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End of employment in Germany

Termination of employment is a complex matter that demands careful attention. Particularly in Germany, where specific guidelines and procedures must be followed, it is crucial for employers to ensure compliance at every step of the process. In this guide, we will explore the key factors you need to keep in mind when navigating the termination of employment in Germany. From understanding post-termination restraints, notice periods, transfer of undertakings, and waivers, to other relevant considerations, this detailed guide will provide the clarity and guidance you need to understand the termination process in Germany.

Germany notice period

The standard notice period in Germany for both employers and employees are four weeks to the 15th or the end of a calendar month. However, this notice period can vary based on any agreements made in the employment contract and on the length of employment service as below:

  • Up to 2 years: 4 weeks’ notice (per the 15th or last day of the month)
  • 2 to 4 years: 1 month’s’ notice
  • 5 to 7 years: 2 months’ notice
  • 8 to 9 years: 3 months’ notice
  • 10 to 11 years: 4 months’ notice
  • 12 to 14 years: 5 months’ notice

For employees who have been with a company for an extended period, longer notice periods may apply. These extended notice periods are typically stipulated in collective bargaining agreements or individual employment contracts.

Termination notice period

There are specific legal provisions that govern the immediate termination of employment contracts in cases where an employment relationship is terminated without notice. Grounds for immediate termination include serious misconduct, breach of contract, or other justifiable reasons. Employers must adhere to legal requirements when terminating without notice to avoid potential legal disputes and liabilities.

Severance pay in Germany

Employers in Germany provide severance pay if an employment agreement is terminated suddenly, without prior notice. In such cases, the employer provides severance pay equivalent to what the employee would have earned if proper notice had been given.

If the reason for termination is caused by the company’s operational changes, the employer must provide severance payment, generally two weeks of regular salary payment for each year of service.

Probation period in Germany

In Germany, the probation or trial periods, known as “Probezeit,” are generally 6 months, although they can be shortened through applicable collective bargaining agreements or employment contracts. This serves as a trial period for both employers and employees to assess the employment relationship.

During the probationary period, either party can terminate the employment relationship with a shortened notice period. The two types of notice periods during probation are as follows:

  • Two weeks during the first three months of the probation period.
  • Four weeks after three months of the probation period.

Yet, these notice periods during probation can still vary based on specific agreements outlined in employment contracts or collective bargaining agreements.

Employee termination in Germany

The termination process in Germany differs depending on the employment agreement and collective agreement, as well as the type of contract and reason for termination. 

What is a wrongful termination? 

Wrongful termination, also known as “unfair dismissal” or “unjustified termination,” refers to the termination of an employment contract that is in breach of German labour laws. 

In Germany, termination must be based on valid grounds and follow proper procedures to be lawful. There are two types of termination recognised in Germany: ordinary termination and extraordinary termination. 

  • Ordinary termination: This termination occurs when either the employer or the employee terminates the employment relationship within the prescribed notice period. For ordinary terminations, employers must follow the statutory notice periods outlined in the German Civil Code (Bürgerliches Gesetzbuch, BGB) or any applicable employment contracts or collective bargaining agreements.
  • Extraordinary termination: This type of termination is immediate termination and without notice. Extraordinary termination is only permissible when there are serious grounds that make continuing the employment relationship impossible or unreasonable. Some examples of valid grounds for extraordinary termination include severe misconduct, repeated breaches of contractual obligations, or criminal actions.

Wrongful termination claims may arise when an employment contract is terminated without valid grounds or proper procedures. Employees who believe they have been wrongfully terminated can bring legal action against their employer and seek reinstatement or compensation for damages suffered as a result of the termination.

Best practices to reduce the risk of wrongful termination

To minimise the risk of wrongful termination claims, employers in Germany should adhere to the following best practices:

  • Familiarise yourself with German labour laws: Stay updated on current labour laws, including the termination process, notice periods, and valid grounds for termination. This knowledge will help you ensure compliance with legal requirements when terminating an employee.
  • Document performance and conduct issues: Maintain clear and accurate records of employee performance evaluations, disciplinary actions, and any relevant incidents. This documentation can provide support for termination decisions and be essential in the event of any legal disputes.
  • Provide employees with proper feedback: Regularly communicate with employees about their performance, conduct, and expectations. Offer opportunities for improvement and provide them with constructive feedback. This can help address potential issues before they escalate and support the decision-making process if termination becomes necessary.
  • Follow proper termination procedures: When terminating an employee, ensure that you follow the correct procedures and provide written notice of termination. Be prepared to explain the reasons for termination and act in compliance with any contractual or legal requirements.
  • Seek legal advice: This is particularly true for complicated cases. If you have concerns about terminating an employee or are unsure about the legal requirements, it is advisable to consult legal counsel experienced in German labour law or a global employment solution provider like CXC. They can provide guidance specific to your situation and help ensure compliance with local labour laws and regulations.

