Employees

Definition and Legal Classification of Employees

The Term employees refers under German law to workers who, on the basis of an employment contract, are employed in a company or organization for dependent, not merely temporary, externally determined work against remuneration. Employees are in a personal relationship of dependency with their employer and are subject to the employer’s right to issue instructions concerning the nature, execution, time, and place of work performance.

Distinction: Employees and Workers

Traditionally, German labor law differentiated between workers and employees. While workers typically perform simple, primarily manual tasks, employees are generally entrusted with predominantly non-manual, commercial, administrative, scientific, or technical duties. This distinction has been largely eliminated in practice by the increasing alignment of labor law conditions, particularly through the harmonization of essential statutory regulations. Nevertheless, use of these terms, for example in collective bargaining agreements or pension insurance, refers to historically developed structures.

Employee Status and Legal Consequences

To be recognized as an employee within the meaning of labor law, certain requirements must be met. The employment relationship is based on a contract in which the worker is personally dependent and integrated into the employer’s organizational structure. The decisive factor is that the employee provides their labor within the framework dictated by the employer and under the employer’s right to issue instructions.

In contrast to self-employment, employees lack entrepreneurial risk and the freedom to make business decisions. The status of an employee gives rise to numerous legal protections, such as protection against dismissal, occupational health and safety, continued payment of wages in the event of illness, maternity protection, parental leave, and participation rights.

Legal Foundations for Employees

German Civil Code (BGB)

The main legal foundations of the employment relationship are regulated in the German Civil Code (§§ 611 ff. BGB). The law defines the employment contract as a reciprocal contract, obliging one party to work and the other to pay remuneration. The distinction from a freelance service contract and a contract for work is made primarily based on the degree of personal dependency and the obligation to follow instructions.

Statutory Protection Provisions

• Dismissal Protection Act (KSchG): Protects employees from terminations that are not socially justified and regulates the essential requirements and forms for ending employment relationships.
• Working Hours Act (ArbZG): Sets limits and conditions for the working hours of employees, such as maximum working hours, rest periods, and breaks.
• Federal Leave Act (BUrlG): Regulates the entitlement to minimum vacation as well as the calculation and timing of vacation.
• Continued Remuneration Act (EFZG): Ensures that employees continue to receive their pay for a specified period from the employer in case of illness.
• Maternity Protection Act (MuSchG) and Parental Leave Regulations: Provide special rights in employment to protect expectant mothers and parents.

Collective Agreements and Company Regulations

Many regulations for employees arise from collective bargaining agreements and company arrangements. These cover, for example, the amount of work remuneration, working time models, vacation entitlements, special payments, and company pension schemes. In certain sectors, there are special collective agreements for employees, such as in public service (TVöD) or banking.

Employees in Social Security Law

Compulsory Insurance

Employees are generally subject to mandatory membership in the statutory social security systems:

• Health insurance
• Pension insurance
• Unemployment insurance
• Long-term care insurance
• Accident insurance

The obligation to pay contributions lies with both parties to the employment contract—the employer and the employee share these equally (except for accident insurance, which is borne solely by the employer).

Notifications and Proof

Employers are required to notify the competent social security agencies about the employment of employees. The actual circumstances determine the classification as an employee, not the contractual designation.

Distinction from Other Forms of Employment

Freelancers and Self-Employed Persons

Freelancers or self-employed persons are not legally employees, since they are not integrated into the business and essentially determine their working hours and the manner of performing their services themselves. The contractual and factual arrangement of the employment relationship is decisive for classification.

Temporary Agency Workers and Trainees

Temporary agency workers (employee leasing) are employees of the lender company, but are usually assigned to work for a third-party company on a daily basis. Trainees are also employees, though with special protection and support provisions under the Vocational Training Act (BBiG).

Participation and Co-determination Rights of Employees

Works Council and Staff Representation

Employees have the right to elect a works council, which represents their interests vis-à-vis the employer. This council has extensive co-determination, participation, and information rights in social, personnel, and economic matters (§ 80 ff. BetrVG). In public service, staff representation performs comparable functions.

Participation in Corporate Decisions

In particular, under the One-Third Participation Act or the Co-Determination Act, larger companies are obligated to include employees via employee representatives on the supervisory board.

Termination of the Employment Relationship

Dismissal and Termination by Agreement

An employee’s employment relationship may be terminated properly by dismissal or extraordinarily for good cause. Special protection provisions exist for certain groups (e.g., pregnant women, severely disabled persons, works council members). Alternatively, termination agreements may be mutually concluded.

Severance Pay and Employment Reference

In connection with the termination of employment, employees may, depending on the legal basis, be entitled to severance pay. There is also a general entitlement to a favorable written employment reference that documents the nature and duration of the employment.

Significance of Employee Status

Employee status has far-reaching consequences in labor, tax, and social security law. It establishes comprehensive protection rights, includes special reporting, contribution, and participation obligations, and shapes the integration of the employee into the company organization and co-determination.

