What Foreign Employers Need to Know About German Labor Law

German labor law is renowned for its comprehensive employee protection provisions and complex regulations. For foreign employers operating in Germany, understanding the fundamental aspects of German labor law is crucial to minimize legal risks and ensure a successful collaboration with German employees.

1. Employment Contract

• Essential Content: Employment contracts should be concluded in writing and include at least details on the workplace, tasks, working hours, remuneration, vacation, and notice period. An indefinite employment contract can also be concluded in electronic form under certain conditions.
• Recommendation for Foreign Employers: Ensure all employment contracts are in the German language (additional language versions are possible, but the German version is binding) and in written or, where permissible, electronic form to avoid disputes.

2. Minimum Wage and Remuneration

• Essential Content: The statutory minimum wage in Germany currently amounts to EUR 12.82 per hour (as of January 1, 2025). Exceptions only apply to certain groups, such as trainees.
• Recommendation for Foreign Employers: Regularly check the current minimum wage level and ensure all employees are remunerated accordingly.

3. Working Hours and Rest Periods

• Essential Content: Daily working hours must not exceed 8 hours, with a possible extension to 10 hours under certain conditions. Adequate rest periods must be provided (at least 11 uninterrupted hours of rest in every 24-hour period). For working hours exceeding 6 hours, employees must take at least a 30-minute break. For working hours exceeding 9 hours, the break time extends to at least 45 minutes. Moreover, employers are obligated to systematically record employees’ actual working hours, which can also be done by the employee, provided the employer offers a reliable time-tracking system. This documentation must record the start and end times of work, as well as break times. It is advisable to use digital programs to record working hours to fulfill these requirements.
• Recommendation for Foreign Employers: Implement an effective and digital time-tracking system to objectively, tamper-proof, and legally document and prove compliance with working hour regulations.

4. Protection Against Dismissal and Notice Periods

• Essential Content: After a waiting period of 6 months and provided at least 10 full-time employees are employed in the establishment at the time of dismissal, the general protection against dismissal under the Employment Protection Act (KSchG) applies. For calculating the number of employees in the establishment, the following applies: an employee working more than 30 hours a week counts as a full employee; one working more than 21 but less than 30 hours a week counts as 0.75 employees; and one working up to 20 hours a week counts as half an employee. The statutory notice period varies depending on the length of service, starting at 4 weeks to the 15th or end of a month.
• Recommendation for Foreign Employers: Consider the specific notice periods and requirements to ensure legally effective terminations.

5. Data Protection in the Workplace

• Essential Content: The processing of employees’ personal data is subject to strict regulations. A transparent data protection policy and compliance with the GDPR are mandatory.
• Recommendation for Foreign Employers: Establish a clear data protection policy and inform your employees about data usage.

6. Key Differences Between Foreign and German Employers

• Essential Content: Foreign employers with staff in Germany must fulfill the same social security obligations as domestic employers, including contributions to health, pension, and unemployment insurance. This applies even without a physical presence or a permanent establishment in Germany; registration with the relevant authorities and regular filings are still required. Unlike German employers, foreign employers are generally not obligated to withhold wage tax (Lohnsteuer). Instead, employees must declare and pay their income tax via their annual tax return. Additionally, foreign employers without a German office may need to appoint a local representative to receive official communications and have a mailing address.
• Recommendation for Foreign Employers: Ensure compliance with social security regulations, inform employees about their tax responsibilities, and assess whether appointing a local representative is necessary for effective communication with German authorities.

German labor law offers comprehensive protection for employees, which can pose a challenge for foreign employers. By adhering to the above points, legal risks can be minimized, and a successful collaboration with German employees can be fostered.

We Recommend: For specific questions or when implementing labor law measures, consult a German employment law attorney to best cover your individual needs.