Arbeitsvertrag: What employment contracts need to contain in Germany

Contents:

• Purpose of an employment contract
• Drafting employment contracts
• Mandatory content per the Verification Act
• Key clauses of a German employment contract
  • Contract duration
  • Job description
  • Right to transfer 
  • Working hours
  • Remuneration
  • Notice period
  • Incapacity for work 
  • Secondary employment
  • Confidentiality
  • Cut-off period
  • Non-compete clause
  • Severability clause
• Create an employment contract for part-time work
• Prohibited clauses
• DIY employment contracts
• Contract templates

 

 

What is the purpose of an employment contract

An employer and employee enter into an employment contract to establish the respective rights and obligations of the relationship.

The legal framework of the contractual employment relationship is the Civil Code (§§ 611-630 BGB).

For the employment contract to be legally valid, it must contain all the minimum necessary clauses and comply with the statutory regulations.

Important: Contractual errors are always considered in favour of employees, as they didn’t draft the contract.

This article provides you with a reliable guide to help you draw up and check your first employment contract.

What you should know about drafting employment contracts

What an employment contract should contain is clearly defined by law.
Getting this wrong can cause you big legal headaches in your employment relationships.

There are no rules about an employment contract’s format – it can even be verbal for the first four weeks. But, it’s far less risky to use a legally compliant document right from the start. Better safe than sorry!

Before your start

You should always leave complex contracts to a professional. Exotic agreements often don’t hold up in legal disputes because it’s harder to make them compliant.

If you’re unsure how to draft the employment contract, seek the help of an employment law specialist.

 

What must a work contract legally contain?

Section 2 of the Verification Act (Nachweisgesetz) sets out what an employment contract must legally contain:

• Name and address of the employee
• Name, address and manager of the employer
• Beginning of the employment relationship
• Place of work or reference to changing places of work
• General information on collective agreements and company agreements applicable to the employment contract
• Signature of employer and employee with place and date

 

Key clauses of a German employment contract

The most consequential (yet tricky) part of drafting an employment contract is writing its clauses. These are the parts that describe the rights and obligations of the employer and the employee.

Ensure you consider all possibilities to avoid conflicting interpretations, making you vulnerable to being sued.

To help guide you, we’ve set out the statutory clauses in the order in which it appears in standard contracts.

Important: Below, the text is in English to give you a clear idea of what an employment contract in Germany should contain. But, if you plan on entering into a contract in Germany, make sure you have a German version as well.

1 Contract duration (Vertragsdauer)

One of the first clauses you encounter when drawing up an employment contract is the duration of the contract.

Fixed-term contracts differ from open-ended contracts. What both have in common is that the date of commencement of work is set first.

Here, state whether there is a probationary period and, if so when it ends.

There are differences for the end of the contract: Fixed-term contracts expire without the need for termination. Without any end-of-contract clause, your employment contract is open-ended.

Tip: If you draw up a fixed-term employment contract, make sure that it has demonstrable reasons for the time limit, for example maternity leave cover or a fixed project period. Fixed-term employment contracts without a concrete reason are only possible under certain conditions.

 

2 Job description (Tätigkeitsbeschreibung)

It is possible to state exactly what work the employee has to do in the employment contract.

But, it is advisable not to fill in this area in too much detail, as you restrict what kind of work you can assign to your employee.

Only including a rough job description and not being overly rigid is the way to go for most employers.

3 Transfer (Versetzung)

The transfer clause always makes sense if you want to keep open the possibility of employing your employee at another location or in another department.

However, according to Section 307 of the German Civil Code (BGB), the employee must not be disadvantaged by the transfer.

Tip: You must point out the transfer clause in the contract otherwise it’s not legally effective.

4 Working hours (Arbeitszeit)

The clause on working hours is part of every reasonable employment contract. It specifies how many hours your employee has to work per week.

In addition, you designate break times and state that this is not part of ‘working hours’.

5 Remuneration (Arbeitsentgelt)

This section contains the agreements on wages or salary and other remuneration. This includes the monthly gross salary is stated in this section, as well as the time of payment and the entitlement to special payments.

Should you waive the clause on remuneration, you’ll usually pay your employee the applicable collectively agreed wage or the employee can claim this.

6 Notice period (Kündigungsfrist)

A contractual notice period regulates the conclusion of an employment relationship. The legislator provides for a minimum of four weeks’ notice.

However, the statutory period is extended depending on the duration of the employment relationship. You can contractually agree with your employee longer notice periods for ordinary termination than those prescribed by law.

Additionally, you should fix the notice period within the probationary period in writing in the contract. If you don’t specify any notice periods, the statutory regulations automatically apply.

7 Annual/holiday leave (Urlaub)

When you draw up the employment contract, the holiday leave entitlement should never be forgotten. If your employees work a 5-day week you need give them at least twenty working days are required.

Of course, you may negotiate deviating agreements with the employee. You should also find an arrangement for carrying over the leave to the next year.

Tip: You can set a time limit for the transfer of remaining leave to the next calendar year. Many companies can give vacation days an expiry date of 31 March.

8 Incapacity for work (Arbeitsunfähigkeit)

If your employee is unable to work due to illness or accident, you can specify in the employment contract when he or she must report this to the company. You can also make provisions about what rights you have as a company in the absence of a certificate of incapacity for work.

9 Secondary employment (Nebentätigkeit)

If your employees want to have a side job (or business), you can make it clear in the contract that you will be informed of this. If the interests of the company are no longer protected, you can even exclude certain secondary activities in such a case.

10 Confidentiality (Geheimhaltung)

To ensure that employees don’t disclose confidential information to third parties, a confidentiality clause in the employment contract is common.

Make sure that this also includes the time after the employment relationship has ended.

