Labour Law

Hiring Employees – Information for Employers

Status as at October 2011

1. Prior to the Conclusion of the Employment Contract
1.1 Job Advertisement
1.2 Personnel Selection
1.3 Employers Right to Ask Questions
1.4 Reimbursement of Interview Costs
1.5 Government Grants
1.6 Work Documents
1.7 Hearing of the Works Council
2. Contents of the Employment Contract
2.1 Form of the employment contract
2.2 Probationary Period / Temporary Probationary Employment Contract 
2.3 Collective Agreements
2.4 Betriebliche Übung (Established Customs) and Gleichbehandlungsgrundsatz (Principle of Equal Treatment)
2.5 Working Hours / Extra Hours
2.6 Remuneration
2.7 Holiday
2.8 Secondary Occupations
2.9 Notice Periods
2.10 Continued Pay in the Case of Illness
3. Special Employment Relationships
3.1 Temporary Employment Contract
3.2 Part-time Work / Marginally Employed Employees / Short-Term Employment
4. Special Legal Provisions
5. Social Security Law
5.1 Health, Care, Pension and Unemployment Insurance
5.2 Statutory Accident Insurance
6. Tax Law

This information issued by the Chamber of Industry and Commerce provides a brief introductory overview of the most important aspects to be considered when recruiting employees. As a great number of laws as well as collective agreements and works agreements might apply under Arbeitsrecht (Labour Law), prospective employers are recommended to seek detailed legal and tax advice for each individual case.

Further requirements are provided for in the Allgemeine Gleichbehandlungsgesetz (AGG – General Law on Equal Treatment) which has been in effect since 26 August 2006: employers are required to avoid any type of discrimination from the arrangement of the employment relationship (i.e. job advertisement and selection of applicants) to the form of the contract, the practical structure of the employment relationship and the termination of such a relationship. Unfavourable treatment on the following grounds is prohibited:

• Race, ethnic background;
• Gender, sexual identity;
• Religion or ideology;
• Disability;
• Age.

Any kind of differentiation according to the characteristics mentioned above is only permitted in a small number of strictly defined cases and if special reasons which justify it exist. For example, it is permissible to look for a man as a menswear model or for a management assistant in a commercial enterprise whose mother tongue is German (irrespective of nationality!) without this leading to accusations of discrimination on the grounds of gender or race.

For an overview of the latest amendments to the AGG, please refer to the link in the service column.

An alternative to recruiting employees is to use temporary workers or to work with self-employed persons (e.g. subcontractors or free-lancers). The basic precondition for this is that the activities really can be performed independently/by the self-employed, i.e. there is freedom regarding the time, place and type of the performance of the activity (meaning that no Scheinselbständigkeit (disguised employment) exists). The possible cost advantages are, in practice, often offset by a disadvantage which often only appears at a later stage: only a limited influence may be exerted on the performance of the activity as there is of course no right to give instructions, a right which is a core element of an employment relationship. In addition, self-employed persons are often not bound by particular duties of loyalty such as the prohibition on performing competitive activities in a secondary occupation or working with competitors.

This information was prepared with great care. However, no liability will be accepted for the correctness of the contents.

1. Prior to the Conclusion of the Employment Contract

1.1 Job Advertisement

The wording of a job advertisement must be neutral as to the sex of the person (e.g. ”We are looking for a salesman/saleswoman for ––). Otherwise, the employer might become liable for damages to an applicant of the opposite sex. Furthermore, the job must also be advertised as part-time if it is suited for part-time work. To avoid age discrimination, the adjectives ”young– or ”older– should be avoided. However, terms such as ”dynamic– or ”experienced– should be permissible, unless they exclude a certain age group.

1.2 Personnel Selection

Fundamentally, you may decide to recruit the applicant who, in your opinion, seems most suitable for the job. However, the employer–s freedom to select is restricted by numerous legal employment bans (e.g. regarding children) and imperatives (e.g. severely disabled persons). To ensure you are able to refute any later accusations of the discriminatory rejection of an applicant, you should note which (permissible!) selection criteria the selection was based on.

Some notes below:

• Citizens of EU member states

Citizens of states which were already members of the EU prior to 1 January 2007 must not be discriminated against in the establishment of employment relationships.

Citizens of Bulgaria and Romania which became members of the EU on 1 January 2007 are subject to restrictions. They will not be covered by the right to the free movement of workers until 31 December 2013. The employment of foreign employees, employees under work contracts and seasonal workers is possible under certain, very restricted conditions.

