Key Takeaways:
- Employers with 10+ staff must justify termination as “socially justified” after six months’ tenure.
- Every termination notice must be delivered on paper with a wet-ink signature. Emails, faxes, DocuSign, and verbal conversations have zero legal weight under Section 623 of the German Civil Code.
- Companies with a works council must consult it before dismissing any employee; failing to do so invalidates the termination.
If you’ve ever managed employees in the U.S., letting someone go can be pretty straightforward — HR communicates the details with the person being let go, sorts out the paperwork, and moves on. In Germany, it’s not that simple.
German labor law is based on the principle that employees deserve strong protection from arbitrary dismissal. The rules are detailed. Documentation requirements are strict. Employers who cut corners risk having the termination thrown out by a labor court. That could mean months of back pay, legal fees, and, in some cases, a court order reinstating the employee.
This guide covers the legal framework you need to understand before terminating an employee in Germany, including the Dismissal Protection Act, works council consultation, notice periods, and severance.
Understanding Germany’s Employee Protection Framework
At-will employment doesn’t exist in Germany. The entire system is designed to keep employees in their positions unless an employer can show a documented, defensible reason to end the relationship. That mindset shapes every aspect of the termination process.
Protection Under the Dismissal Protection Act
The Kündigungsschutzgesetz (KSchG), also known as the Dismissal Protection Act, is the central statute governing employee termination. It kicks in after an employee has been employed at a company with more than 10 employees for more than 6 months. (Part-time staff counts proportionally toward that number: someone working up to 20 hours a week counts as 0.5, while 20 to 30 hours counts as 0.75.)
Under the KSchG, employers must show that a dismissal is “socially justified” by proving it falls into one of three buckets:
- Personal reasons cover situations like a long-term illness that prevents the employee from performing their role.
- Conduct-related reasons apply when an employee has violated company rules or breached their contract, typically after receiving at least one formal warning.
- Operational reasons come into play with restructuring, downsizing, or redundancy.
If a dismissal does not fall under any of these three legally permitted grounds, the termination can be declared void by a labor court.
Special Protection for Certain Employee Groups
Some employees have protections that go well beyond the KSchG. Pregnant employees, for instance, are covered by the Maternity Protection Act (MuSchG).
Section 17 of the MuSchG protects pregnant employees. Employers cannot terminate a pregnant employee from the beginning of pregnancy until at least four months post-delivery. An employer who wants to terminate a pregnant employee must first request approval from the state occupational health authority, and approvals are rarely granted.
Employees on parental leave, severely disabled employees, and works council members get even more protection. In these cases, dismissing the employee almost always requires government approval before the employer can proceed with the termination.
Types of Employee Termination in Germany
German law clearly spells out the three ways an employment relationship can end. Each one has different legal requirements, and failing to follow the proper process can create real problems for employers.
Ordinary Termination (Ordentliche Kündigung)
This is a termination with notice. The employer states a valid reason, adheres to the applicable notice period, and provides a written termination letter. That letter needs a real, handwritten signature per Section 623 of the BGB. A scan, email, or a DocuSign won’t suffice. German courts take the written-form requirement seriously, and violations render termination void on procedural grounds alone.
When termination is due to redundancy, employers must apply social selection criteria. They must weigh the employee’s length of service, age, dependents, and any severe disabilities before deciding who stays or goes.
Extraordinary Termination (Außerordentliche Kündigung)
Extraordinary termination is immediate dismissal with no notice period. It is reserved for serious misconduct, such as theft, fraud, workplace violence, or severe breach of trust. The legal bar is deliberately high because the consequences for the employee are drastic.
Two key rules apply. First, the employer has two weeks from learning of misconduct to act. Waiting longer means losing the right to terminate without notice. Second, a prior formal warning is generally expected for less severe behavior. Courts disfavor employers who fire someone without giving a chance to improve, unless the behavior is truly egregious.
