Hiring in Germany

Germany's labor laws are some of the most employee-friendly in Europe, and if you're hiring there through an EOR, you need to understand what you're signing up for. The Dismissal Protection Act (KSchG) kicks in at companies with more than 10 employees, and once it applies, you can't just fire someone without a valid reason. Valid reasons fall into three buckets: personal conduct, the employee's capability, or operational business needs. Even then, the employer has to prove the dismissal was justified, which is the opposite of at-will employment in the US. If a works council (Betriebsrat) exists at the workplace, the employer must consult it before any termination, and the works council can object and delay the process. Works councils are a big deal in Germany. Any company with five or more permanent employees can form one, and they have real power through co-determination (Mitbestimmung) rights over things like working hours, overtime policies, workplace rules, and even individual hiring decisions.

Notice periods scale with how long someone has been employed. The baseline statutory notice period is four weeks to either the 15th or the end of a calendar month. But for employer-initiated terminations, that stretches with tenure: one month after 2 years, two months after 5 years, three months after 8 years, four months after 10 years, five months after 12 years, six months after 15 years, and seven months after 20 years. During a probationary period (max 6 months), the notice period drops to just two weeks. These are minimums, and many employment contracts or collective bargaining agreements set longer periods.

Employees are entitled to a minimum of 20 paid vacation days per year based on a 5-day work week (24 days for a 6-day week), but in practice most German employers offer 25 to 30 days. Sick leave is generous too. If an employee gets sick, the employer pays their full salary for the first 6 weeks (Lohnfortzahlung). After that, the employee's statutory health insurance takes over with Krankengeld (sick pay) at roughly 70% of gross salary, capped at 90% of net, for up to 78 weeks. There's no limit on how many times an employee can take sick leave for different illnesses, which can catch foreign employers off guard.

Social security contributions are split roughly 50/50 between employer and employee, but the employer's total share adds up to around 20-21% of gross salary. That breaks down to about 9.3% for pension insurance, 7.3% plus a supplementary contribution for health insurance, 1.3% for unemployment insurance, 1.8% for long-term care insurance, and 0.15% for insolvency insurance. These contributions apply up to assessment ceilings that change annually.

Maternity protection (Mutterschutz) prohibits termination during pregnancy and for four months after delivery. Mothers get 6 weeks of leave before and 8 weeks after birth (12 weeks for premature or multiple births) at full pay. After that, both parents can take parental leave (Elternzeit) for up to 3 years per child, with a government-funded parental allowance (Elterngeld) covering 65-67% of net income up to EUR 1,800/month for the first 12-14 months. The Working Time Act caps daily working hours at 8 hours, extendable to 10 hours if averaged back to 8 over 6 months. The weekly maximum is 48 hours. Fixed-term contracts are allowed without a reason for up to 2 years, with a maximum of 3 renewals within that period. After that, the contract automatically becomes permanent.