Germany Offers a Motivated and Highly Qualified Workforce

Germany offers a rich potential of excellently trained experts and executives: Economists, lawyers, physicians, IT specialists, engineers, agricultural experts, skilled industrial labour, and craftsmen. In general, employees from Germany are in high esteem for their precision and reliability.

Around 60 percent of young people go into vocational training for a state-recognized profession either on the dual vocational training system or as school training in a vocational college. More than a third enrols in one of the 410 universities.

Students and young scientists are supported by a lot of different foundations, for example the “Helmholtz Association”, the “Max Planck Society for Advanced Science” and the “Leibniz Science Association” with the objective to generate more and more skilled, motivated workers and specialists.

How to Find Suitable Staff

In the last years, a lot of employers services were established to support companies with their professional job services. There are numerous possibilities to publish a job offer, e.g. an internal placement system of the Local Employment Agencies, the website of the Federal Employment Agency and the EURES Job Database.

To find suitable staff for their venture, companies usually advertise positions in newspapers, journals, the company´s homepage, or on one of the many internet job markets. The job adverts in newspapers usually appear on the weekend. Adverts for highly qualified staff usually appear in national newspapers and special local papers usually contain adverts for jobs requiring less qualificationed workers. Potential employees often apply directly to companies or place applications at their availability.

So called temp companies offer firms an additional option for flexible adjustment of employment levels. They provide personnel at short notice, e.g. to cope with peaks in production or to replace staff who are temporarily absent.

The Contract of Employment

The employment contract can be concluded in written form or verbally. For a better provability, a written employment contract is preferable. If no written employment contract is concluded, the employer is obliged to constitute the key aspects of the employment relationship at the latest one month after the beginning of the employment relationship. Hereby the following main matters are obligatory:

• Parties of the contract
• Work to be performed
• Salary and benefits
• Annual vacation
• Starting date of employment
• Place of performance
• Notice period
• Hours of work
• Indication, if collective agreements are applicable

Payment

The employees’ pay principally can be negotiated freely unless a minimum wage applies. Although there is no general minimum wage, in certain industries collective agreements exist, which set minimum wages.

Gross wages in Germany are very stable compared to other countries, and the unit wage costs are falling. Wage costs vary greatly from one region to another, also within Bavaria.

The state is not involved in wage fixing. German wage autonomy means that employers and employees alone are responsible for this. As a rule, the associations of employers usually agree collective bargaining agreements with the industry trade unions. These agreements specify pay, working hours, and leave entitlement. If the company is a member of the employers' association, it must keep to these agreements. However, in economically difficult situations, companies can negotiate deviations from the collective bargaining agreement with the trade union. The applicable standard wages also serve as a guideline for payment for companies that do not belong to the employers' association.

Working Time

All week days excluding Sundays and public holidays are considered to be working days. However, German employees normally work from Monday to Friday (five-day week).

The regular weekly productive working time generally may not exceed 48 hours. A daily working time of up to ten hours productive working time is possible if, over a period of six months, the average weekly working time does not exceed 48 hours.

Working on Sundays and public holidays is generally prohibited. However, the German law on working hours provides for several exceptions when working on Sundays and public holidays is permitted (prior approval by governmental authorities is required under certain circumstances).

German labour and employment law grants a statutory claim for 20 working days vacation per calendar year for employees who work a normal five-day week. However, the majority of employees receives between 25 and 30 vacation days per calendar year, depending on seniority and the type of business.

Employment Termination Law

German employment termination law is regulated by various codes and is intended to provide protection against unfair dismissal for the employee.

For example, the employer must observe the applicable notice period, which is ordinarily determined by law (between four weeks and seven months, depending upon the length of employment). If the employer and the employee have mutually agreed upon a longer contractual notice period, the longer contractual notice period will prevail. Any agreement on a notice period that is shorter than the applicable statutory notice period will be invalid.

The employer has to give written notice of termination to the employee. The document has to be signed by the employer. All other forms of notice of termination (i.e., those given orally or by email or fax) are void and have to be redone in a proper way.

The German Termination Protection Act restricts termination of employment if the employee has been employed for more than six months. This act applies, however, only with regard to companies that employ more than ten employees. If the act is applicable, the employee may be terminated if the termination is “socially justified”. The particular reasons enumerated in the act that permit termination include reasons related to the personal situation of the person to be dismissed, reasons related to the behaviour of the person to be dismissed, or reasons related to the business of the employer.

Business Reasons

The most important reason for termination is business-related. It is permitted if the employee’s job ceases to exist as a result of restructuring, if the company ceases to operate, or if there is insufficient work due to a lack of orders. If only some of a number of similar jobs are to be cut, a social selection procedure decides which employees are to be dismissed. This procedure takes account of the length of time the employee has been with the company, his or her age, possible liability to provide maintenance, and a possible disability of the employee. Finally, the termination must be proportionate, and the possibility of a notice of termination with the option of reengagement on changed conditions or employment elsewhere in the company should be taken into consideration.