Note: In jobs with special responsibilities (management positions, responsibility for sensitive data or trade secrets, strong competition, etc.), clauses on penalties in case of breach of contract are common.

11 Cut-off period (Ausschlussfrist)

To prevent any special payments such as paid sick leave from continuing indefinitely, you should include a corresponding time limit when drawing up the employment contract. In such a case, any claims become ‘time-barred’ after the time period written in the contract.

12 Non-compete clause (Wettbewerbsverbot)

The non-competition clause under section 241(2) BGB should be part of the employment contract. This enables you to prevent your employees from working for your competitors for the duration of the employment relationship.

Tip: A non-competition clause can even take effect beyond the employment relationship. To do so, you must ensure that the period is a maximum of two years and that each month is remunerated with at least half of the previous salary.

13 Severability clause (Salvatorische Klausel)

A severability clause means that a contract continues to exist if individual provisions of the contract are changed, deleted or invalidated. This means that you do not have to draw up a new employment contract if a change occurs.

 

Create an employment contract for part-time work

Drawing up an employment contract for part-time employees is not much different from the version for full-time employees. For example, weekly working hours and holiday entitlement must be adjusted. The part-time model as such does not have a legal fixation requirement, which is why you are free to create it. Here are some examples:

• Fixed daily working hours (reduced)
• Irregular daily working hours
• Fixed full working days
• On-call work
• Job sharing
• Working from home (Home Office)

However, you don’t have to specify the part-time work model in the employment contract nor working hours. This has the advantage for both sides that the working hours can be flexibly adjusted without you having to draw up a new employment contract.

It is also advisable to put a provision about overtime in writing. Here, for example, you can specify the maximum number of hours of overtime. This is particularly relevant for part-time models, as otherwise there may be an automatic transition to full-time work.

Tip: Compensation for unsolicited overtime can be excluded by clause in the case of part-time work.

Prohibited clauses

Want to draw up an employment contract correctly? Then make sure you avoid common banned clauses that make an employment contract contestable. The following clauses must not be included in your employment contract under any circumstances:

Overtime (Überstunden)	“Overtime is not remunerated and is already included in the salary”.	This clause is invalid for full-time contracts because it violates § 3 of the Working Hours Act and § 612 of the German Civil Code (BGB), which stipulate that overtime must be remunerated or compensated by time off.
Further education and training (Fort- und Weiterbildung)	“Costs for further education and training must be repaid in full after the termination of the employment relationship”.	Since further training benefits the company to the same extent, the costs for it may not be demanded back. The only exception is if the employee resigns directly after a training course.
Maternity protection (Mutterschutz)	“The employee will refrain from becoming pregnant for four years, otherwise the employment relationship will be terminated.”	According to § 138 BGB and § 9 MuSchG, an employer may not interfere in the private affairs of employees. Contractual clauses like this are not valid.
Allowances (Zulagen)	“Non-agreed voluntary benefits to employees may be revoked.”	This refers to allowances such as Christmas bonuses or bonuses that the employee might regard as a company practice. Such a clause is legally valid, but it must be much more specific than in this example.

Tip: Should you want to protect yourself from a lawsuit regarding the company practice, it is advisable to print out the voluntary reservation on the respective payslip and to name the allowance in detail.

 

DIY employment contracts: Small cost. Big risk

Creating a regular employment contract does not involve high costs if you do it yourself. The only cost factor is the time you have to spend on research and drafting.

When it comes to drafting the contract, you can use template formulations that you can take from the relevant technical literature and put together. For example, you can bit-by-bit and put together a draft by working through the mandatory clauses for employment contracts described here.

Weigh up the risks

However, there are risks in self-drafted employment contracts that can ultimately cause the costs to skyrocket. If you make false statements or use inadmissible clauses, the employment contracts may be invalid.

Your employees can file a lawsuit against this and demand money from you in court. You may have to pay out several months’ salary of the respective employee, not to mention possible lawyer’s fees and court costs.

As a general rule, the more cost-intensive the employee and the more complex the contents of the contract, the more legal security you need. So always weigh up whether you should draw up the employment contract yourself or take the safe route and hire a lawyer for this task. A middle ground is often the creation of a model contract from a professional, which you can easily adapt for other employees if necessary.

 

Create an employment contract online: When are templates useful?

If you just need a straight forward you can create your employment contract online. There are lots of ready-made contracts you can use that only need the company and employee data. Templates are a popular choice, especially for mini-job employment contracts.

However, if you need an employment contract with special clauses then an online template won’t be much help. This is the case if you have special general agreements in your company or if you are assigned to a special industry in which many additional clauses are necessary.

Also bear in the mind that templates on the internet is not always up to date, which means there could be errors. As a rule, the providers do not assume liability for legal errors.

If a contract template doesn’t match your requirements, seek help from a specialist lawyer.

 

 

Get a lawyer to draw up an employment contract

If you are unable to draw up the general employment contract for your company get assistance from a lawyer.

A legal professional can help you create an employment contract or make it from scratch with the information you provide.

Specialised lawyers for labour law in particular know all the legally compliant formulations – and the pitfalls that can arise from a poorly formulated employment contract. Also, a lawyer is always up to date with the law.

When drafting your employment contracts, a lawyer can incorporate all company agreements in a legally secure manner and tailor the contract specifically to your industry. In this way, you can specifically prevent legal disputes.

Costs of a professional employment contract from a lawyer

Creating a regular employment contract does not involve high costs if you do it yourself. The only cost factor is the time you have to spend on research and drafting.

When it comes to drafting the contract, you can use template formulations that you can take from the relevant technical literature and put together. For example, you can bit-by-bit and put together a draft by working through the mandatory clauses for employment contracts described here.

 

 

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