• Non-EU citizens

To start any type of employment in Germany, non-EU citizens need a residence permit in addition to a valid passport. Since 2005, residence permits have comprised both work and residence authorisation and are issued by the embassy / general consulate in the home country prior to initial entry to Germany or, for foreigners who already are in Germany, by the Ausländerbehörde (Alien Registration Authority). As a residence permit is in most cases only provided on a temporary basis, the employment contract should also be restricted to this period of time.

• Persons entitled to Asylum

Persons entitled to asylum may not perform gainful employment for as long as they are obliged to live in a holding centre for asylum seekers. After one year of residence in the country, the person entitled to asylum may be allowed to enter the employment market with the approval of the Bundesagentur für Arbeit (Federal Job Agency). (cf. above: "Non-EU Citizens").

• Children / Adolescents

The employment of children (up to 14 years of age) is fundamentally prohibited. Adolescent employees need the consent / authorisation of their legal representatives to conclude an employment contract. Employers with relevant previous convictions are banned from employing minors.

1.3 Employer–s Right to Ask Questions

During the recruitment process, the employer may ask any and all permissible questions which are decisive for him. However, the applicant is only obliged to honestly answer permissible questions. If the employee untruthfully answers a permissible question, the employer is, in most cases, entitled to challenge the contract at a later time if the employee was hired based on the untruthful answer. An untruthful answer to a permissible question has, however, no legal consequences for the employee.

Permissible without restrictions are questions regarding marital status, professional background and professional skills as well as non-competition clauses in former employment contracts.

If specifically related to the future work, the following questions may also be permitted:

• Questions about the applicant–s financial circumstances, for example whether a significant attachment of wages has been ordered,
• Questions about the state of the applicant–s health. Applicants may only be asked if they are HIV-positive in the case of medical and care jobs. Applicants may, however, be asked if they have AIDS as there is a risk that the person will become ill and be unable to work in the foreseeable future;
• Questions about previous convictions, e.g. in the case of cashiers, questions about previous convictions for offences against property. Insofar as a driver–s licence is required for the activity, the applicants may also be asked about pending criminal procedures which are likely to result in the withdrawal of their driver–s licence;
• Questions regarding an affiliation to Scientology are only permitted if the person applies for a job which requires a high degree of trust and is connected with special duties of loyalty towards employer and company.

Questions regarding financial circumstances; weddings in the foreseeable future; membership of trade unions, parties or religious affiliation are not permitted. Exceptions apply to Tendenzbetriebe (establishments which serve political, religious, charitable, educational, scientific or artistic aims or engage in news reporting and the expression of opinion). Applicants do not, furthermore, have to answer the question of how much they earned in previous employment.

At the latest since the AGG took effect, questions about severe disability are no longer admissible. The applicant only needs to inform a prospective employer of a disability if he is not or only to a limited degree able to meet the requirements of the job. Accordingly, the question of whether the person is pregnant will only be permitted in the case of temporary employment if the person may not perform professional activities; should the applicant be able to meet the requirements of the job, she does not need to inform a prospective employer of an existing pregnancy.

Until legislation on these issues has become clearer and definitive, you are best advised to exercise extreme restraint.

Medical examinations and psychological suitability tests may only be performed in cases provided for by law or with the express consent of the applicant.

1.4 Reimbursement of Interview Costs

Even if the applicant is not hired, the applicant must be reimbursed for interview costs (in principle, a 2^nd class return train ticket; in exceptional cases even overnight accommodation, catering or loss of earnings) if the employer invited them to the interview.

Tip: the employer may expressly exclude this claim in writing by stating it in the invitation to the interview (e.g. ”unfortunately, we will not be able to cover any expenses").

1.5 Government Grants

The Dritte Sozialgesetzbuch (Social Act three) includes grants for integration and recruitment, grants for trainee allowances and for the integration of disabled persons (for information, please contact the Intergrationsfachdienst (Integration Service), Reichenbachstr. 26, 70372 Stuttgart, telephone number 0711-23923-20, and the Kommunalverband Jugend und Soziales (Municipal Association for Young People and Social Issues of) Baden-Württemberg, Lindenspürstraße 39, 70176 Stuttgart, telephone 0711-6375-0, fax -134). A formless application for these grants must be filed with the competent Agentur for Arbeit (Job Agency) prior to the conclusion of the employment contract (for further information, please contact the Agentur für Arbeit, Neckarstr. 155, 70190 Stuttgart, telephone 0711 920-2222, Internet: www.arbeitsagentur.de).

Integration grants towards remuneration can be granted in the case of the recruitment of employees who require special assistance. These grants should constitute compensation for underperformance. The amount and duration of such grants depend on the extent of the underperformance of persons

• requiring special initial training, e.g. unemployed persons; or
• who are hard to place (long-term unemployment, disabled persons); or
• who are older than 50; or
• employees under 25 years of age without training in a company; or
• who are re-entering professional life, e.g. persons who return after a break to take care of their family.

