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Termination Processes in Germany

Companies that operate under ‘at will’ labor policies may be surprised to find that many countries enforce strict termination rules for employees.  Germany protects employees’ rights by defining the conditions for termination, notice periods, and when there is protection from termination.

This guide will outline the basic termination and notice rules so that you can avoid non-compliance with Germany’s labor laws.

Termination by Agreement in Germany

When the end of employment is mutually agreed upon, that is the easiest for both parties.  In Germany, this is known as ‘termination by agreement’, which must be in writing and signed by both the employer and employee.

The agreement should contain:

  • Date of termination
  • Severance payments
  • Effect on company pension
  • Non-competition and confidentiality
  • Return of company property
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Termination with Cause in Germany

Termination with a cause is allowed for operational reasons, misconduct or employee personal reasons.  Where there is the justified cause, notice is required depending on the length of service.  For less than two years’ service, notice is either to the 15th or end of a calendar month, meaning it will always be at least two weeks.

After two years of service, notice is one month, effective to the end of a calendar month.  There is a sliding scale used for up to 20 years of service, which requires 7 months’ notice.

Terminations for serious misconduct do not require notice.

Protection Against Dismissal

Companies with fewer than 10 employees don’t have to follow any dismissal protection guidelines.  Even if a company has fewer than 10 staff, employees on maternity leave, paternity leave, or those with disabilities cannot be terminated without an exceptional reason.

If a company has more than 10 employees, there will be some statutory protection against dismissal, if the employee has at least 6 months of service.  First, the termination must be ‘socially justified’, meaning for personal reasons such as illness, conduct related, or based on personal or operational grounds.

Conduct related:  A breach of contractual duties by the employee, after receiving at least one warning.

Personal grounds:  Long employee absences due to illness that undermine the employer’s need for services.

Operational grounds: Employer-based decision to reduce staff or eliminate the position, resulting in no other job vacancy to be filled.

Client Case: Terminating a 6-Month Renewable Contract

One of our clients with employees in Germany wanted to know the rules for terminating a 6-month renewable contract.  We let them know that unless the contract was renewed prior to the end date, no notice is required and the contract would be terminated automatically.  The only requirement would be to pay out any accrued leave entitlements.

Do you need more information about Germany?

If you are new to hiring in Germany, you might have other questions such as:

Is there statutory severance in Germany?

Can employees contest a termination in a legal tribunal?

Can notice be paid in lieu to the employee?

These are the types of questions from our clients that we respond to regularly, to ensure they are compliant and up to date with foreign payroll, entitlement and labor rules.  We make international employment simple.

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Looking to hire an employee in Germany? Get in touch.

 

The information in this article is subject to changes in local legislation.

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