Letter of termination of employment

In Germany, employers are not explicitly required by law to provide a written letter of termination to employees when ending an employment contract. However, it is common practice and advisable for employers to issue a written notice of termination to ensure clarity, document the decision, and provide the employee with a formal record of the termination. The termination notice can be delivered personally, placed in the employee’s mailbox, or sent by registered mail.

Verbal termination notices or informal methods like text messages or emails are legally invalid. Employers must provide a written termination letter to ensure compliance with legal requirements and avoid potential disputes. The letter should clearly state the reasons for termination, the effective date of termination, and any applicable notice period or severance pay details.

In addition, employers should be aware of any additional obligations that may arise during the termination notice period. These obligations may include providing employees with paid time off for job interviews or giving them the opportunity to use accumulated vacation days before the termination becomes effective. Compliance with such obligations demonstrates fairness and goodwill, fostering positive employee relationships even during periods of transition.

Post-termination restraints in Germany

To protect your business interests, employers can consider implementing post-termination restrictions. In Germany, post-termination restraints must be in writing. While non-compete agreements are not specifically regulated by law, it is common practice in Germany for such restraints to have a duration ranging from two to five years.

Here are some key considerations that employers must be aware of:

  • Express agreement: Post-termination restraints, including non-compete agreements, must be expressly agreed upon between the employer and employee. While restrictions on competition during ongoing employment relationships are mandated by law, post-termination restrictions require explicit agreement to be enforceable in Germany.
  • Reasonableness: When drafting post-termination restraints, employers should ensure that the limitations imposed are reasonable in duration, geographical score, and the nature of the activities restricted. Overly broad and excessively long restraints may be deemed unenforceable.
  • Consideration: To enhance the enforceability of post-termination restraints, German law requires employers to provide adequate consideration to employees in exchange for accepting these limitations. This consideration could take the form of additional compensation or other tangible benefits.

Meanwhile, garden leave is common for senior employees. For non-compete restrictions, it’s usually limited to six to 12 months, and legally cannot exceed two years. There’s a requirement to compensate the employee with 50% of their wages during this non-compete period.

Restrictions on soliciting customers

While restrictions on customer solicitation are allowed, they are subject to specific and narrow circumstances.

Restrictions on soliciting employees

Restrictions on hiring employees from a particular business are generally not enforceable. However, if the solicitation of employees is related to illegal poaching, such restrictions may be permissible.

Waivers in Germany

Waivers must meet specific requirements to be considered valid and enforceable. These requirements include the clear and unambiguous agreement of both employers and employees, the absence of coercion, and the provision of fair consideration to the employee. Seeking legal guidance can help employers ensure that waivers adhere to these requirements. Certain rights and protections granted by labour laws in Germany cannot be fully waived through employment contracts. This is to ensure that employees are not disadvantaged or exploited. Employers should familiarise themselves with the relevant laws to ensure compliance and avoid any potential disputes.

Transfer of undertaking regulations in Germany

In Germany, when an undertaking, business, or part of a business is transferred to a new owner through an agreement, employee rights are protected under Section 613a of the German Civil Code. 

This provision applies to all existing employment relationships, including full-time, part-time, indefinite-term, and fixed-term employment, as well as apprentices, executive employees, and employees seconded outside of Germany. 

Under Section 613a, employees automatically transfer to the new employer at the time of the business transfer, maintaining their existing terms and conditions of employment. This ensures that employees’ rights and obligations remain intact despite the change in ownership or undertakings. 

These regulations provide critical protections for employees during business transfers to protect their rights and maintain employment continuity in the event of organisational changes. 

When undergoing a transfer of undertakings in Germany, employers should keep the following factors in mind: 

  • Consultation and communication: Employers should engage in meaningful consultations with employee representatives or works councils, if applicable, regarding the transfer.
  • Due diligence: Conduct thorough due diligence on the legal, financial, and operational aspects of the transfer. This includes reviewing employment contracts, assessing potential liabilities, and ensuring compliance with employment laws and regulations.
  • Obligations under EU directive: Employers should be aware of the European Union Directive on Transfers of Undertakings, as it sets out the requirements and protections for employees during business transfers. Germany has implemented this directive into national law through Section 613a of the German Civil Code.
  • Seek legal advice: It’s best to consult with employment law specialists to ensure compliance. Legal experts or global employment solution providers like CXC can provide guidance specific to your situation and help mitigate the risks associated with the transfer.

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Speak to our team for valuable insights and expert guidance to optimise your international expansion journey.

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