The amount and duration of the grants depend on the respective integration needs and the extent of the employee–s underperformance.

• Recruitment allowances may be granted to founding entrepreneurs
• who have been self-employed for a maximum of two years only; and
• who give an unemployed person or a person requiring assistance a permanent contract for a newly created job;
• if the employer employs a total of not more than five employees;
• if they provide a statement from a specialist body on the feasibility of the business founded (for example from the Chamber of Industry and Commerce in the Stuttgart region).

The allowance will be granted for a maximum of twelve months and amounts to 50 per cent of the remuneration eligible.

1.6 Work Documents

Upon conclusion of the contract, the employer may request the employee to present the following work documents:

• Lohnsteuerkarte (German Wage Tax Card) (for this matter, please refer to the tax laws);
• Sozialversicherungsausweis (German Social Security Card) (issued by the Datenstelle der Rentenversicherung (Data Office of the Pension Insurance) upon application by the employee);
• Kindergeldbescheinigung (Certificate of the Receipt of Child Allowance);
• Certificate of the holiday granted or paid out in the current calendar year (Holiday Certificate);
• Documents on asset-creating benefits;
• The reference to be issued by the employer at the end of the employment relationship according to Art 312 SGB III;
• Work reference or leaving certificate.

The following must also be provided: for the construction industry, the Lohnnachweiskarte für Urlaub, Lohnausgleich und Zusatzversorgung (Wage Card for Holiday, Compensatory Wage Increases and Additional Benefits); for the food industry, a Gesundheitszeugnis (Health Certificate); for foreign employees from non-EU-member states, their residence permit, and for adolescents a health certificate.

Work Reference / Leaving Certificate, Social Security Card and Certificate of Employment must be returned to the employee after submission. All other work documents must be carefully filed by the employer.

1.7 Hearing of the Works Council

Insofar as a company employs more than 20 employees entitled to vote, the Works Council – if any – must be involved in the recruitment of an employee.

2. Contents of the Employment Contract

2.1 Form of the Employment Contract

An employment contract may also be concluded orally, unless otherwise provided for in collective agreements (exception: the setting of a time limit for an employment relationship and any non-competition clause which will become applicable after the end of the agreement must be agreed in writing). However, in accordance with the Nachweisgesetz (Evidence Law), the employer is obliged to provide the employee in writing with the following essential contractual provisions within one month after the start of the employment relationship at the latest:

• Name and address of the contractual parties;
• Start (in the case of temporary employment relationships also the probable duration) of the employment relationship;
• Place of work (if needed, information on different places of employment);
• Activity;
• Composition, amount and due date of the remuneration;
• Working hours;
• Holiday;
• Notice periods;
• Applicable collective agreements, works agreements;
• Marginally employed persons must be informed that they can acquire higher accrued pension rights and claims for other pension insurance benefits (such as cures) if they make voluntary contributions to increase the lump-sum employer–s contribution.

However, it is advisable to conclude an employment contract in writing, even if only for reasons of evidence.

The greater the detail in which the activity is specified in the employment contract, the more limited the employer–s option of changing the content of the job at a later time in the context of his right to give instructions. Activities should therefore be described in the broadest sense possible.

Tip: In addition, it is advisable to add the clause: ”The employer is entitled to allocate other reasonable activities to the employee which correspond to the latter–s qualifications."

If you intend to employ the employee at different places, a note to this effect must be included in the employment contract.

2.2 Probationary Period / Temporary Probationary Employment Contract

If the first months of the employment are to be a probationary period, this must be expressly agreed as such. This period may amount to a maximum of six months (e.g. "The first – months will be a probationary period–.) An advantage of this agreement is that, within the probationary period, the contract can be terminated without special reason with a notice period of just two weeks. If a longer period of time is specified in collective agreements which are involved, the latter will apply with priority.

A distinction must be made between the agreement on a probationary period in the employment contract and the ”temporary probationary employment contract.– In the latter case, a contract is concluded for a probationary employment relationship ”from – to –– After the end of the period for which the contract was concluded, this employment relationship ends automatically without the need for notice of termination. Insofar as the employee proves suited to the job during the term of the temporary probationary employment relationship and is to be hired permanently, a new employment contract must be concluded.

An advantage is that special provisions on protection against dismissal do not apply to this probationary employment contract, i.e. the probationary employment relationship ends at the agreed time, irrespective of any prohibitions on dismissal which might have occurred in the meantime (e.g. pregnancy).

