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Employment law overview Germany
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Employment law overview Germany


German employment law is divided into two areas: individual employment law and collective employment law. Individual employment law concerns relations between the individual employee and the employer, while collective employment law regulates the collective representation and organisation of employees as well as the rights and obligations of employees’ representatives.

German employment law is not consolidated into a single labour code: the main sources are Federal legislation, case law, collective bargaining agreements, works council agreements and individual employment contracts.

Key Points

  • Employees who are not from the EU/EEA require a residence title for the purpose of taking up employment.
  • A statutory minimum wage of 9.35 EUR (2020) / expected to be 9.50 EUR for 2021 per hour, currently applies to all employees in all sectors of business. Aside from the statutory minimum wage, there are special regulations and collective bargaining agreements within certain sectors.
  •  Overtime pay is not expressly regulated by law, but is subject to the employment agreement, collective bargaining agreements and works council agreements.
  • Trade union representatives support employees and works councils, but do not have participation rights within a company.
  • Due to the high level of protection against dismissal, it is reasonably common for employment to be terminated by a separation agreement.
  •  Severance payments are paid if a number of conditions are fulfilled.

German labour and employment law is not consolidated into a single labour code. Separate laws for particular issues exist – e.g. the Federal Vacation Act, the Working Time Act or the Maternity Protection Act. The main sources of German employment law therefore are Federal legislation, collective bargaining agreements, works council agreements and individual employment contracts. Many labour and employment law matters are heavily influenced by case law so that judicial precedent is an important part of the legal framework. Numerous separate laws and case law generally make German employment law difficult to navigate. There have been discussions about introducing a uniform Labour Code. The project was however abandoned and an introduction in the short- or mid-term is very unlikely.

New Developments

a. New Regulations due to Covid-19

The Covid-19 pandemic is fundamentally changing daily operations. The legislator has therefore enacted various short-term packages of measures and laws in connection with the pandemic, which are initially limited until 31 December 2020, but may be extended at short notice, including e.g., compensation for child care and an easier deferral of social security contributions to be paid by the employer.

In April 2020, the Federal Ministry of Labour and Social Affairs issued the so-called Occupational Safety Standard, which was further specified in September 2020 by the Occupational Safety Regulations. These rules are intended to ensure the safety of all employees in the workplace during the pandemic and to minimise the spread of the virus. The regulations are only recommendations and therefore they are not legally binding. Nevertheless, the employer is obliged under public law to comply with occupational health and safety regulations and has a duty of protection and care towards employees.

Due to the pandemic, the legislator has also decided to ease the access to short-time work benefits. Depending on the duration of the short-time work, the corresponding short-time work allowance increases continuously over months. At present, discussions are underway to extend the regulations beyond 31 December 2020.

In addition, changes have been introduced for a limited period, until December 2020, to allow for secondary income while receiving short-time work benefits. An employee’s additional income while receiving short-time work compensation, under certain circumstances, may not be taken into account.

Draft laws are currently under discussion to stabilise the labour market also in 2021. In particular, employees should be able to receive short-time work benefits for 24 months (instead of 12 months).

b. Immigration Law

Since 1 March 2020, the general conditions for the immigration of skilled workers from third countries (countries outside the EU/EEA) have been facilitated. As a result, the German labour market is now open not only to highly qualified individuals, but also to individuals with recognised vocational training.

As a result of the changes in the German Residence Act, the so called “job market test” is no longer required if an employment contract can be presented. With the “job market test” which, up to March 2020 had to be carried out for every application for a work permit, the Federal Labour Agency checked whether German/EU/EEA nationals or nationals with an unrestricted residence permit were also eligible for the job.

In addition, skilled workers from third countries can now immigrate to Germany for a limited period of time to look for a job, provided they can prove they have the necessary German language skills and can secure their living.

c. Work of Tomorrow Act

Special provisions were inserted into the Works Constitution Act to deal with the Covid-19 pandemic. Participation in meetings of the works council and other bodies under the Works Constitution Act and the adoption of resolutions by these bodies, can now be carried out by means of video and telephone conferences, if it is ensured that third parties cannot take note of the content of the meeting. The regulations are currently limited in time until 31 December 2020.

Works meetings can be held via video conferences until 31 January 2021.

d. Data Protection

The “Second Data Protection Adaptation and Implementation Act EU” of 21 November 2019, has relaxed the requirements for having a company data protection officer for smaller companies and voluntary associations. It is now mandatory for a company data protection officer to be appointed if 20 persons are regularly involved in the processing of personal data; previously the threshold was 10 persons.

In addition, to simplify the process of obtaining the employees’ consent to data processing, this can now also be done by e-mail (instead of wet ink signature). Text form for example includes e-mail

e. Formal Requirements

With the Third Bureaucracy Relief Act, the electronic certificate of incapacity to work replaces the previous paper certificate. The health insurers inform the employer electronically upon request, about the beginning and duration of the incapacity to work for employees insured in the statutory health insurance. The regulation shall apply from 1 January 2022.

In addition, the notification of the employer’s decision in response to an employee’s wish to work part-time under the Part-Time and Fixed-Term Employment Act, is now also possible in text form (instead of wet ink signature). Therefore, e-mail will also now comply with the form requirements.

f. Immigration – A1 certification

In principle, all employees are subject to the legislation of the member state within the European Union in which they perform their work activities. Therefore, if an employee is only temporarily working in another member state within the European Union (so-called posting), the law of the posting country still applies as an exception, and the employee can prove whether he/she is subject to the law of his/her country of residence (sending country) or the regulations of the foreign country with a so-called A1-certificate.

Also, an employee regularly working in several member states needs an A1-certificate. The advantage of this, is that simultaneous payment of social security contributions in several member states, and switching between social security systems, is avoided. An A1-certificate may also be issued in the event that Germany has signed a bilateral social security agreement with countries outside of the European Union (e.g. India, Brazil, United States of America).

Especially for short-term assignments, this has led to problems since the employee could not prove that his/her employer applied for the A1-certificate.

Therefore, the employer now has the option of having the proof that the application has been issued, which the employee can use to prove that his employer submitted an application for an A1 certificate prior to the posting. This should facilitate short-term assignments of up to one week.

g. Maximum compensation for members of the Board of Management (ARUG II)

The remuneration of members of the Board of Management, in particular of the Board of Management of large listed stock corporations, is the subject of ongoing discussions. The Supervisory Board determines the remuneration system for members of the Board of Management, whereas the General Meeting is responsible for concluding the contracts with members of the Board of Management and therefore, decides on the compensation of the members of the Board of Management.

Now, the Supervisory Board additionally has to determine the maximum compensation of the members of the Board of Management as part of the compensation system (containing inter alia, also detailed provisions regarding fixed and variable remuneration elements). Current contracts are not affected by this.

The resolution on the remuneration system to be submitted by the Supervisory Board, must be adopted for the first time at the Ordinary General Meeting held after 31 December 2020.

Any questions

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