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Termination and Notice Periods

Guidelines on termination of employment, notice periods, and severance pay in Germany.

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Comprehensive Guide on Termination and Notice Periods in Germany

Termination of employment in Germany is governed by a robust legal framework designed to protect both employees and employers. The key legislation regulating termination is the German Civil Code (Bürgerliches Gesetzbuch, BGB) and the Protection Against Unfair Dismissal Act (Kündigungsschutzgesetz, KSchG). Below is a detailed guide covering all aspects of termination and notice periods in Germany.

1. Legal Framework

a) German Civil Code (BGB)

The BGB outlines the general rules for employment contracts, including notice periods and termination procedures. It applies to all employment relationships unless superseded by more specific laws or collective agreements.

b) Protection Against Unfair Dismissal Act (KSchG)

The KSchG applies to employees working in companies with more than 10 employees and who have been employed for at least six months. It provides additional protections against unfair dismissal, requiring employers to justify terminations based on specific grounds.

2. Types of Termination

a) Ordinary Termination (Ordentliche Kündigung)

This is the standard form of termination, where the employment relationship ends after a notice period. It must comply with statutory or contractual notice periods.

b) Extraordinary Termination (Außerordentliche Kündigung)

This is termination without notice, only permissible in cases of severe misconduct or other significant reasons that make continuation of the employment relationship unreasonable. Examples include theft, fraud, or gross breaches of duty.

c) Mutual Termination Agreement (Aufhebungsvertrag)

Both parties can agree to terminate the employment relationship without adhering to notice periods. This agreement must be in writing and is often used to avoid disputes.

3. Notice Periods

Notice periods in Germany are regulated by Section 622 of the BGB. They vary depending on the length of employment and whether the termination is initiated by the employee or employer.

a) Statutory Notice Periods

The statutory notice periods for employers are as follows:

  • During probationary period (up to 6 months): 2 weeks
  • Less than 2 years of employment: 4 weeks (to the 15th or end of the month)
  • 2 years of employment: 1 month (to the end of the month)
  • 5 years of employment: 2 months (to the end of the month)
  • 8 years of employment: 3 months (to the end of the month)
  • 10 years of employment: 4 months (to the end of the month)
  • 12 years of employment: 5 months (to the end of the month)
  • 15 years of employment: 6 months (to the end of the month)
  • 20 years of employment: 7 months (to the end of the month)

For employees, the statutory notice period is generally 4 weeks (to the 15th or end of the month), regardless of tenure, unless otherwise agreed in the employment contract.

b) Contractual Notice Periods

Employers and employees can agree to longer notice periods in the employment contract, but these must not disadvantage the employee compared to statutory notice periods.

c) Collective Agreements (Tarifverträge)

In industries covered by collective agreements, notice periods may differ from statutory rules. These agreements take precedence over individual contracts.

4. Termination Procedures

a) For Employers

  1. Written Form Requirement: Termination must be in writing and signed by an authorized representative of the employer. Verbal or electronic terminations are invalid.
  2. Delivery of Termination Letter: The termination letter must be delivered to the employee in person or via registered mail to ensure proof of receipt.
  3. Justification (if KSchG applies): Employers must provide a valid reason for termination, which falls into one of three categories:
    • Personal reasons: Inability to perform duties due to long-term illness or other personal circumstances.
    • Conduct-related reasons: Misconduct such as repeated tardiness, insubordination, or theft.
    • Operational reasons: Business restructuring, downsizing, or economic difficulties.
  4. Consultation with Works Council (if applicable): If a works council (Betriebsrat) exists, it must be informed and consulted before termination. The council can object, but its objection is not binding.

b) For Employees

Employees must also provide written notice of termination. The notice period must comply with statutory, contractual, or collective agreement terms.

5. Costs and Legal Obligations

a) Severance Pay (Abfindung)

There is no automatic right to severance pay in Germany unless:

  • It is stipulated in the employment contract or collective agreement.
  • It is offered as part of a mutual termination agreement.
  • It is awarded by a court in unfair dismissal cases.

Severance pay is typically calculated as half a month's salary for each year of service, but this can vary.

b) Remaining Leave and Overtime

Employees are entitled to compensation for unused vacation days and overtime hours upon termination. Employers must either allow the employee to take the leave during the notice period or pay it out.

c) Social Security Contributions

Employers must continue to pay social security contributions (health, pension, unemployment, and long-term care insurance) until the end of the notice period.

6. Special Considerations

a) Termination Protection for Specific Groups

Certain groups of employees enjoy special protection against dismissal:

  • Pregnant employees and new mothers: Protected during pregnancy and up to 4 months after childbirth.
  • Employees on parental leave: Protected during the leave period.
  • Severely disabled employees: Termination requires prior approval from the Integration Office (Integrationsamt).
  • Works council members: Special protections apply to prevent retaliation.

b) Probationary Period (Probezeit)

During the probationary period (usually up to 6 months), both parties can terminate the contract with a shorter notice period of 2 weeks. Termination does not require justification unless discrimination or other unlawful reasons are alleged.

c) Cultural Aspects

  • Direct Communication: Germans value clear and direct communication. Termination discussions are typically formal and to the point.
  • Documentation: Employers and employees should keep detailed records of all communications and documents related to termination to avoid disputes.
  • Works Council Involvement: In companies with a works council, its role in termination procedures is significant and reflects Germany's emphasis on employee representation.

7. Dispute Resolution

If an employee believes a termination is unfair or unlawful, they can file a claim with the local labor court (Arbeitsgericht) within 3 weeks of receiving the termination notice. The court will assess whether the termination complies with legal requirements.

8. Key Takeaways

  • Termination in Germany is highly regulated to protect employees.
  • Notice periods depend on tenure, contractual agreements, and collective agreements.
  • Written termination is mandatory, and employers must justify dismissals under the KSchG.
  • Special protections exist for certain groups, such as pregnant employees and disabled workers.
  • Disputes must be filed with the labor court within 3 weeks.

By understanding these regulations and procedures, both employees and employers can navigate the termination process in Germany effectively and in compliance with the law.