Signing a new employment contract in Germany? Read this before.

Things to check before you sign your contract

Disclosure: not written by ChatGPT! Bookmark this page because sooner or later, you or someone close to you will be signing a new employment contract in Germany.

Executive summary or three things to remember:

  1. Look for provisions in your contract that are important to you and have the guts to fight for them.
  2. Not every clause in your contract that restricts you is valid and enforceable – find out which clauses you need to worry about and which you don’t.
  3. Don’t sign a contract you don’t fully understand!

Jean and his perfectionism strike again! We have previously tackled things to take care of if you intend to start a side business, and we are back with one of the most important parts of your employment: your contract. We went for a FAQ format again and prepared 17 questions in four chapters. 

I’m not gonna lie: I did my best to keep some answers shorter, but when discussing things with lawyers, it’s hard to avoid the usual: “Well, it depends…” And rightly so–law and its interpretations are complex. 

I knew you could negotiate your salary and variable compensation, but you could at least try to negotiate vacation days and overtime pay. I wish I had known it earlier and that I could negotiate from the position of power.

🥳 On top of great answers, Jean is also offering a reduced rate for the initial consultation for Handpicked readers (10€), subscribers of more than two months (30€) and supporters (50€). Mention “Handpicked” along with your status. You better call Jean. In German, English and French.

These are the four chapters this time:

If you have any further questions regarding the topic, approach Jean, and if you have suggestions about the article, approach me. Now, let’s dive in!

Contract essentials and negotiation

1. Do I need a written contract?

Most of the time, no. An oral employment contract is just as valid as a written one. However, your employer is legally bound to provide you with a written and wet-signed summary of the terms of your contract.

For certain types of employment, the contract needs to be wet-signed. This is the case for term-limited contracts but also for post-contractual non-competition clauses. Failure to meet the “written form” requirement can lead to the clause being unenforceable. For example, if a term limitation of your employment is not wet-signed, you are technically on an unlimited contract (you’ll have to enforce it).

2. What are the clauses I need to check?

Read the entire contract carefully. If a clause is not completely clear or causes doubts, raise it. Focus on provisions likely to carry much weight in your employment relationship. 

This usually includes:

  • Overtime and overtime pay: Does your contract require you to work overtime if needed? Is overtime compensated? If so, how? Is there a flat amount of overtime covered by your base salary? Will you be compensated in money or time off?
  • What is the notice period for you to resign? What is the notice period for your employer? Does your contract have a probation period?
  • What are the benefits, bonuses and other variable parts of the compensation package?
  • How much paid time off do you get?
  • How is the work-from-home organized?

3. What if some of these clauses are not in the contract? 

A clause in the contract by your employer indicates that your employer seeks to deviate from the law at your expense.

Unless expressly stipulated in your employment contract, the default statutory provisions apply. For example:

  • If no notice periods are stipulated in your employment contract, the standard statutory notice periods of four weeks to the 15th and end of a month apply – for the employer, the notice periods increase with the duration of the employment relationship. 
  • If your employment contract does not provide for a fixed term, the employment relationship will be regarded as indefinite. 
  • If your employment contract does not include a non-competition clause, the statutory regulation remains that you may not compete with your employer for the duration of the employment relationship. 
  • If no specific probationary period has been agreed upon, you can assume that no probationary period applies to your employment relationship. 

4. Does it make sense to negotiate the clauses?

A contract is an agreement both sides have to agree on, so of course, it is in your best interest to negotiate every contract clause. In practice, the employer provides their template and tries to open as little room for negotiation as possible. 

The success of your negotiations hinges on how strong your position is. Think of it like a game of tug of war: the stronger your grip and stance, the better your chances of getting your concerns addressed and your needs met.

Employers are usually prepared to discuss salary and variable compensation. Once you have agreed on these, why not negotiate overtime pay, vacation or any other issue you value? 

5. This clause sounds fishy. Can they really do that?

Chances are the contract you are being presented has not been drafted exclusively for you. Employers usually have their interests in mind when drafting contracts.

The law is well aware of that and has established a mechanism that ensures that employers do not abuse their position of power. 

In Germany, when it comes to employment contracts, certain rules apply that can’t be broken. Think of these rules as a safety net set by the law and past court decisions. If a contract tries to bend these rules too far, it steps over a line where it’s no longer valid. In such cases, the standard legal rules automatically kick in. 

So, if a part of your contract crosses this line, don’t worry about trying to change it – it’s already considered non-binding, and the default legal protections will apply. We call these clauses smirking clauses: smile and sign.

Whether a clause is valid and enforceable or not is not always clear-cut; it always depends on several factors and the general context of the contract. This makes it difficult for employers to gauge whether a certain provision crosses that line or not. By law, the risk is on them.

This is why having your clauses checked by a professional is a good idea.

6. I have a non-compete clause in my contract. Is it enforceable?

We need to distinguish between two states: during and after the employment relationship. 

