Employment Law for Employers

Yes. In its decision of 13 September 2022 (1 ABR 22/21), the Federal Labour Court held that employers are already obliged under existing occupational health and safety law (Section 3 ArbSchG) to record the start, end and duration of daily working time, including overtime. Trust-based working time remains possible, but the hours must be objectively recorded. The introduction of an electronic system is subject to works council co-determination. A statutory reform of the Working Time Act has been announced; the recording obligation already applies now.

False self-employment (Scheinselbständigkeit) arises where a purported freelancer is in fact bound by instructions and integrated into the business like an employee (Section 7 of the Social Code IV). The German Pension Insurance determines the status in the procedure under Section 7a. If dependent employment is assumed, retroactive social security contributions may be due for up to four years, and up to 30 years in cases of intent, together with personal liability of management and possible criminal liability. We go through contracts and actual practice in advance and put the cooperation on a sound footing.

Employer-of-record models operate close to licensable personnel leasing (AÜG). The Federal Employment Agency adjusted its position several times in 2025: under the current guidance, purely remote deployment from abroad does not require a licence. As soon as a domestic connection is added, such as business trips or mobile work in Germany, unlawful personnel leasing may arise, with the consequence that an employment relationship with the host company is deemed to exist. We assess the specific model and design a viable alternative.

For skilled workers from third countries, the route runs through a residence title for employment. The key instruments are the EU Blue Card for academic professionals above an annual salary threshold, the points-based Opportunity Card for job-seeking within Germany, and the fast-track procedure for skilled workers via the immigration authority. What matters is the right sequence of qualification recognition, visa or residence title and employment contract. We guide employers through the procedure and draft the contracts on a legally robust basis.

The Act applies where a business regularly employs more than ten employees and the employment has lasted longer than six months. Every ordinary dismissal then requires a reason: operational, conduct-related or personal. In small businesses dismissals are less restricted, although general limits such as the prohibition of victimisation and special protection for pregnant employees, severely disabled staff and works council members still apply.

The statutory basic notice period is four weeks to the 15th or to the end of a calendar month. It increases with length of service, up to seven months to the end of a month. Employment and collective agreements may provide for different periods; during probation, two weeks apply. Written form and provable receipt are equally decisive for a valid dismissal.

There is no general statutory entitlement. In practice, severance arises from social plans, separation agreements, court settlements or the statutory offer for operational dismissals under Section 1a of the Dismissal Protection Act. Half a gross monthly salary per year of service is the established reference point; depending on litigation risk, settlements are reached well above or below it. With separation agreements, a possible blocking period for unemployment benefits has to be considered.

The works council must be heard before every dismissal; otherwise the dismissal is invalid. The hearing periods are one week for ordinary and three days for extraordinary dismissals. Larger measures additionally involve a reconciliation of interests, a social plan and, where thresholds are met, a mass dismissal notification to the Federal Employment Agency.

For work performed in Germany, the mandatory parts of German employment law apply regardless of the choice of law in the contract, including minimum wage, working time, holiday and dismissal protection. Registration for social security, wage tax withholding and, depending on the country of origin, work permit and visa procedures come on top. Employment is possible without a German subsidiary; the employer duties remain in place.

Before the assignment, the applicable employment law, social security coverage and the contractual basis need to be settled. Within the EU, the A1 certificate keeps the employee in the German social security system; local minimum working conditions apply in the host country. For longer assignments, a secondment agreement or a local contract is advisable, aligned with tax and immigration law.

Managing directors are generally not employees: the Dismissal Protection Act does not apply to them as a rule, and the ordinary courts rather than the labour courts have jurisdiction. The service agreement therefore has to be precise on term, remuneration, the link to the corporate office, post-contractual non-compete covenants and D&O insurance. Depending on the constellation, individual protective rules may still apply; the drafting is decisive.

No employer has to set up a works council on its own initiative, but from five permanent employees who are eligible to vote the staff can require one to be elected. The employer may neither prevent nor obstruct that election, and being the subsidiary of a foreign group makes no difference. Once a works council exists, its co-determination rights also apply to decisions taken by the foreign parent company. What foreign parents need to know is set out in our article on the works council in Germany for foreign employers.