2. 3 Collective Agreements

All conditions in the employment contract can be freely negotiated, but it must contain the legal minimum provisions (e.g. Bundesurlaubsgesetz (Federal Holiday Act), Entgeltfortzahlungsgesetz (Law on Continued Pay), Arbeitszeitgesetz (Act on Working Hours)). However, scope for negotiation is often restricted by collective agreements, works agreements and betriebliche Übung (established customs).

A collective agreement is binding for a company if the employer is a member of the Arbeitgeberverbandes (Employer Association), if the applicability of the collective agreement was agreed in the employment contract or – and this is, unfortunately, often overlooked – if a collective agreement has been declared to be generally applicable by the Bundesminister für Wirtschaft und Arbeit (Federal Minister of Economy and Labour). This means detailed clauses are prescribed for employment contracts in companies which belong to those industries and such clauses in some cases go far beyond the legal minimum standards.

2.4 Betriebliche Übung (Established Customs) and Gleichbehandlungsgrundsatz (Principle of Equal Treatment)

Certain customs of the employer might become part of the contract even without an explicit agreement if they are considered ”established customs–. For instance, the employee will have a claim to benefits which the employer has unconditionally granted to other employees over a prolonged period of time (e.g. a Christmas or holiday bonus which has been granted three times). According to the principles of equal treatment of all employees in a company, such a claim for bonus then also applies to all employees newly recruited in the company. In addition, the principle of equal treatment also creates the principal obligation to pay such bonuses not only to full-time employees but also (on a pro-rata basis) to part-time employees (e.g. marginally employed persons).

2.5 Working Hours / Extra Hours

The period of time for which you wish to employ somebody is normally left to your discretion. The working hours per working day must be specified. They may, in principle, not exceed eight hours per day. In practice, working hours can be increased to ten hours per day in exceptional cases provided compensation for these hours is provided within half a year.

Tip: as it is disputed whether and under which preconditions employees must work extra hours without a special legal basis, it is recommended that relevant provisions be included in the employment contract. The contract might include: "The distribution of the working hours depends on the company–s requirements, taking into consideration the legal provisions. It will be specified by the superior and amendable at any time."

Furthermore, what is to be done with extra hours performed should also be established, e.g. whether or when a payment will be made, whether allowances will be paid and whether and when the employee might take time in lieu or if applicable when extra hours will lapse.

Insofar as a Works Council exists, it must be involved in the case of a possible reduction or extension of the working hours customary in the company.

2.6 Remuneration

Fundamentally, the amount of remuneration – unless specified e.g. by collective agreements – can be freely negotiated. It normally depends on how much you are interested in the applicant–s working in your company and on the salary of other employees in your company. The amount of remuneration, possible bonuses and other special payments as well as their due date must be specified in the contract. Insofar as bonuses and special payments are to be paid on a voluntary basis only, this must be specified in writing.

Tip: if special payments are made, it is recommended that the following clause be included: ”Special payments are not made for periods of time during which the employment relationship is dormant–. This enables the exclusion of claims by employees who are currently not working due to military service or parental leave.

An adequate lump-sum can be agreed in the employment contract to deal with possible wage seizure. In addition, it is possible to exclude an assignment of wage claims by way of an individual agreement.

The following supplement should be included for marginally employed persons: "The employee has been informed that he/she can achieve the status of a compulsorily insured employee under statutory pension insurance if he/she waives his/her exemption from insurance by way of a statement to be provided to the employer."

2.7 Holiday

The duration of annual holiday must be included in the contract. An employee–s legal minimum claim to holiday is a minimum of 24 working days per year. As Saturday is considered a working day, which means that legislation takes a six-day working week as a basis, the minimum holiday for a five-day working week is 20 working days per year (the following applies to the calculation: annual minimum claim for holiday = 4 x the number of working days per week), irrespective of how many hours the employee is to work per day. A full claim for holiday will only exist after six months. If an employee falls ill during his holiday, the days which he can evidence as sick days by way of a medical certificate of incapacity will not be counted as holidays.

Tip: Employers can save money by agreeing on the following clause: ”If the employee leaves the company during the year, the holiday in excess of statutory holiday rights can be reduced on a pro-rata basis."

2.8 Secondary Occupation

It is also sensible to require the employee to obtain your written consent before he can accept a secondary occupation.

2.9 Notice Periods

Tip: It should be agreed that termination prior to starting work is excluded and that a contractual penalty shall apply in the case of failure to start work. By doing this, the employer has, at least, a certain compensation for the fact that he had rejected other applicants and must find a new person for the job. The amount of the contractual penalty must be adequate. In the case of a 14-day notice period during the probationary period, the penalty must not exceed one half of the gross monthly salary.