While employed, you are subject to a non-competition obligation–you are not allowed to work for a competitor or become your employer’s competitor yourself. For more on potential side businesses, check this article. Even if the non-compete clause isn’t expressly defined in your contract, it always applies and can be, under labour law, sanctioned and even may justify a termination without notice.

After your employment has ended, the post-contractual non-competition clause (Nachvertragliches Wettbewerbsverbot) applies. It prohibits you from working for competitors of the former employer. But it only applies if it has been expressly agreed. 

This agreement must be concluded in writing, i.e. on paper with a handwritten signature, and may only extend for a maximum period of 2 years. In addition, the employer must pay compensation for compliance with the non-competition clause, which must amount to at least half of the previous total compensation.

Only if these provisions are met, the post-contractual non-competition clause will be binding. 

7. If a contract I sign contains terms that violate the law, do these terms still legally apply to me?

Ultimately, the law only provides a framework and standard regulations for contracts. This means that the parties to a contract are free to make their own arrangements. The law merely specifies which regulations apply if the contracting parties have not made any other arrangements – or if the arrangements they made are void or unenforceable.

However, labour law is shaped by the fact that the structural imbalance between employer and employee needs to be balanced. To this end, the law provides for certain mandatory provisions and minimum standards to a greater extent than in other areas of law, from which the contracting parties may not deviate even if they have explicitly agreed on them. This applies, among other things, to protection against dismissal, holidays, the minimum wage, the control of standard clauses and much more.

8. What are the implications of fixed-term versus indefinite contracts in Germany? Can my fixed-term contract get extended several times?

Fixed-term contracts are positions where you know the end date right from the start. Normally, these contracts can’t stretch beyond two years unless there’s a very specific legally valid reason for it being temporary (for example, four years in companies in the first four years since their founding). Those reasons can be (but not limited to):

  • Temporary operational need: A fixed-term contract is appropriate if a company requires work for a limited period, perhaps due to seasonal demands or special projects.
  • Transition post-training or studies: Fixed-term contracts may be offered to facilitate smooth entry into the workforce after completing educational or training programs.
  • Employee replacement: In situations where an employee is temporarily absent, for instance, on parental leave, another employee can be hired on a fixed-term basis as a replacement.
  • Employee-related reasons: In some cases, the specific circumstances or needs of an employee can justify a fixed-term arrangement.

But what counts as a ‘legally valid reason’? Well, that’s something a court can decide. If the court finds that the reasons are insufficient, the position is permanent by law.

Important! If you have a term-limited contract, but your contract is signed only digitally, the term limitation is invalid as well, which means you can claim your position is permanent.

9. Are there any limits to the probationary periods?

The law is pretty straightforward: The probation period may not be longer than six months, and the notice period cannot be shorter than 14 days. Some exceptions apply, 

If your contract has a fixed end date, the probation period should make sense in relation to the total contract duration. Also, in agreements between unions and employers, the minimum notice period may sometimes be shorter than the legal default.

However, beware: The protection under the unfair dismissal protection starts after six months in the company at the earliest, so even if you do not have a probation period in your contract, your employer does not need a valid reason to terminate your contract before six months in. The probation period essentially allows them to apply a shorter notice period.

10. Is there anything in particular about termination clauses that I need to know?

For you, the employee: You’ll always have a four-week notice period. This means from the day you decide to quit, you’ll work for another four weeks before leaving. You can choose to have this period end either in the middle of the month (the 15th) or at the end of the month. This is laid out in Section 622 of the German Civil Code (Bürgerliches Gesetzbuch, BGB).

For your employer: Things are a bit different. The longer you’ve worked at a company, the more notice they have to give you if they decide to let you go. It starts from four weeks and can go up to seven months if you’ve been with them for 20 years!

However, your employment contract may stipulate a longer notice period for you and your employer. In many employment contracts, you might find a clause that says you have to give the same amount of notice as your employer would. So, if you’ve been at a job for a long time, and your employer’s notice period has increased, yours might, too. The notice period for the employee cannot be longer than the notice period for the employer.

Verbal agreements, company changes, and standards

11. My manager promised an extra day off and/or an additional bonus if I worked more. Does this overrule my contract?

Just as a verbal employment contract is just as valid as a written one, you can also discuss individual provisions verbally with your employer and deviate from your written employment contract. 

However, you need to be aware that you may not be able to prove the terms of your agreement in the event of a dispute. I therefore always recommend that you put any agreements that deviate from your contract in writing or at least be able to substantiate what you discussed with e-mails. 

Many contracts stipulate that only written amendments are binding; more often than not, this clause itself is unenforceable. However, even if verbal agreements may be just as valid as written ones, they are usually much harder to prove. In this case, it makes sense to leave some kind of paper or email trail.

You should also make sure that the contact person making the informal changes to the contract is actually the one internally authorized to sign off on those changes with you.

