Employers are particularly pleased with fixed-term employment contracts. They allow them to check the qualifications of new employees over a long period of time. In addition, companies can manage their staff flexibly if, for example, the number of orders suddenly decreases.
For employees, on the other hand, a fixed-term contract means one thing above all: uncertainty in life planning. As if that were not enough, there are many misconceptions about fixed-term contracts. In this article, we debunk these myths.
Mit 1: fixed-term employment contracts can be for a maximum of two years
Indeed, Section 14(2) of the German Act on Part-Time Work and Fixed-Term Employment Contracts (German: Gesetz über Teilzeitarbeit und befristete Arbeitsverträge, TzBfG) states that the period of employment under a fixed-term employment contract may not exceed two years if there is no objective reason that would justify it. However, there are exceptions that many employees are unaware of:
- There is an objective reason: an employment contract that has been entered into for a fixed term for objective reasons may last longer than two years. This is the case, for example, when the employee in question replaces someone who is on parental leave or sick leave. A limitation of the duration of the employment contract can also occur after completion of studies or vocational training (more objective reasons are listed in § 14 (1) TzBfG).
- Newly established company: in the first four years after the establishment of the company, employees may be employed on a temporary basis for up to four years (§ 14 (2a) TzBfG).
- Variations provided for in a collective agreement: parties to collective agreements may stipulate a longer duration for fixed-term employment contracts. According to a 2019 decision of the Federal Labour Court (German: Bundesarbeitsgericht, BAG), parties to collective agreements may agree to enter into fixed-term contracts without objective reason for up to six years, with these contracts being renewable a maximum of nine times (Ref: 7 AZR 410/17).
- Variations provided for in a collective agreement: Variations provided for in a collective agreement: Variations provided for in a collective agreement: Variations provided for in a collective agreement: Variations provided for in a collective agreement may establish longer fixed-term employment contracts.
- Elderly employees: employees aged 52 and older who have been unemployed for at least four months before being hired may be granted a fixed-term contract for up to five years (§ 14(3) TzBfG).
Mit 2: It does not matter at what point the fixed-term employment contract is renewed
Not true! A contract can only be renewed during its term. For example, if a fixed-term contract ends on January 31 and an extension is not signed until February 1, it is legally equivalent to new employment. However, entering into another fixed-term employment contract without an objective reason is tantamount in legal effect to entering into an indefinite-term employment contract.
Mit 3: a statutory notice period applies to a fixed-term employment contract
“A fixed-term employment relationship can only be terminated in the ordinary way if this is agreed in an individual contract or in a valid collective agreement,” says §15, paragraph 3, of the German Act on Part-Time Work and Fixed-Term Employment Contracts (German: Gesetz über Teilzeitarbeit und befristete Arbeitsverträge, TzBfG). Therefore neither the employer nor the employee may terminate the fixed-term employment contract before the end of its term. Exceptions to this rule may be provided for in the employment contract or in a collective agreement. Nevertheless, extraordinary termination is also possible for fixed-term contracts.