Personal Reasons

If the employees are not (anymore) physically or mentally suited to their job, termination is possible if the burden on the company is unreasonable. A similar condition applies if continued employment cannot be reasonably expected of the company following an employee’s long-term illness. However, the employer must first carry out reasonable stop-gap measures, such as staff reorganization or the hiring of temporary staff.

Conduct-Related Reasons

Inappropriate conduct such as lateness or low performance can result in a termination, provided that the employer has warned the employee about his or her infringements. A warning must make specific reference to and complain about the employee’s conduct, and state that a repetition will result in termination. Immediate termination without a warning – though the legal period of notice nevertheless applies – is possible in case of serious infringements, such as a serious insult or an infringement on the ban on competition.

Extraordinary Termination

In cases of serious misconduct, employers can give exceptional, i. e. immediate notice of termination – the legal period of notice does not apply in these cases. The termination must not only be regarded as necessary, it must be imperative immediately. This is the case, for example, if an employee intentionally causes the company damage, for example by passing on internal information to a third party.

Co-Determination through Internal Employee Representatives

In companies with more than five employees, the employees may elect a works council. The work council represents the employees and negotiates, cooperates and consults with the employer in various situations. For example, the work council must always be heard before each termination of employment, otherwise, the termination cannot take effect. The work council’s agreement to a termination is not required, unless this was agreed in advance with the employer or one of the few exceptions applies. In companies with more than 20 employees, however, the agreement of the work council is required for hiring measures, transfers, restructuring, or similar measures. In practice, the work of the work council runs smoothly.

The German Social Security System

The German social security system can be divided into 5 parts:

• Pension insurance
• Unemployment insurance
• Health insurance
• Nursing care insurance
• Companies accident insurance

Employees with a German employment contract or working in Germany becomes, with some exceptions, liable to all of this parts of the social security system. Contributions to pension insurance, unemployment insurance, health insurance and care insurance are paid half by the employer and half by the employee, the companies accident insurance is paid only by the employer. For calculation of the monthly contribution to pension insurance, unemployment insurance, health insurance and care insurance special ceiling amounts apply. This means that contributions are only calculated up to a maximum amount, exceeding earnings will remain free of social security contribution.

Pension Insurance

The statutory pension insurance is the most important pillar of old-age provisions. Its financing is split: The monthly contributions paid by employees and employers pay the pensions of those currently in retirement. Through their contributions, those insured acquire some rights when they themselves become pensioners. In turn, coming generations provide for these future rents with their contributions (cross-generational contract). In addition, company and private pensions are the second and third pillars of provisions for old age. Under certain conditions these also enjoy government support.

Unemployment Insurance

Unemployment insurance is the branch of statutory social security that insures employees against the risk of unemployment. The primary purpose of unemployment insurance is the prevention of loss of employment, and only secondarily it includes protection against loss in the form of payments (unemployment benefit). It therefore provides not only insurance payments but also funding for job creation and protection and, in the context of employment promotion, funding for fostering vocational training, entry into active employment and occupational rehabilitation. The provision of unemployment assistance is not an unemployment insurance matter.

Health Insurance

Almost all citizens in Germany have health insurance, whether as a compulsory member of the statutory health insurance scheme (88 percent) or in a private health insurance scheme (almost 12 percent). The health insurance companies cover most of medical treatment, medication, hospitalization and preventive health care. Contributions to the health insurance scheme are made by employees and employers. Non-employed family members of those in a compulsory health insurance scheme do not pay any contributions.

Nursing Care Insurance

This insurance protects the covered person against the financial consequences of nursing care, and provides assistance and support services in this case. It is organised in more or less the same way as the health insurance. Half of the contribution rate is paid by the employer, half by the employee.

Companies Accident Insurance

Statutory accident insurance is a liability insurance on the part of employers in favour of employees who are thereby protected from the consequences of an accident at work or an occupational disease.

Payroll Accounting

In contrast to some other countries, in Germany an employee receives a wage or salary from which tax and social security contributions have already been deducted (net). The employer calculates the gross wage, but withholds a percentage of it and transfers this to the health insurance company responsible for collecting the complete social security contribution and to the tax authority. Gross incomes are therefore much higher than the amount actually paid out.

Mini Jobs and Midi Jobs – Low-Paid Employment Models

Simplified rules apply for temporary or part-time work. Part-time jobs ("mini jobs") are jobs that pay up to 400 euros per month, or for which the employee works no more than 50 days per year in the company. In these cases, employers pay a flat-rate charge of 30 percent of the gross wage to the Miners' Sickness Fund (Knappschaft Bahn See), which is responsible for the low-paid jobs. The employee does not pay any taxes or charges for the job.

There is also the option of low-paid jobs ("midi jobs") with wages of between 401 and 800 euros per month. In these cases, the government subsidizes the employee's social security contributions. The employer’s share is paid in the usual way. Charges are transferred to the Miners' Sickness Fund.