German Employment Contract: Know This Before Signing

German employment contract

Congratulations! Your hard work paid off: you landed the interview, impressed the employer, and now have been offered a job. The only thing separating you from your new desk? The employment contract. Below we give you an overview of a German contract and what to look out for before you sign.

Fixed-term or Permanent Employment Contract

Your employer will offer you either a fixed-term or permanent employment contract. If you are offered a permanent contract, your employment is for an indefinite amount of time. If you are offered employment for a specific window of time, then you are dealing with a fixed-term contract. A fixed-term employment contract can be renewed up to three times, and your employment can last a total of two years, maximum. For example, you could have a six-month contract renewed three times for a total of two working years. Exception: If there are justifiable reasons (Sachgrund) for extending the two-year limit or the three-renewal limit, this can be done.

Employlment contract research
Before signing a contract, employees should inform themselves about the conditions agreed upon within the contract. Foto: littlehenrabi

Fixed-term contracts are generally advantageous for the employer. Labor law expert Uwe Schlegel from Cologne states, “Fixed-term contract are disadvantageous for employees; the contract ends automatically, as soon as the fixed-term ends. The employer doesn’t need to fire the employee, there is no job protection —not for women who are pregnant, the handicapped, for nobody.”

Job Description

An employment contract always includes a job description, though these can vary in how detailed or broadly it is written. If you don’t want your future boss to force you to work on any arbitrary task, be sure to have a precise job description in your contract. What you don’t find in the description is not your job: your employer cannot demand that you take on work that you are not contractually obligated to take on. That means the more concretely your job description is written, the fewer conflicts there will be later. However, lawyer Uwe Schlegel also knows the advantages of a vague job description: “A very detailed description might be a disadvantage for employees because it makes it easier for employers to dismiss someone due to operational conditions. If the job description is broad enough, it is harder for the employer to dismiss the employee because of redundancy.” This means: a detailed job description could help prove that the work you do at a company is no longer necessary.”

Place of Work

The employment contract contract should define where you will be working. If a concrete, fixed location is named in your contract, your employer cannot place you in another location. However, many work contracts include a transfer or relocation clause, so that your employer would have the ability to transfer you to another location.

work contract overtime
If they are not included in your contract, your employer cannot mandate any overtime for you Foto: Szepy

Working Hours

The contract should establish your weekly work hours. In general these will amount to 35-40 hours a week. According to the Working Hours Act, employees cannot exceed a daily work limit of eight hours per day. So, as Saturday counts as a workday, one may work a maximum of 48-hours a week.

The daily work hours can be increased to ten-hour-days, as long as you don’t exceed the eight-hour-day average as calculated in six calendar months, or 24 weeks.

Overtime

If it is not included in your employment contract, your employer cannot mandate any overtime for you, except in operational emergencies (§ 14 ArbZG). If your employer wishes to demand overtime from you, it needs to be stipulated in your work contract. The contract should establish how many overtime hours are compensated, and with what pay. Legally, the working day cannot exceed eight hours, however: your employer can increase your hours to ten per day, if he can arrange the necessary compensatory time-off for you within the next six months.

A general contractual clause that stipulates overtime hours be unlimited is invalid. Before signing your employment contract, you as an employee must know how many hours of overtime you can expect and if you will be compensated for these hours with time-off or through pay.

Those who earn exceptionally well don’t have a claim to paid overtime. The earning bracket which is too high to warrant overtime compensation goes according to social security contribution assessment ceiling of the federal pension insurance (Beitragsbemessungsgrenze in der Rentenversicherung), which has been set in 2017 at: 76,200 Euro a year, or 6,350 Euro a month in West Germany, and 68,400 a year, or 5,700 a month in East Germany. Germany’s Federal Labor Court established in 2012, that the respective high-earners can expect no overtime compensation: They would rather be compensated for the execution of a task, not for working hours.

employment contract salary Germany
Expect your salary to shrink before it lands in your bank account as net pay Foto: wutwhanfoto

Salary

Your concrete gross salary should be established in your employment contract. Expect this number to shrink—and not insignificantly —before it lands in your bank account as net pay. This shrinkage is from your payroll deductions: you pay an income tax and are also subject to pay a social insurance contribution (Sozialpflichtversicherung). In addition to your base salary, your employer can compensate you for a good performance with bonuses and provisions. Your employer can also compensate you with special payments such as a Christmas bonus or vacation money. Be sure that such payments are addressed in your contract: you only have a claim to special compensation or bonuses if such provisions are stated in your contract. Your contract should also state when you will be paid. Your first payment is usually deposited on the first of the month following your employment, after the “performance of services”. After this initial payment, your contract will outline a regular payment schedule.