12. What are the implications of a change in company ownership or restructuring on my contract?

A change of ownership does not change anything about your contract. The new owner is not allowed to interfere with your contract without your consent, and it is illegal to terminate your employment on the grounds of this change of ownership. You’ll find these provisions in Section 613a of the German Civil Code.

13. Are there any standards for annual performance reviews? Am I entitled to any?

There is no legal requirement for annual performance reviews. However, you are entitled to discuss your performance or your career possibilities in the company under Section 82 of the Works Constitution Act (Betriebsverfassungsgesetz, BetrVG). But his is something you have to ask for.

Additional considerations and precautions

14. What are the usual nasty tricks you have seen in your practice?

This is a bit of an Anna Karenina situation: While good contracts all tend to look alike, bad contracts are usually bad in their very own way. Over the last years, I’ve seen a few spectacularly wild ones, like the clause “no vacation will be granted” or “this contract will be considered on probation period for its entire duration.”

However, it’s not the bold and obvious ones that worry me. Usually, my clients have no trouble figuring that out. The trickier ones are the ones where it’s less obvious, more subtle and on the edge of what is just permissible, and that might slip through.

It’s this uncanny valley you need to beware of. 

By law, the party that is presented with standard terms by the other party has a nice advantage: Any ambiguity in the terms is resolved to the detriment of the party posing these terms (cf. § 305 c subsection 2 BGB). In other words, if your employer makes you sign a standard clause, any misunderstanding is on them.

One very frequent and especially relevant variant is variable remuneration: Many employers promise variable bonuses but want to reserve the right to decide whether or not they actually want to pay them out. Since the employee fulfilled their end of the bargain, these clauses are held to a very strict standard.

For example, if your contract tells you that you are entitled to a bonus under certain conditions, your employer will have to pay it out once these conditions are met. If your contract says “we will define the conditions at a later point in time” and it turns out you didn’t, you may be entitled to your full bonus nevertheless. Employment judges know the usual bait-and-switch moves and usually won’t let them slide.

15. How should my overtime compensation be addressed? 

Under German employment law, if your work hours exceed what’s specified in your contract, you’re typically entitled to overtime pay. However, there are instances where contracts might include a provision for a certain amount of overtime each month without additional pay. The extent to which this is enforceable depends on several factors: your salary, the nature of your job, and your position in the company.

It’s also crucial to understand how overtime is compensated. Contracts should clearly state whether overtime is compensated with time off (such as additional hours or days off), or with additional pay. Being aware of these details can help you better understand your rights and entitlements in the workplace.

16. What can I do if my contract has an unenforceable clause?

“Papier ist geduldig”, the Germans say; paper is patient: On paper, anything goes. You have to make your claim to take advantage of your contract’s faulty clause.

If your contract contains an invalid clause, your employer will not be able to invoke it, but you’ll have to stand up for yourself. 

In other words, if the unenforceable clause denies you a claim, you may still assert it (e.g. a bonus). If it requires you to do certain things, you may not be required to do them (e.g. work overtime at no compensation or pay back the relocation costs that your employer covered). 

It is up to you to actively assert your claim and ask your employer for what they owe you (do it by e-mail). I am happy to help you find out whether a clause is unenforceable and to contact your employer on your behalf.

If your employer refuses because they maintain a different legal opinion, you may have to submit the issue to the labour court for clarification as a last resort.

17. Anything else I need to be aware of?

Usually, there is nothing to negotiate related to these clauses, but still pay attention to:

  • the regulations for sick notes: when do you have to let whom know that you are ill? What exactly do you have to report? When do you need a doctor’s note? These are frequent sources of discrepancies and lead to warnings and dismissals more often than you might think.
  • Don’t let your claims (salary, travel expense or a bonus) get lost: Check whether your employment contract provides for a cut-off period (“Ausschlussfristen”). You must assert your claims against your employer within this deadline. If you do not meet this deadline, you can no longer assert your claim. The deadline is usually three months. It’s nice to be patient, but being patient for longer than three months may cost you dearly. If your employer does not respond to your claim, you often have to file a claim within a further three months.

Good luck! If you need any legal advice, make sure to call Jean.

🎉 Remember, you can get a reduced rate for the initial consultation! Handpicked readers (10€), subscribers of more than two months (30€) and annual supporters (50€). Mention “Handpicked” along with your status.

Wait a minute. Who’s Jean? And why is he giving us advice? 

I am an attorney (Rechtsanwalt) with a focus on employment law. I’ve been serving the expat community of Berlin and Germany since day one. I offer my consultation services in English, French and German. I practice in Graefekiez in Kreuzberg, where I also live with my wife and two kids. I love photography and cooking for my friends. I’ve got two kids, so I’m as comfortable discussing the realm of unicorns and ninjas as much as I am talking about terminations and clauses in employment contracts. You can e-mail me or add me on Linkedin.

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