licensed temporary work agency, like Payoneer Workforce Management, may help businesses with handling employment contracts, payroll, benefits, termination, and more, with compliance support. 

Key labor laws in Germany

Labor laws in Germany are not consolidated into a single code. The country has separate laws for specific issues, including:

• General Equal Treatment Act (Allgemeines Gleichbehandlungsgesetz): Prohibits discrimination at work due to race or ethnic origin, gender, religion or belief, disability, age, or sexual identity
• Federal Paid Leave Act (Bundesurlaubsgesetz): Establishes a minimum paid leave for employees
• Continued Payment of Remuneration Act (Entgeltfortzahlungsgesetz): Protects the regular payments of employees on leave due to illness, injury, or taking certain types of leave
• Part-time and Fixed-term Employment Act (Teilzeit- und Befristungsgesetz): Allows employees to reduce their working hours, protects employees from being treated differently from full-time employees unless there are justified grounds
• Caregiver Leave Act (Pflegezeitgesetz): Allows employees to provide care for relatives at home for up to 6 months while fully or partially released from employment
• Protection Against Dismissal Act (Kündigungsschutzgesetz): Requires justifications and formal requirements for employee dismissals, such as a notice period
• Collective Bargaining Agreements Act (Tarifvertragsgesetz): Supports collective labor agreements
• Works Constitution Act (Betriebsverfassungsgesetz): Protects rights to form employee representatives/unions
• Minimum Wage Act (Gesetz zur Regelung eines allgemeinen Mindestlohns): Guarantees a minimum hourly wage for employees  
• German Commercial Code (Unternehmergesetz): Regulates employer obligations
• Working Hours Act (Arbeitszeitgesetz): Limits work hours and mandates rest periods
• Maternity Protection Act (Mutterschutzgesetz): Ensures maternity rights and safety
• Parental Leave Act (Elternzeitgesetz): Secures parental leave and job protection

Essential contract elements

A compliant German employment contract should include:

• Name and address of both the employer and the employee
• Contract start date, when employment begins
• Duration of contract (AÜG limits indirect employment to 18 months)
• Duration of probation period – is optional, max 6 months, or 4 months for 18‑month contracts.
• Place of work
• Job description and details of duties
• Remuneration, including salary, additional allowances, bonuses, and overtime
• When salary is paid (typically the last day of the month)

Minimum wage in Germany

Germany’s minimum wage is set at EUR 12.82 per hour. 

The German government regularly adjusts the minimum wage to reflect changes in the cost of living and inflation. For example, officials have recently confirmed that the minimum wage will reach EUR 14.60 ($16.95) by 2027. This target will be met through two planned increases, which are scheduled to take place between 2025 and 2027.

Employees who work beyond their contractually stated hours are usually entitled to overtime pay. 

In Germany, the maximum daily working time is limited to 10 hours. Furthermore, over six months (Monday through Saturday), the average daily working hours must not exceed 8 hours, which translates to an average of 48 hours per week.

Overtime pay rates can range from 1.5 to 2 times the regular salary:

• Night hours – 1.5 times
• Weekdays – 1.25 times
• Weekends – 1.5 times
• Public holidays – 2 times

Working hours in Germany

German employees are entitled to a minimum of 20 vacation days per year, or 24 if they work a 6-day week. They’re also entitled to 9 federal public holidays, as well as additional holidays celebrated in their state.

Learn more about employee leave policy in Germany.

Mandatory benefits 

Other mandatory benefits guaranteed in employment and labor law in Germany include:

• Statutory social insurance: Covering health, pension, unemployment, and long-term care
• Sick pay: Entitles employees to 6 weeks of full pay per illness (covered by the employer), after that, the state compensates for sick pay at 70% of salary, but not less than 90% of net.
• Maternity benefits: Including a Maternity Protection Period (Mutterschutzgesetz) of 14 weeks, 6 weeks before & 8 weeks after birth. During this maternity leave, employees are entitled to Maternity Pay (Mutterschutz), which is split between the employer and their social insurance. Government maternity benefit is max €13/day; employer pays the difference to match net monthly earnings.
• Mandatory annual leave: 20-24 vacation days.

Termination

Labor laws in Germany provide termination protections for employees to safeguard their rights. These termination protections fall into two categories: general protections and special protections. Special protections apply to employees who may face a greater risk of dismissal, such as pregnant or disabled employees.

Here are some key considerations for employers when terminating employment contracts in Germany.

Grounds for dismissal

According to German employment laws, employment contracts can be terminated by mutual consent, including the expiry of a fixed-term contract or notice given by either party. 

Otherwise, employers must have just cause to dismiss an employee. Just cause includes reasons like misconduct, operational requirements, or performance issues. 

Redundancy

The Dismissal Protection Act (DPA) classifies redundancy terminations as ordinary terminations. However, for mass redundancies or collective dismissals, employers must consult with the German works council.

Severance package

Severance pay is not required under employment laws in Germany. However, it is common practice for employers to pay 50% of an employee’s regular monthly salary per year of service with the company. 

Notice period

Employers may terminate employment contracts without notice in severe circumstances, such as crimes against the employer. 

In all other cases, employers should provide notice. Notice periods can vary based on the length of employment, ranging from a minimum of 2 weeks (during probation) up to 7 months (after probation).

Other employee rights and protections

Some other key employee rights in Germany include:

• Parental rights: In addition to maternity benefits, Germany also offers parental benefits. This includes up to 3 years of parental leave per child. Employees’ jobs are protected during parental leave.

Navigate employment laws in Germany with trusted support

Staying compliant with local laws is a priority when onboarding talent in Germany. Labor laws are enforced, and breaches may attract hefty fines and penalties. 

Payoneer Workforce Management’s unified solution offers support with employment contracts, payroll, benefits, and more, with compliance support.

Book a demo today!

FAQs

1) Does Germany have a 40-hour work week?

Yes, the standard workweek in Germany is between 40 and 48 hours. Employees can work overtime, although this is capped at 8 hours per week, resulting in a maximum working week of 48 hours. 

The daily working hours limit is 8 hours, although employees can work up to 10 hours under certain circumstances, such as overtime. 

2) What are the rights of employees in Germany?

Key employee rights in Germany include:

• Minimum wage: Set at EUR 12.82 per hour
• Working hours: A 40 to 48-hour work week
• Paid time off: A minimum of 20 paid vacation days per year, as well as around 9 public holidays (state-dependent)
• Protection against unjust termination: Employers must have just cause to terminate an employee.
• Notice period: A minimum of 2 weeks’ notice during probation, 1 to 7 months’ notice after probation, depending on the tenure
• Statutory social insurance: Including health, pension, unemployment, and long-term care
• Sick pay: 6 weeks of full pay per illness
• Maternity benefits: Including a Maternity Protection Period (Mutterschutzgesetz) of 14 weeks and Maternity Pay (Mutterschutz).
• Mandatory leave: Including vacation days, maternity leave, parental leave, sick leave, etc.
• Parental rights: Up to 3 years of parental leave per child, during which their employment is protected
• Health and safety: A safe working environment, with regular risk assessments, and any necessary protective equipment