Such a contractual penalty may also be agreed in case the employee leaves the job without complying with the notice period.

The legal notice period is fundamentally four weeks to the 15^th day of the month or to the end of the month. Furthermore, the following increases in notice period apply to termination by the employer depending on the duration of the employment relationship, in each case to the end of the calendar month:

• 1 month from 2 years
• 2 months from 5 years
• 3 months from 8 years
• 4 months from 10 years
• 5 months from 12 years
• 6 months from 15 years
• 7 months from 20 years and more

Periods for which the employee worked for the company prior to his 25^th birthday will not be included in the calculation of the duration of employment. This rule was meant to support the employment of young people. However, the European Court of Justice ruled that this is a discrimination against young employees. This means that employers should calculate the duration of employment including the period prior to the employee´s 25th birthday.

Shorter notice periods specified in the employment contract are normally invalid (exception: in the case of temporary help); if longer periods are agreed, these will apply. By agreeing on a longer notice period, the employer is able to retain important employees in the company for a longer period of time.

Tip: Including the following clause is also recommended: "If the employment relationship ends due to justified termination without notice by the employer, the employee will not be entitled to any holiday or Christmas bonus. Any holiday or Christmas bonus which the employee has already received must be paid back."

2.10 Continued Pay in Case of Illness

In the case of inability to work as a result of illness for which the employee is not responsible, employees who have been in an employment relationship for four weeks have a legal claim to the continued payment of their salary / wage for a period of six weeks; this continued pay must be equivalent to 100 per cent of the remuneration to which the employee is entitled for the working hours decisive for him.

Companies which normally employ up to 30 employees might request the reimbursement of their expenses for continued pay according to the Umlageverfahren U 1 (Pay-As-You-Go System); this applies both to workers and employees.

Insofar as the employee is entitled to claim damages for loss of earnings from a third party due to legal provisions, the employer will be entitled to this claim insofar as the latter continues to pay remuneration to the employee (for up to six weeks) and is obliged to make contributions to the LVA (Regional Pensions Office) / BfA (Federal Insurance Office of Employees) or pay employer–s social security contributions. The employee is therefore obliged to inform the employer of all details required to enforce these claims.

If there are doubts about the legality of a certificate of incapacity, the employer may contact the medical service of the employee–s health insurance.

3. Special Employment Relationships

3.1 Temporary Employment Contract

Fundamentally, the law assumes that employment contracts are concluded for an undefined period of time and as full-time employment contracts. This basic form is often amended in practice by way of individual agreements (e.g. by way of a time limit or part-time relationship).

Admissible limited employment contracts end at the end of the period for which they were concluded; no termination is required for this purpose. However, insofar as an employment contract was limited in an inadmissible manner, it is deemed to be an unlimited employment contract and may, as such, only be terminated by complying with the notice periods. The advantage of a valid limitation is that neither the law on protection against termination nor special provisions on protection against dismissal (such as those applicable to pregnant or severely disabled persons) need to be observed.

Tip: Please note that the agreement on a limitation implicitly excludes the right of ordinary termination. Therefore, the clause: ”The employment relationship ends on ...; no termination is required for this purpose– should not be included in limited employment relationships on its own, but rather always in connection with an additional expressly agreed ordinary termination option (”Either party may terminate the limited employment relationship by way of ordinary termination–.).

Fundamentally and from the point of view of Labour Law, employees who are employed for a limited period of time must be treated in the same way as employees holding an unlimited employment contract. The following special features must be observed:

• From 1 May 2000, limited employment relationships must be concluded in writing.
• Insofar as an employment relationship is limited to less than four weeks, there can be no claim for continued pay in the case of illness. However, the employer must pay an increased contribution to the statutory health insurance during the period of illness.
• The employee has no claim to holiday if the employment relationship is limited to less than one month. Should it be less than six months, the employee is only entitled to reduced holiday calculated on a pro-rata basis.

Since 1 January 2001 it is possible to make the following limitations:

a) Limitation without Factual Reason

An employment relationship may be limited without a factual reason if the employment contract does not exceed a total period of two years. Within this period of two years, the employment contract may be extended maximum of three times.

However, exceptions apply to founding entrepreneurs. They may conclude limited contracts for up to four years. A founding entrepreneur is any person whose business registration in the Trade Register or with the Financial Authority was made less than four years ago. If the foundation of the company is based solely on the restructuring of an existing company or group, this exception does not apply.

The limitation is expressly not permitted if a limited or unlimited employment relationship has previously existed with the same employer.

