What You Need to Know Before Hiring in Germany: A Guide to Terminations

At the beginning of an employment relationship, when you’re making your first German hire, terminating them is likely far from your mind. However, even if you’re sure everything will work out, it’s crucial to be aware of the employment law basics surrounding the dismissal of a German employee.

Workers in Germany cannot be dismissed without notice. Should you decide to end the employment relationship and fail to do so within the legally required notice period, you’re putting your company in jeopardy of a lawsuit. The same goes for breaking any of the other labor laws surrounding dismissals.

Read on to learn everything you need to know before hiring German employees—and how hiring through an Employer of Record (EOR) can spare you from bungling the termination of an employment relationship.

5 essential things to know before hiring in Germany

• You must establish terms of dismissal in your employment contract. The employment contract you send to your Germany team member should include a clause that specifies your company policy on termination, including the notice period they’ll receive and the severance payment they can expect to receive. When you draw up the contract, make sure you comply with the minimum statutory requirements of German employment laws.
• The works council must be notified of the termination of employment. If there’s a local works council, you must notify them of your intention to dismiss the employee and clearly explain the reasons why you made this decision.
• You can only dismiss with no notice period in extreme cases. Generally, employees are entitled to a statutory notice period if they’re going to be dismissed. This does not, however, apply to employees who are found to be in severe breach of their employment contract. Under German laws, “severe breach” includes embezzlement and abuse.
• Germany does not have statutory severance payments. The federal German labor code doesn’t have any guidance as to statutory severance payments. Instead, this matter is left up to either the local works council or the collective bargaining agreement you made with the employee in their employment contract.
• Employees have the right to take you to court over severance. With the above being said, employees still have the right to take their former employer to court if they feel the severance payment they’ve been provided isn’t adequate. This is why it’s a good idea to lay out the policy right away in the initial employment contract. Generally, German employers offer 50% of the employee’s monthly salary for each year of employment if they’re let go.

Dismissal rules in Germany: What are acceptable grounds for termination of employment?

German employers and employees are free to part ways if both sign a fixed-term contract, and there are no repercussions for not renewing it. As for full-time employees, protection against unfair dismissal is divided into two main categories: general and special protection. Read more about each below:

• General. The general category applies to both businesses with more than ten employees and employees who have worked for the same company for more than six months. Both of these groups are protected under the Dismissal Protection Act (DPA), which states that an employee can only be dismissed on “socially justified” grounds. “Socially justified” grounds include problems relating to the employee, such as harassing another employee, issues related to the employee’s conduct, such as extensive absenteeism, and operational reasons, such as a reorganization of the company. In all cases, German labor laws encourage employers to find other means of solving the problem, such as sending written warnings or verbally reprimanding the employee, before choosing to terminate them.
• Special protection. This category applies to certain specially protected groups, such as pregnant employees, those on parental leave, employees with disabilities, or those who have been elected members of the works council. In all cases, if you want to dismiss these employees, you must get government authorization to do so.

Germany’s termination requirements might differ from those in other countries where you hire, so it’s crucial to keep your global hiring compliant with local laws.

What are the mandatory notice periods and termination pay for German employees?

German employment laws are extremely strict about notice periods for termination. They stipulate that an employee can be terminated in accordance with how long they’ve been working for the company and that the termination will be effective on either the 15th of the month or at the end of it, depending on when the notice was served.

Below is a table showing how much notice German employees should receive in accordance with how long they’ve worked for a company. As you’ll see, people who have worked at the same company for two years or more have longer notice periods:

As mentioned earlier, there are no federal laws regarding severance pay. Their severance is determined by the collective bargaining agreement you signed with them and whatever your contractual obligations are.

The easiest way to comply with German termination requirements

If you employ a global workforce, keeping track of termination requirements gets complicated. Without any assistance, employers need to master conflicting just-cause considerations, probationary and notice periods, and severance pay laws that vary both within and among countries.

An alternative is to hire through an EOR, which can monitor termination requirements for you.

Frequently asked questions about terminating employees in Germany

Do you need a reason to terminate an employee in Germany?

Yes. Germany is not an “at will” employment state; in fact, this doesn’t exist in Germany at all. Instead, the company’s dismissal policy should be clearly stated in the employment agreement the new hire signs before they begin onboarding. The policy should include the notice period, the severance payment they should expect, and the reasons they can be dismissed.

Additionally, if you terminate an employee who either falls under the special protection or general categories discussed earlier, you must document the reason for the dismissal as well as provide evidence you tried other means of fixing the problem before you fired them. And, keep in mind that under German employment laws, you must give the employee at least one warning before dismissing them.

What are the laws for businesses with fewer than 10 employees?

In Germany, dismissing an employee at a business that has fewer than 10 workers doesn’t need to be “socially justified.” The only requirements are that it not be discriminatory (for example, you can’t fire someone due to their age, race, or religion) and that it not violate any major public policies (for instance, dismissing a person under special protection without first consulting the works council).

What qualifies as wrongful dismissal in Germany?

In Germany, an employee who believes they have been wrongly dismissed is permitted to take their employer to court. Wrongful dismissal includes not giving the employee written notice that they are being dismissed, firing them without any warning, and—if they’re part of the specially protected group—dismissing them without consulting the works council. Terminations based on discrimination are also unlawful in Germany.

What is always required when an employer terminates an employee in Germany?

When an employee is terminated in Germany, they must receive a notice in writing and within the proper notice period (see the table earlier in this article). Additionally, they must be provided with the severance package agreed upon in the employment agreement and be permitted to apply for social security and unemployment benefits based on the amount of money they made in their last month of employment.

What is the law for dismissing a contractor in Germany?

While employees are protected under German labor laws, the same does not go for independent contractors in Germany. They can be terminated at any time, and there is no notice period.

If an independent contractor is found to be misclassified, they may be entitled to employment standards legislation protections and notice or termination pay in lieu of notice.

What is a works council?

In Germany, works councils are sort of like the equivalent of unions in the United States. They’re an elected group made up of employees who work in concert with the company to ensure it’s properly managed. They have numerous rights and responsibilities, such as creating collective bargaining agreements and occasionally giving their approval if an employee under special protection is to be terminated.

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Catch Rippling in action and learn how Rippling can manage the tangled web of global termination requirements—so you don’t have to.

Rippling and its affiliates do not provide tax, accounting or legal advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any related activities or transactions.