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Germany has different models of employment, providing investors with flexible employment solutions - especially in the starting phase of the business. Temporary employment agencies provide appropriate personnel at short notice.
Standard employment contracts are not generally time restricted. They usually include a probation period of up to six months.
Companies are nonetheless free to offer fixed-term contracts. Such fixed-term contracts automatically expire on a specific date. A dismissal is not required to terminate this type of contract (unless the contract needs to be terminated before expiring). It is for the employer to decide whether to renew the contract or not.
Fixed-term contracts are limited to a maximum of two years. A fixed-term contract may be extended up to three times provided the total duration of contract does not exceed the maximum of two years.
| A limited six months contract can be extended three times for a further six months (for a total duration of 24 months). |
During the first four years of a company’s existence in Germany, employment contracts may be limited or extended several times up to a total duration of four years.
Temporary employment means that a company can hire staff without concluding an employment contract. Instead, the company hires staff from a temporary employment agency by concluding a service contract which regulates the conditions under which the employees are sent to the hiring company.
The employee is legally employed by the temporary employment agency, which means that the employee receives financial remuneration only from the temporary employment agency, as no contractual relationship exists between the hiring company and the employee. The hiring company pays a certain fee to the temporary employment agency as set out in the service contract.
The duration and the terms of termination of the service of the employee in the hiring company are not subject to labor regulations, but only set out in the service contract between the hiring company and temporary employment agency.
The general working conditions such as weekly working hours and wages are usually determined in collective agreements between unions and the respective employers’ associations of the temporary employment industry. These collective agreements provide flexible working hour models by using working hour accounts to adjust the demand of the hiring company and working time regulations.
Mini jobs are jobs with salaries below EUR 400 per month (also known as “400 Euro Jobs” or “short-term” jobs) or an employment period in which the employee works 50 days per year or less for the company.
For mini-jobs with a salary below EUR 400 per month, employers pay 30.1 percent of the gross wage as social security contributions and flat tax (composed of 13 percent health insurance, 15 percent pension insurance, 2 percent flat tax, and 0.1% percent sick pay contribution allocation). Employees are fully exempt from social security contributions (even if they hold another fully taxable employment position).
For mini jobs with less than 50 working days per year, personal income tax has to be transferred to the tax authorities (subject to a number of conditions including whether 25 percent flat tax or individual tax rate of employee is payable). No social security contributions must be paid by both employer and employee.
“Midi” jobs (or “low wage jobs”) are jobs that pay between EUR 400.01 and EUR 800 per month. They are subject to reduced employee social security contributions. Employers are subject to the normal social security contributions of around 21 percent of the gross wage, which represents a lower rate than the general tax for mini jobs.
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