Collective agreements can specify a number of extensions and a maximum duration of limitation which deviate from the provisions above. Within the scope of applicability of such collective agreements, employers and employers not subject to the collective agreement may also use these provisions for the limitation of the employment relationship.

The provision which is currently still included in Art. 14 sec. 3 Teilzeit- und Befristungsgesetz (Act on Part-Time Work and Limitation), according to which employees over the age of 52 can be employed under limited employment contracts without a factual reason and without a time limit, was declared invalid for the EU in a judgement of the European Court of Justice published on 22/11/2005. However, it is unclear whether limitations which were agreed on the basis of the provision are invalid. In any case, you are strongly advised not to conclude new limited agreements based on this legal provision. The result of the ineffectiveness of the limitation would be that contracts are concluded without limitation.

b) Limitation with Factual Reason

Limited employment contracts are permitted if the limitation is justified by a factual reason. Such reasons exist, in particular, in the following cases:

A temporary need for workers exists for operative reasons;

1. The limitation is made after the employee has completed a training course or studies;
2. The employee is employed to cover for another employee;
3. The special nature of the work justifies a limitation;
4. The limitation is made to test the employee;
5. Reasons exist relating to the person of the employee which justify the limitation;
6. The employee is remunerated from budget funds which are intended for limited employment under budget law and will be paid accordingly; or
7. The limitation is based on a court settlement.

Limitation with factual reason might also be made subsequently to a limited employment contract which was effectively concluded without factual reason.

A limited employment contract with factual reason may not be concluded subsequent to a limited employment without factual reason with the same employer.

If an employee has been employed uninterruptedly by one employer for several years on the basis of several limited employment contracts, this can also result in the last limited employment contract being deemed unlimited.

3.2 Part-time Work / Marginally Employed Employees / Short-Term Employment

Employees can also be employed part-time. Fundamentally, the same rules apply for such employees as for full-time employees. In particular, part-time employees must not be treated differently to full-time employees without a factual reason (e.g. when granting catering allowances). Insofar as full-time employees receive benefits, part-time employees also have a pro-rata claim to these.

Marginal employment (so-called mini-jobs), part-time employment relationships with a monthly salary of between EUR 401 and ÊUR 800 (sliding scale) as well as short-term employment are types of part-time employment relationships privileged under social security and tax law.

Information on marginal employment is provided by the Minijob-Zentrale (Mini-Job Centre) of the Deutscher Rentenversicherung Bund (German Pension Insurance Association) in Essen
Telephone 01801 200 504 (calls charged at the local rate from Deutsche Telekom landlines)
Monday to Friday 7.00 am to 7.00 pm
Fax 0201 384979797
minijob@minijob-zentrale.de

4. Special Legal Provisions

Special legal regulations apply to certain issues including legal protection of working mothers, juvenile labour protection, protection of severely disabled persons, and for persons in military service or persons performing community work instead of military service.

Furthermore, there are minimum standards for buildings and operational facilities (e.g. bathroom facilities etc., computer workstations). For further information on this subject, please contact the Gewerbeaufsicht (Trade Supervisory Centre) at www.gewerbeaufsicht.baden-wuerttemberg.de or the

Regierungspräsidium (Highest Regional Government of) Stuttgart
Ruppmannstraße 21; 70565 Stuttgart
Postfach 80 07 09; 70507 Stuttgart
Telephone 0711 904-0
Fax 0711 904-2408
poststelle@rps.bwl.de
www.rp-stuttgart.de

5. Social Security Law

5.1 Health, Care, Pension and Unemployment Insurance

Under law, employees and apprentices are fundamentally covered by social security. With the exception of accident insurance contributions, social security contributions must usually be transferred by the employer in the form of a complete social security contribution to the competent bodies (to the health insurance organisations as social security providers; in the case of marginally employed persons to the Minijob-Zentrale / Deutsche Rentenversicherung Bund, 45115 Essen). In principle, the employer must withhold half of the total social security contribution from the employee–s remuneration and pay it together with the other half to be paid by the employer (cf. 2.1.b below). Under the Social Security Act, the employer has the following duties: He must

- determine whether the individual person is subject to compulsory insurance or if he is exempted therefrom; in case of doubt, it is recommended that the competent bodies be contacted (right to consultation) or that a status inquiry be made to clarify whether the person is already employed or self-employed. This inquiry is free of charge and should be made at the

Deutsche Rentenversicherung Baden-Württemberg
Rotebühlstraße 133
70197 Stuttgart
Telephone 0711 61466-0
Fax 0711 61466-190

- notify the competent bodies to which payments must be made;
- determine the remuneration which is subject to contributions;
- calculate and pay the entire social security contribution,
- manage the wage documents.