Literature and Further Legal Provisions

For more information, the following laws and regulations, among others, may be consulted:

• German Civil Code (BGB)
• Dismissal Protection Act (KSchG)
• Works Constitution Act (BetrVG)
• Collective Bargaining Act (TVG)
• Maternity Protection Act (MuSchG)
• Federal Leave Act (BUrlG)
• Social Code (SGB IV, VI, VII)

The Term employees is central to understanding German labor law and reflects the historical and legal development of employment relationships in Germany.

Frequently Asked Questions

When does a valid employment relationship exist between an employee and an employer?

A valid employment relationship between employee and employer exists when both parties have entered into an employment contract that covers the performance of work in personal dependency that is subject to the employer’s instructions and determined by the employer in return for remuneration (§ 611a BGB). Effectiveness of the employment relationship does not necessarily require a written contract; an oral agreement is also generally legally binding. However, the Act on Documentation of Employment Conditions requires that the essential contractual terms must be recorded in writing and handed over to the employee no later than one month after the start of the employment relationship. If the document is missing, the employment relationship still remains effective but may result in problems with proof in the event of a dispute. The features “personal dependency”, “obedience to instructions”, and “integration into the organization” are decisive. Mere designation as an “employee” is not legally sufficient to establish an employment relationship.

What obligations does an employer have towards their employees?

Employers are legally obliged to pay their employees the contractually agreed remuneration punctually, assign them the agreed scope of work, and ensure proper working conditions. This includes especially protection of health and safety at the workplace according to the Occupational Health and Safety Act (ArbSchG), compliance with the Working Hours Act (ArbZG), and the observance of regulations on maternity protection, parental leave, and the Part-Time and Fixed-Term Employment Act. Furthermore, the employer must pay payroll tax and social security contributions. The employer’s duty of care also includes safeguarding personal rights and the obligation to protect against bullying, discrimination, and sexual harassment at work (AGG). Upon request, the employer must provide information about the status of vacation entitlement and issue a qualified employment reference.

What are the notice periods for employees?

The statutory notice periods in Germany are governed by § 622 BGB. As a rule, the notice period for both parties is four weeks to the 15th or the end of a calendar month. For employers, the periods increase stepwise according to the length of service of the employee, up to a maximum of seven months to the end of a calendar month after twenty years of service. This rule can be deviated from in employment or collective agreements, but the notice periods for employees may not be longer than those for the employer, unless a collective agreement expressly stipulates otherwise. Dismissals must be made in writing according to the Act on Documentation of Employment Conditions. Special protection and extended or restricted dismissal rights apply to certain groups—such as pregnant women, severely disabled people, or works council members.

What should be observed regarding the working time of employees according to the law?

The working time of employees is primarily regulated by the Working Hours Act (ArbZG). Accordingly, daily working time may not generally exceed eight hours, but can be extended to ten hours if, within six calendar months or 24 weeks, an average of eight hours per day is not exceeded. There must be an uninterrupted rest period of at least eleven hours between two working days. Special protection provisions apply to work on Sundays and public holidays, with exceptions only permitted under certain conditions. There are also regulations concerning breaks and rest periods, as well as for night work and particular groups (e.g., young persons, expectant mothers). Violations of working hours protection provisions can result in fines and, in case of repeated violations, even criminal consequences.

What rights do employees have in the event of illness?

In the event of illness, employees are generally entitled, under § 3 of the Continued Remuneration Act (EFZG), to continued payment of wages by the employer for up to six weeks, provided the employment relationship has existed for at least four weeks and the incapacity for work was not self-inflicted intentionally. The employer must be notified of the incapacity to work without delay, and a medical certificate (sick note) must be submitted no later than the fourth day. After these six weeks, the entitlement to sick pay passes to the statutory health insurance, provided the employee is compulsorily insured there. During illness, no disadvantages may arise in the employment relationship; the employer may not, for example, issue an ordinary dismissal while special protection against dismissal applies (e.g., severe disability, pregnancy).

What needs to be considered in the case of fixed-term employment contracts?

Fixed-term employment relationships are regulated by the Part-Time and Fixed-Term Employment Act (TzBfG). A fixed term is permitted either with an objective reason (e.g., replacement, project work, seasonal activities) or without an objective reason. A fixed term without an objective reason is permissible for a maximum of two years, and within this period, the contract may be renewed a maximum of three times. If an objective reason exists, the fixed term can be longer. A new fixed term without an objective reason with the same employer is not permitted if there was a previous employment relationship. The fixed-term agreement must be set in writing before starting work; an oral agreement is invalid, and in such cases, an unlimited employment relationship is considered agreed.

What co-determination rights do employees have in the company?

The co-determination rights of employees in companies with a works council are governed by the Works Constitution Act (BetrVG). Employees can elect the works council, which represents their interests before the employer and participates in decisions relating to social, personnel, and economic matters. These include, among others, working time rules, vacation and break arrangements, company policies, and health and safety measures. The works council also has participation rights in dismissals, transfers, and recruitment and can initiate conciliation proceedings within the company through conciliation committees. In certain companies with more than 500 employees, further co-determination rights apply at the supervisory board level, as specified in the Co-Determination Act (MitbestG).