Table of Contents

Germany

Table of Contents

Currency

Euro (EUR)

Payroll Frequency

Monthly

Employer Taxes

20.65%

About Germany

As of the end of 2022, Germany solidified its position as the largest economy within the European Union, boasting an estimated GDP of $4.504 trillion. This economic powerhouse is particularly dominant in the automotive sector, which significantly bolsters its GDP. In addition to its substantial role in the global automotive industry, Germany stands out for its exceptionally skilled and adaptable workforce.

Employment Relationship

• Permanent Employment

Employment in Germany is considered to be for an indefinite period unless otherwise specified in the employment contract or agreed to by both parties in writing by giving notice. 

• Fixed-Term or Specific-Purpose Contracts

Fixed-term contracts are permitted under the German legislation, as long as the term does not exceed two years (four years in the case of a new business). Employers can hire workers on a fixed-term contract for objective and material reasons.  Fixed-term contracts can be renewed no more than three times, as long as the entire period does not exceed two years. Exceptions are made in case of employees older than 52 years of age and successive fixed-term contracts with objective reasons. If the employment relationship is continued after the expiry of the period for which it was entered into or after the purpose has been achieved with the knowledge of the employer, it is deemed to be extended for an indefinite period. 

• Temporary Employment Contratcs

According to Germany's reformed Temporary Employment Act, temporary employees can be engaged through an agency for a maximum term of 18 months. After that time, either the employer engages them as a regular employee or the employment agency withdraws them from the assignment. However, the term can be further extended if there is a gap of three or more months between two assignments. Temporary employment agencies that provide temporary employees to hirers require permits to operate. The hiring out of employees and allowing them to work as temporary workers is only permitted if there is an employment relationship between the agency and the temporary worker. The agency is obliged to ensure that the temporary workers are provided similar working conditions and wages as comparable permanent employees. 

Probationary Period

In Germany, the probationary period can last up to a maximum of six months. During the probationary period, the employment relationship may be terminated by either party with two weeks' notice. Probationary period can be stipulated for both indefinite term and fixed-term contracts. 

Working Hours

The working hours are regulated by the Hours of Work Act, which states that a regular, full-time workday may not exceed eight hours. There is a ten-hour limit, including overtime, as long as an eight-hour average is maintained over six calendar months. Employees must have an uninterrupted rest period of at least eleven hours after the end of daily working hours. Young people under 18 years of age cannot be employed more than 8 hours a day and not more than 40 hours a week. They must have a daily rest of at least 12 hours. These limits can be extended in emergency situations when work cannot be postponed, in extraordinary circumstances, or if agreed upon in collective agreements.

Holidays / PTO

• Statutory Holidays

In Germany, public holidays are predominantly regulated on the state level. The minimum number of paid public holidays is 9 – these are the national public holidays. In addition to the national holidays, there are state-specific public holidays regulated by individual state laws.  All German employees are entitled to a public holiday for the following days: New Year’s Day (Neujahr) – January 1 Good Friday (Karfreitag)  – date subject to change annually Easter Sunday (Ostersonntag) – date subject to change annually Easter Monday (Ostermontag) – date subject to change annually Labor Day (Maifeiertag) – May 1 Ascension Day (Christi Himmelfahrt) – date subject to change annually Whit Sunday (Mit Sonntag) – date subject to change annually Whit Monday (Pfingstmontag) – date subject to change annually German Unification Day (Tag der Deutschen Einheit) – October 3 Christmas Day (Weihnachtstag) – December 25 Boxing Day (Weihnachtstag) – December 26

• Paid Annual Leave

Employees in Germany are entitled to a minimum of 24 working days of leave per year. This number is based on a 6-day workweek and can further be amended by collective agreements or employment contracts. Leave is granted continuously but can be divided for operational or personal reasons, such that at least one of the leave allotments lasts 12 consecutive days. Annual leave can be transferred to the following year for personal or business reasons but must be taken before March 31 of that following year. Home workers are also entitled to the same benefits, unless otherwise stated in their contracts.  While annual leave should be taken the same year that it has accrued, the statute of limitations for unclaimed vacation leave is 3 years.  Employees are entitled to one-twelfth of the annual leave for each full month of employment and acquire full leave entitlement after six months of work. The right to annual leave does not exist if a previous employer has granted the employee the same type of leave in a calendar year. If the vacation can no longer be granted in whole or in part due to the termination of the employment relationship, the employee must be compensated.