Vacation

With a five-day working-week, an employee is entitled to 20 days of paid vacation. With a six-day working-week, an employee can take 24 days of vacation. For many companies, even longer vacation day allotments are common. These allotments should be outlined in the employment contract. Your employer can also pay you a vacation bonus, but he is not required to unless it is mentioned in the contract.

Arbeitsvertrag Urlaubstage Urlaub
With a five-day working-week, an employee is entitled to 20 days of vacation Foto: Peshkova

Termination

Your employment contract should establish a notice period for when you give notice that you will quit your job or your employer dismisses you. If there is no arrangement in the contract, the time period is four weeks after the probationary period. That means you will need to give your employer notice four weeks ahead of time before you quit, and he will need to give you four weeks notice that you will be terminated.

Probationary Period

During the probationary period, you and your employer get to know one another and determine if you can meet each other’s expectations. Most probationary periods last three or six months, in special cases, nine. During this time, both the employee and employer may decide to end the employment (at two weeks) for no explicit reason. Your employer can decide to go without a probationary period when hiring you.

Illness

If you are sick, you need to tell your employer you won’t be coming into the office. If you are sick for three days or more, you need a doctor’s note (Arbeitsunfähigkeitsbescheinigung). It is possible that your contract requires you to provide a doctor’s note even for the first day of your illness. If your contract references the Act on Continued Remuneration During Illness (Entgeltfortzahlunsgesetz), that is sufficient for determining your pay during your sick leave. It is required that employers pay you your full salary for six weeks while you are sick, as long as you have already been employed for an uninterrupted four weeks. A deviation in the contract is only effective when it benefits you as an employee, for example, if you and your employer arrange for a longer payment period.

Employment contract Arbeitsvertrag Krankheit
An employee that stays home sick for at least three days must give their employer a doctor’s note Foto: monkeybusinessimages

Side Job

Generally, employees can take on a side job in addition to their main job, but principally employees need to tell their employers about any additional work they are doing. The employer can then only prohibit your extra work if it is a conflict of interest for the company—for example, if you want to work for a competing company.

Obligation to Secrecy

Often employment contracts include a discretion or secrecy clause. But even without an explicit secrecy clause, you are already bound by law to keep company secrets to yourself (Act Against Unfair Practices: §§ 17, 18, 19, UWG). Sensitive company information is information that employees are not allowed to share due to the valid financial interests of their employer. Among these secrets are technical and operational data (production infrastructure, computer software), information from the economic sector (user lists, balances, calculations, inventions) and from the personnel department.

Non-Competition Clause

Your employment contract will often include a section, such as a non-competition clause, that forbids you from working with the companies that your company is competing against. You may work exclusively for your employer, without the employer’s permission you may not work elsewhere in the industry. Even if this non-competition clause isn’t stated explicitly in your contract, you are still prohibited from helping your company’s competitors
Once your employment ends, you are no longer bound to the non-competition clause. That is, unless you had a post-contractual non-competition clause in your contract. Such a clause has these minimum requirements: The non-competition clause may last for no longer than 24 months, and the employer is bound in that time to pay a waiting allowance, which is a monthly compensation (Karenzentschädigung) that meets the legal minimum rate. The employer must pay you half of your monthly salary. This is calculated from the average of the last three years.

Also in our blog: After finding a job in Germany, finding an apartment appears at the top of your to-do list. Finding an apartment isn’t always easy, especially in Germany’s large cities. Often there is intense competition between dozens of apartment-seekers for one flat. We have six tips to make your apartment search less stressful and more successful.

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