02. Employment Contracts

Minimum requirements

Employment contracts generally do not require written form in order to be valid.

The newly introduced German Verification Act (Nachweisgesetz – NachwG), which implements the EU Directive on transparent and predictable working conditions (EU 2019/1152), provides for a verification and documentation obligation on the part of the employer since 1 August 2022. This means that the essential terms and conditions of employment must be set out in writing, signed by a representative of the employer (wet ink) and provided to the employee. Violations of the NachwG do not result in the invalidity of the employment contract but can be penalised with a fine of up to EUR 2,000.00 per case.

The verification under the NachwG, which can be given as part of the written employment contract or separately, must contain at least the following:

• name and address of the employer and the employee;
• information on the starting date of the employment;
• the end date or anticipated duration of employment (only in case of fixed-term contracts);
• the place of work or a notice on the possibility to freely choose the place of work, if applicable;
• the nature of the activity involved;
• duration of the probationary period, if agreed;
• the composition and amount of the remuneration, including remuneration for overtime, bonuses, allowances, premiums and special payments as well as other components of remuneration, each of which must be stated separately, and, for all remuneration components, their due date and the method of payment;
• the working hours and rest periods;
• in case of shift work, details of the shift system, rhythm and possibilities for change;
• in the case of on-call work, precise details of the arrangement;
• if agreed, the possibility to instruct overtime and its prerequisites;
• the duration of annual leave;
• any entitlement to further training provided by the employer;
• name and address of the pension provider, if a company pension scheme exists;
• the procedure to be followed in the event of termination, at least the requirement for written form, the period of notice and the period for filing a lawsuit against a termination; and
• a general reference to the collective bargaining agreements, works or service agreements applicable to the employment relationship, if any.

To avoid future disputes, a version of the employment contract should be drafted in German. However, this is not required by law.

Fixed-term/Open-ended Contracts

As a general rule, the employment contract is entered into for an unlimited period. A fixed-term contract is possible, provided the term is agreed upon in writing before the employment commences. A fixed-term contract ends automatically without written notice at the end of its term.

A fixed-term employment relationship must be justified by objective grounds, some of which are set forth in statutory law (e.g. temporary increase in work volume, substitution of an employee during parental leave). If no objective grounds exist, the fixed-term employment is limited to a maximum duration of two years, provided that no previous employment contract with the same employer existed. If the parties continue the employment after the expiration of the fixed-term contract, the agreement is deemed to be concluded for an indefinite period.

Trial Period

The employer and employee may agree upon a trial period, which is limited by law to a maximum duration of six months. Since 1 August 2022, Section 15 paragraph 3 of the German Act on Part-Time Work and Fixed-Term Contracts (Teilzeit- und Befristungsgesetz – TzBfG) requires that a trial period agreed in a fixed-term employment contract has to be in reasonable proportion to the duration of the fixed-term contract and the type of work. Therefore, a six-month trial period may be unreasonable in this constellation. The notice period within the trial period is two weeks, unless otherwise agreed. The Dismissal Protection Act does not apply during the first six months of employment, regardless of whether the parties agreed upon a trial period.

Notice Period

The length of the notice period for the employer depends on the employee’s length of service, ranging from 4 weeks for employees with less than 2 years’ seniority, to 7 months for employees with more than 20 years’ seniority. Unless otherwise stated in the employment contract, the extended statutory notice periods are only applicable to terminations by the employer, whereas the employee may terminate the employment with a notice period of four weeks to the 15^th or the end of a calendar month. Most employment contracts align the notice periods for employees with the extended periods applicable to employers. Collective agreements may specify longer or shorter notice periods, whereas individual contracts of employment may only specify longer notice periods.