An employment contract is a contract that is concluded between an employer and an employee and justifies the employment relationship and regulates the mutual legal relations. A distinction is made between a fixed-term and an indefinite-term employment contract. While the employment relationship in the case of a fixed-term contract ends on the date specified therein without the need to give notice, the employment relationship in the case of a contract for an indefinite period is indefinite. It should be noted that the type of contract, i.e. its duration, must already be specified when the contract is concluded. If the duration of the contract is specified after the commencement of employment, this is not valid [in accordance with the decision of the Labour Court of Iserlohn, ArbG Iserlohn, 19.05.2009, 5 Ca 1806/08].
Conclusion of an employment contract in Germany
There are basically three options for concluding an employment contract in Germany:
- in writing
- orally
- by means of so-called “tacit consent” (stillschweigend) – the employee takes on the job and the employer does not object
A fixed-term contract must always be concluded in writing in accordance with § 14 Abs. TzBfG.
We therefore recommend that you enter into every contract in writing and in as much detail as possible, in order to avoid unnecessary annoyances in the future. According to the German Evidence Act (Nachweisgesetz) the employer is obligated to put certain terms and conditions of employment in writing.
Both the employee and the employer are obliged to sign the employment contract, but the latter may be represented by a deputy. The latter can be represented by a deputy (e.g. the head of personnel), but it must be ensured that the deputy has the necessary power of attorney, which clearly shows that he is acting on behalf of the employer.
The following employment contracts are not permitted in Germany:
- those concluded with persons under the age of 14
- contracts that do not comply with the law on undeclared work (Gesetz zur Bekämpfung der Schwarzarbeit)
- contracts with a temporary employment agency that does not have the necessary permits [LArbG Düsseldorf, 26.07.2012, 15 Sa 336/12].
If, for some reason, an employment contract is concluded despite a violation of any of the above points, then such a contract is considered invalid.
In addition, the following contracts are also considered invalid in Germany:
- contracts that violate good morals, which in practice happens very rarely
- where one or both parties are found to be legally incapable at the time of conclusion
- where at the time of conclusion, the substitute employer does not have the necessary powers of attorney
- which can be legally challenged
What information must a German employment contract contain?
Working hours (Arbeitszeit): Regular weekly working hours have to be included in the employment contract. In most German companies 35 or 40 working hours per week are common practice. According to the Working Hours Act the daily working hours can only exceed 8 hours in exceptional cases.
The duration of the contract (Befristung): The employer determines whether the contract is for a definite or indefinite period of time. Fixed-term contracts are usually made for a maximum of 2 years and can be renewed 3 times during this period. If there is a compelling reason why the contract can be entered into for a definite period of time (e.g. replacement during parental leave for another employee), then the employer may deviate from this rule.
Salary (Gehalt): The gross salary is stated as a monthly or annual salary. In addition to the basic salary, performance-related benefits such as bonuses and premiums may also be included. Unless regulated otherwise, your salary must be paid into your account on the last working day of each month at the latest.
Sickness (Krankheit): It is sufficient for your contract to include a reference to the “Entgeltfortzahlungsgesetz” (Law on Incapacity for Work). This law states that the employee must give notice of his illness as soon as possible (preferably first thing in the morning at work) and that the employer is obligated to pay wages to the sick employee for six weeks (if the illness lasts that long). A contractual deviation from this rule is only possible to the employee’s advantage, for example, if the tariff agreement provides for a longer payment period than the statutory one.
Notice of termination (Kündigung): A German employment contract stipulates when both parties can terminate an employment relationship. After the probationary period it is four weeks until the 15th or until the last working day of the calendar month unless otherwise specified. A reference to the Kündigungsschutzgesetz (Law on the Protection of Employees against Unjustified Termination of Employment) is sufficient. Sometimes longer notice periods are also stipulated, for example at the end of a quarter.
Additional work (Nebentätigkeit): The employer may require in the contract that the employee gives information about possible additional work. It is generally possible to work elsewhere at the same time – on days off, during vacations, or in the evenings.
Place of work (Arbeitsort): Usually the employer’s premises are also the employee’s place of work. If there is a need to frequently change the place of work or to travel, this should also be included in the employment contract.
Probationary period (Probezeit): Is part of many employment contracts. During the probationary period, employers and employees can check whether their expectations have been met. The probationary period is usually 6 months, sometimes it can be as long as 9 months for more complex jobs. During the probationary period, both parties have a 2-week notice period. According to the law, the probationary period can be waived.
Obligation of secrecy (Schweigepflicht): Even if this point is not separately mentioned in the contract, you are nevertheless obligated to maintain secrecy as an employee and not to disclose internal company secrets.
Occupation (Tätigkeit): The job description and position should be included as precisely as possible in the employment contract. If the wording is very general, there is a high probability that your duties will include tasks that you have not considered at all.
Overtime (Überstunden): Sometimes you are contractually obliged to perform overtime if it is not possible to do the work in the standard time. However, the question of overtime pay should be clarified: will you be paid for it and how much? Will they be compensated with days off?
Vacations (Urlaub): According to the law governing vacations, employees are entitled to 20 days of vacation per year if they work 5 days a week (if they work 6 days, they are entitled to 24 days of vacation). In tariff agreements, even more vacation days are often stipulated. It is also possible to agree on more vacations in a standard employment contract. If, on the other hand, the contract states that you have fewer vacation days than the statutory vacation entitlement, the clause is void – even if both parties have signed it.
Breaking the contract (Vertragsbruch): What happens if an employee breaks the contract, for example if he decides to take another job just before starting work? This should be stated in the employment contract. Usually, a financial penalty in the amount of salary is applied, until the end of the notice period. If you do not terminate your contract in writing, the employment court will decide what the consequences will be.
Parties to the contract (Vertragsparteien): The employment contract must state between which parties the contract is concluded – names, addresses and who is the employer and who is the employee – otherwise the contract is void.
Non-compete (Wettbewerbsverbot): An employee may not compete with his/her employer as long as the employment relationship between them continues.
German employment contract – example
Here is a sample of an employment contract in German:
