Bureaucracy in German labor law: What companies from the EU need to consider

When companies from the EU operate in Germany or post employees to Germany, they must comply with numerous labor law regulations. German employment law is known for its extensive regulations for the protection of employees, which is often a challenge for foreign employers. Here is an overview of the most important obligations and requirements.

1 Employment contracts in Germany: What is mandatory?

In Germany, the so-called Evidence Actwhich obliges employers to record the most important contractual conditions in writing.

1. Written employment contract: Although verbal contracts are valid in Germany, the employer must confirm the essential working conditions to the employee in writing.
2. Mandatory information in the contract: These include working hours, remuneration, notice periods and vacation entitlement.
3. Fixed-term employment contracts: These must always be concluded in writing, otherwise they are automatically deemed to be open-ended.Practical example:
   An Italian company hires a sales employee in Germany. The contract must be in writing and clearly regulate which working hours, salary components and notice periods apply.

2. working hours and overtime: Strict regulations in Germany

The Working Hours Act (ArbZG) sets clear limits for working hours:

• Maximum 8 hours per dayin exceptional cases up to 10 hours.
• At least 11 hours rest time between two working days.
• Overtime regulation: Overtime must either be paid or compensated by time off.

Important for EU employers:
Working hours in Germany are more strictly regulated than in many other EU countries. Violations of the Working Hours Act can be punished with fines of up to €15,000.

Practical example:
A Polish construction company sends workers to Germany for a project. They regularly work more than 10 hours a day. They are threatened with heavy fines during an inspection by the trade supervisory office.

3. compulsory social insurance in Germany

As soon as an employee works in Germany, they are generally subject to German social security contributions, unless they have a A1 certificate (for postings from the EU).

German social security contributions are made up of the following components:

• Health insurance: approx. 14.6 % (half borne by the employer and half by the employee)
• Pension insurance: 18,6 %
• Unemployment insurance: 2,6 %
• long-term care insurance: 3.05 % (childless employees pay 3.4 %)

Exception:
If an employee is only temporarily posted from an EU country, they remain covered by social security in their home country if they have a valid A1 certificate is available.

Practical example:
A Czech logistics company has deployed drivers in Germany. Without an A1 certificate, the drivers must be registered for social security in Germany.

4. minimum wage and payroll accounting: no room for violations

In Germany, a statutory Minimum wagewhich is regularly adjusted. Since January 2024, it has been 12,41 € per hour (as of 2025 it could rise).

Attention for employers from the EU:

• The minimum wage applies to all employees, including posted workers!
• In some sectors (e.g. construction, care, gastronomy) higher Standard wageswhich must be complied with.

Practical example:
A Hungarian cleaning company provides staff for a job in Germany. It pays the Hungarian minimum wage. This leads to a breach of the German Minimum Wage Act, for which there is a risk of severe penalties.

5. dismissal and occupational health and safety: German laws are employee-friendly

Germany has strict regulations on protection against dismissal. Especially the Dismissal Protection Act (KSchG) protects employees from unjustified dismissals.

• Notice periods: The statutory notice period is at least 4 weeks, but is extended with the length of service.
• Reasons for termination: In companies with more than 10 employees, termination is only possible for for operational, behavioral or personal reasons. reasons possible.
• Works Council: In larger companies, the works council has a say in dismissals.

Practical example:
A Spanish employer wants to make an employee in Germany redundant at short notice. As the company has more than 10 employees, this is not possible without further ado. The employer must provide evidence of a recognized reason for dismissal.

6. reporting obligations for foreign employers in Germany

Companies from the EU that employ workers in Germany must comply with certain reporting obligations:

1. Registration with the social insurance: Employers must register their employees for social insurance with a German health insurance fund (unless there is an A1 certificate).
2. Customs declaration for posted workers: In certain sectors (e.g. construction, cleaning, care), employers from abroad must register their employees with German customs in advance.
3. Tax registration: Companies without a registered office in Germany must register for payroll tax.

Practical example:
A Slovakian company sends fitters to Germany for an order. It fails to make the customs declaration, resulting in high fines.

7. sanctions for violations of German labor law

Foreign employers who do not comply with German regulations risk severe penalties:

• Minimum wage violations: Fines of up to 500.000 €
• Lack of social security: High back payments and penalties of up to 50.000 €
• Violations of working hours: Fines of up to 15.000 €

Tip for employers from the EU:
Before deploying employees in Germany, all labor law regulations should be checked and complied with in order to avoid legal problems and high penalties.