Short-term employees are exempted from social security. The amount of the remuneration is not decisive for short-term employees. Such employment exists if

- the activity (which was limited from the start) does not last longer than two months or a total of 50 working days per calendar year (e.g. harvesters, temporary help for an event).

This does not apply if the employment is performed professionally and if the remuneration exceeds EUR 400 per month. Employment is performed professionally if e.g.

- it is not of secondary/minor importance to the employee; or

- employment with over EUR 400 remuneration occurs repeatedly.

There are other cases in which employment is of a professional nature which are not mentioned here due to lack of space.

Please note that even short-term employees might have a claim for the pro-rata payment of Christmas and holiday bonuses in companies which grant such bonuses.

a) Duty to Inform, Subject to Fines in Case of Infringement

Insofar as the employer has not yet employed any staff, he must file a formless application for a Betriebsnummer (Road Number) with the Agentur für Arbeit. This road number must then be used when notifying the health insurance or, in the case of marginally employed persons, the Bundesknappschaft (Federal Insurance Fund for Miners).

These bodies must be informed of all employees, including persons employed for training purposes insofar as they are subject to any social security obligation and for whom contributions must be made.

Fundamentally, the employee may select to which health insurance the employer should transfer the contributions or provide the information.

The employee must become a member of one of the health insurances (listed below) and present the employer with a certificate of membership of this health insurance within a period of 14 days. If the employee fails to do this within this period, the employer is entitled to select one of these health insurances. The following are available for selection:

The AOK of the place of employment or residence;

Any Ersatzkasse (substitute health insurance) the local competency of which depends either on the place of employment or residence of the employee, as defined in the statutes;

Any competent Betriebskrankenkasse (Company Health Insurance Fund) or Innungskrankenkasse (Trade Association Health Fund);

The health insurance of which the employee was a member prior to the start of employment or with which they were insured as a family member of an insured person;

The health insurance with which the spouse is insured.

Notification for which a standard blank form is available from the health insurances or the Deutsche Rentenversicherung Bund / Minijob-Zentrale for marginally employed persons must be given in a number of circumstances or whenever the office needs to be notified of specific facts. The following periods must be observed for notification:

In principle, the employer must comply with his duty of notification in the same way in the case of short-term employment or marginally employed persons. However, neither notification of the interruption of work nor the annual notification need be made for short-term employees.

b) Amount of the Complete Social Security Contribution

A so-called employer account is created for the employer with the competent body to which the contributions must be transferred. The employer can check the amount of contributions to be transferred in a table available from these bodies. The rate of contributions which – except in the case of marginally employed persons – must be borne by the employer and the employee, each paying one half, amount to the following percentages, depending on the income of the employee in question.

*For care insurance, parents do not have to pay as much as childless persons. Childless persons pay a 0.25 % higher contribution if they are over 23 years old.

In addition, please observe the Gleitzonenregelung (Sliding Scale Regulation) which has been effective since 1 April 2003. While the employer must pay his full share of social security contributions for employees receiving a monthly salary of between EUR 400.01 and EUR 800, the employee enjoys certain reductions. The employee–s contribution starts at four per cent and gradually increases. The marginally employed employee is entitled to add to the lump-sum employer contribution to the pension insurance listed in the table by 4.9 per cent, raising it to a maximum of 19.9 per cent. By doing so, the employee also becomes entitled to Berufsunfähigkeitsrente (disability pension) and Erwerbsunfähigkeitsrente (incapacity pension) and the period over which he pays will count in full under pension law. The employer must inform the marginally employed person of this and, if the latter is willing to pay this increased amount and thus waive his exemption from pension insurance, the amount in question must be withheld from his remuneration and paid to the competent body. This increase is sensible for employees who only need a few months to achieve their 60 compulsory months. This is often the case for mothers who have already been in employment for three or four years and been liable for mandatory pension insurance payments. In addition, an Umlage für Krankheitsaufwendungen (Apportionment for Illness Expenses) (U1) to the amount of 0.6 % must be paid to the Minijob-Zentrale in the case of a mini-job, as well as an Umlage für Mutterschaftsaufwendungen (Apportionment for Maternity Expenses) (U2) to the amount of 0.07 %. For further information, please refer to the information from the Chamber of Industry and Commerce on "Mini-Jobs": IHK-Firmeninfo Geringfügige Beschäftigungen (Company Information from the Chamber of Industry and Commerce on Marginally Employed Persons).

In the case of apprentices, the employer pays the entire social security contributions up to a monthly apprentice remuneration of EUR 325.