• Sick Leave

In Germany, sick pay leave is regulated under the Continued Remuneration Act (Entgeltfortzahlungsgesetz). The Act requires employers to provide employees with 6 weeks of paid sick leave for each illness that results in an incapacity to work. Employees are required to inform their employer in due course if they are incapable of working and also how long such incapability may presumably last. If the work incapacity lasts longer than 3 calendar days, an employer must request electronically the employee’s certificate of incapacity from the health insurance company.  During sick leave, the employee has an entitlement to full remuneration paid by the employer for the first 6 weeks. Following 6 weeks of sick leave compensated by the employer, employees will receive a sickness allowance through their health insurance in the amount of 70% of their last salary. The maximum time for this coverage is 78 weeks within a period of 3 years. The employee is entitled to paid sick leave after 4 weeks of continuous employment.

• Maternity Leave

According to the German Maternity Protection Act, female employees are entitled to 14 weeks of paid maternity leave: six weeks of prenatal leave, and eight weeks of postnatal leave. The postnatal leave may be extended to 12 weeks if the female worker gives birth to a child with a disability, or in the case of premature birth or multiple births. Employers cannot terminate the employment contract of a female employee during her pregnancy.   Female workers, even if unemployed, are entitled to paid maternity leave for the six weeks of prenatal leave, the day of the delivery, and the eight weeks of postnatal leave (12 in case of multiple or premature births). The paid maternity leave is calculated at a rate of 100% of the average regular net wages over the last three months before the prenatal maternity leave period. This benefit – up to EUR 13 (euros) per day – is paid by the mother’s health insurance and the employer, who covers the difference between the money provided by the health insurance and the mother’s previous earnings. The benefits are paid directly to the mother by the employer, who can then apply for reimbursement from the relevant health insurance institution. Benefits for mothers with an income below EUR 390 per month are paid by the mother's health insurance alone and match their prior income. 

• Paternity Leave

The labor law does not offer a specific provision on paid paternity leave, other than the regulations for parental leave (which can be taken by either parent). There is no entitlement to paid paternity leave; however, employees are entitled to parental leave for their natural or adopted child and can request up to 3 years of leave to take care of a newborn until the child turns three years of age. This time can be claimed by both parents at the same time, or separately. Up to 12 months of parental leave can be postponed with the permission of the employer until the child reaches eight years of age. The state pays 67% of the employee's average monthly income during parental leave (uo to a maximum of 1,800), generally for 12 months. The minimum benefit amount is EUR 300.

Termination of Employment

• Notice Period

Notice for an employer seeking to terminate an employment relationship ranges from four weeks for employees with less than two years of service, to seven months for employees with more than 20 years of service. Notice must be given in writing. Termination without notice can only be given if there is good cause. An employee may terminate the employment relationship with a notice period of four weeks to the fifteenth or the end of a calendar month. In case of termination during the probationary period, the notice period is two weeks. Collective bargaining agreements can provide for shorter notice periods.

• Severance Benefits

In Germany, employees are entitled to severance pay under the following circumstances: Operational termination – if employees are dismissed due to operational issues, they are entitled to severance pay equal to 50% of monthly salary for each year of employment. Termination of employment by the judgment of a court – if a court determines that dismissal was unfair and the employee cannot continue the employment relationship, the court may decide to dissolve the employment contract and order the payment of severance (up to 12 months' earnings).   Immoral or extraordinary dismissal – if the court decides that the dismissal is unfair or without reason, it can order the employer to pay an appropriate severance payment if the employee cannot continue the employment relationship.  Severance benefits may vary for employees covered under a works council social plan or collective agreement.