Understanding German Labor Laws in 2023: A Comprehensive Overview

Types of employment contracts in Germany

There are several types of employment contracts in Germany, including:

Fixed-term contract: A fixed-term contract is an employment contract that is valid for a specific period of time. This type of contract is common for temporary or seasonal work.

Part-time contract: A part-time contract is an employment contract that involves working fewer hours than a full-time employee. This type of contract is common for employees who have other commitments, such as studying or caring for family members.

Full-time contract: A full-time contract is an employment contract that involves working the standard number of hours per week, typically 40 hours.

Freelance contract: A freelance contract is an employment contract for self-employed professionals who work on a project basis.

Working hours in Germany

The standard working week in Germany is 40 hours. Overtime is allowed, but must not exceed 10 hours per week or 48 hours per month. Employees are entitled to a minimum of 11 hours of rest between working days

An important change to German labor law for 2023

In December 2022, the German Federal Labor Court ruled that employers must record the working time of employees completely and comprehensibly. This decision clarifies that employers have an obligation to comprehensively track working hours to ensure compliance with regulations for the protection of employees and workers​.

Minimum wage in Germany

The minimum wage in Germany is currently set at €12 per hour. This applies to all employees, including part-time and temporary workers.

Employee benefits in Germany

Employees in Germany are entitled to several benefits, including:

Paid Leave: Employees are entitled to a minimum of 20 days of paid leave per year. In December 2022, the Federal Labor Court ruled that statutory vacation entitlements will only be subject to the regular three-year statute of limitations if the employer has previously informed employees of their existing vacation entitlements and the impending expiration of paid leave entitlements. This also applies to the forfeiture of paid leave for employees who have been on long-term sick leave.

Sick Leave: Employees are entitled to paid sick leave if they are unable to work due to illness. Starting January 1, 2023, the paper certificate of incapacity for work, known as the “yellow certificate,” will largely be replaced by electronic notifications from statutory health insurance funds to employers. However, employees with private health insurance or certain other circumstances will still use the previous paper certificate procedure.

Health Insurance: All employees are required to have health insurance, which is typically provided by the employer.

Pension Insurance: Employers are required to provide pension insurance for their employees.

Termination of Employment in Germany

Employers are required to provide notice to employees before terminating their employment. The notice period varies depending on the length of service and is typically between four weeks and seven months.

Other changes to German labor law for 2023

• Whistleblower Protection Act: Germany has implemented the EU Whistleblower Directive through the Whistleblower Protection Act, which will enter into force in mid-May 2023.
• Supply Chain Care Obligations Act: Effective January 1, 2023, German companies must ensure compliance with human rights and environmental protection within their supply chains. Companies employing at least 3,000 people in Germany are initially affected, with the threshold dropping to 1,000 regular employees as of January 1, 2024. Companies must introduce a risk management system to identify, evaluate, and prioritize risks within their supply chains. A human rights representative may be appointed on a non-binding basis. Violations of the obligations under the Supply Chain Care Obligations Act can result in fines of up to EUR 100,000.00 or more. Smaller companies that are suppliers to larger companies may also be indirectly affected by the law​.
• Electronic Work Certificates: Starting January 1, 2023, employment certificates, EU employment certificates, and secondary income certificates must be transmitted digitally to the Employment Agency at the request of the employee. This digitalization process aims to improve efficiency in the issuance and handling of work certificates​.
• Skilled Worker Immigration: The German government is considering modernizing the Skilled Worker Immigration Act to make it easier for foreign specialists from non-EU countries to work in Germany and offer them long-term prospects. The proposed changes include allowing experienced professionals to work in their respective industries without a degree recognized in Germany and lowering the salary threshold for obtaining an EU Blue Card. These changes aim to attract skilled workers to Germany and enable their families to join them.
• Cross-Border Home Office: A framework agreement has been reached to facilitate the provision of work from a home office located in another country. Employees can perform up to 40% of their work from a home office abroad without being subject to the social security regulations of their country of residence. The agreement will formally enter into force on January 1, 2023, but will not take effect until July 1, 2023, due to COVID special regulations that continue to apply until June 30, 2023​.

Please note that this article provides an overview of key aspects of German labor laws and should not be construed as legal advice. For specific legal guidance, it is advisable to consult with a qualified legal professional knowledgeable in German labor and employment law.

We hope you found this comprehensive overview of German labor laws helpful, and we encourage you to explore further to stay informed about the ever-evolving landscape of employment regulations in Germany.

Hiring contractors in Germany? Panther can save you a ton of time

If you’re hiring contractors, you’re probably spending too much time on their payroll, contracts, and tax documents. Which is why we built Panther, which saves you 90% the time you spend on contractor paperwork each month.

With Panther, you can compliantly hire your contractors in 150+ countries, onboard them in minutes, and pay them all at once (in a click). It’s global contractor payroll, finally simplified.

Sound interesting? Click here to watch a 4-minute product demo and see the platform firsthand (without ever having to book a lengthy product demo call).