5.2 Statutory Accident Insurance

Statutory accident insurance is dealt with separately from the complete social security contribution. An insured employee who has been injured in an occupational accident or a commuting accident or is suffering from an occupational illness is entitled to treatment; to medical and supplementary benefits; to occupational assistance, and to a pension for insured persons if applicable. The employer pays the complete accident insurance contribution. The contributions must be paid to the competent trade association with which the employer must register within one week after having started the business. For further information, please contact

Deutsche Gesetzliche Unfallversicherung (DGUV – German Legal Accident Insurance)
Mittelstraße 51
10117 Berlin-Mitte
BG-Infoline: 01805 188088 (14 cents per minute for German landline calls)
info@dguv.de
www.dguv.de

6. Tax Law

Furthermore, the employer is legally obliged to withhold the wage tax, solidarity surcharge and church tax, if applicable, from the employee–s wage and to pay these to the Financial Authority (or in the case of marginally employed persons to the Bundesknappschaft in Essen).

Wage tax is a special form of income tax, the amount of which depends on the employee–s tax category and the amount of his remuneration. Benefits paid voluntarily by the employer under the Vermögensbildungsgesetz (Capital Formation Act) and other voluntarily granted benefits in kind granted to the employee (e.g. provision of a car free of charge) must always be included in wage tax calculations as part of the wage and subject to wage tax.

When the employee takes up his post or at the beginning of the year, the employer is obliged to have the employee submit his Lohnsteuerkarte (Wage Tax Card), which is used to calculate wage tax. The amount of wage tax itself may be established using wage tax tables commercially available from specialist retailers or by contacting the Financial Authority. If the employer is not provided with the Wage Tax Card, the amount of wage tax must be calculated from the agreed gross wage according to tax category VI.

For the year 2011, no new Wage Tax Cards are issued. The Cards of 2010 stay in effect for 2011. This is because a reform of the operation of wage tax deduction. From 2012 on, the operation is to be completely in an electronic procedure.

The Financial Authority must always be informed of wage tax, solidarity surcharge and any possible church tax on the tenth day after the end of the wage tax notification period (month, quarter, year) in electronic form; payment of these taxes must be made within the same period. The following individual regulations apply:

- monthly by the 10^th day of the subsequent month if the wage tax was more than EUR 3,000 in the previous calendar year;

- quarterly by the 10^th day of the month following the relating quarter if the wage tax of the previous calendar year exceeded EUR 800 but was less than EUR 3,000 (e.g. for the first calendar year on 10 April);

- annually by the 10^th day of the subsequent year if the wage tax of the previous calendar year amounted to less than EUR 800.

If the employer does not pay enough wage tax to the Financial Authority, he has an obligation towards the Financial Authority, but also a claim under civil law against the employee.

The employer manages a wage account for each employee per calendar year. At the beginning of the following year, i.e. by 28 February, the employer sends the Wage Tax Cards for his employees to the Financial Authority; this is done online via the Internet. The software required for this purpose as well as information on the electronic transmission process is provided by the Financial Authority at www.elster.de. Employees also receive these data in electronic form or as a hardcopy immediately after the end of the calendar year or immediately after their departure if they leave during the year.

For employees who are only employed short-term, wage tax may also be paid as a lump-sum of 25 per cent of the gross wage. From the point of view of tax law, the employee is considered to be employed short-term when:

- he is only employed occasionally, and not repeatedly on a regular basis,

- he works for no longer than 18 consecutive working days without a free weekend, illness or holiday, and

- he receives an average remuneration of not more than twelve Euros per hour and EUR 62 per day.

The employer must also pay, together with the wage tax, a lump-sum of seven per cent church tax unless the employee proves that he does not belong to a church, as well as a solidarity surcharge of 5.5 per cent.

If employees receive income from ”marginal employment– (so-called mini-jobs), this income is exempted from wage tax for these persons. The precondition is that the remuneration amounts to a maximum of EUR 400 per month in the case of monthly payment. Only the employer must (normally) pay the following lump-sums in the total amount of 30 per cent:

Pension insurance in the amount of 15 per cent (where the employee may voluntarily increase the pension insurance contribution in order to access the full benefits of the pension insurance);

Health insurance in the amount of 13 per cent; as well as

A lump-sum tax in the amount of 2 per cent, which covers both wage and church tax, and the solidarity surcharge.

Tax obligations are dealt with purely by paying the lump-sum tax. The lump-sum levies, including lump-sum tax in the total amount of 30 per cent, must be paid to the Knappschaft-Bahn-See (Pension Insurance for Railway and Sea).