Mutual Termination Agreement (Aufhebungsvertrag)
Employers and employees can also mutually agree to part ways. A termination agreement lets both sides negotiate the departure date, severance terms, and address details such as non-compete clauses or reference letters — all without a formal dismissal process.
This approach avoids the requirement of social justification. But for employees, signing can mean a delay of up to 12 weeks in receiving unemployment benefits. This trade-off makes these agreements a careful negotiation point.
Notice Periods and Legal Requirements
Section 622 of the BGB sets out Germany’s statutory notice periods, which increase with an employee’s length of service.
Statutory Notice Periods
During probation (up to six months), either side can terminate the employment relationship by providing two weeks’ notice. After probation, the minimum notice for employer-initiated termination is four weeks. The end date must fall on either the 15th or the last day of a calendar month.
The periods then increase based on tenure:
• Two years of service: one month to month-end
• Five years: two months
• Eight years: three months
• Ten years: four months
• Twelve years: five months
• Fifteen years: six months
• Twenty years: seven months
These are the bare minimum. Contracts and collective bargaining agreements can mandate longer periods, but never shorter ones. It’s worth noting that these extended periods apply only to employer-initiated terminations. Employees, by contrast, can generally give four weeks’ notice regardless of how long they’ve worked at the company.
Written Notice Requirement
Remember: verbal termination is not legally valid in Germany. Neither is an email or a message sent through HR software. The termination letter must be a physical document with a handwritten signature. The notice period starts on the day the employee receives the letter, not on the day it is sent.
The Role of the Works Council
If your company has a works council (Betriebsrat), Section 102 of the Works Constitution Act (BetrVG) requires a consultation before any termination.
Consultation Requirements
The employer must inform the works council which employee they intend to terminate, the type of termination, and their full reasoning. For ordinary terminations, the works council has one week to respond. For extraordinary terminations, the window shrinks to three days.
A works council can object to a dismissal, but that doesn’t mean the employer can’t move forward. However, it does strengthen the employee's case if they choose to challenge the dismissal in labor court.
What will stop the process is skipping the consultation altogether. If the works council isn’t properly involved, or doesn’t receive complete information, the dismissal is invalid from the start.
Severance Pay in Germany
A widespread assumption among international employers is that German law guarantees severance whenever an employee is let go. In reality, Germany has no general statutory right to severance pay (Abfindung). Most severance payments are the result of negotiation, court settlements, or specific legal scenarios.
When Severance Applies
There is one situation where a statutory severance entitlement exists. Under Section 1a of the KSchG, if an employee is dismissed for operational reasons, the employer can offer severance pay in the termination letter. If the employee does not contest the dismissal within three weeks, they are automatically entitled to 0.5 months’ gross salary for each year of service.
Beyond that specific scenario, severance usually comes into play when an employee challenges their dismissal in labor court. Because litigation is expensive and outcomes are uncertain, employers frequently offer a severance package to settle the case. Termination agreements (Aufhebungsverträge) and social plans negotiated with works councils during restructuring are other common contexts where severance is paid.
The rule of thumb is half a month’s gross salary per year of employment. In practice, the number depends on the employer’s legal position, the employee’s age and service length, and industry norms. Depending on circumstances, factors range from 0.25 to 1.5 or higher.
Alternatives to Termination
German labor courts fully expect employers to have considered less drastic options before pulling the trigger on a dismissal. What those options look like depends on the situation. Reassigning the employee to a different position, adjusting their working hours, or implementing a performance improvement plan are all possibilities that courts consider reasonable.
For health-related dismissals specifically, there’s an additional wrinkle. Employers are legally required to offer workplace reintegration (betriebliches Eingliederungsmanagement) when an employee has been absent for more than six weeks in a 12-month period. Skipping this step before pursuing a termination weakens the employer’s case considerably.
Whatever alternatives the employer explores, they should be documented. If the case goes to court, the employer will need to show that termination was a last resort, not a first instinct.
Risks and Common Mistakes to Avoid
Employees in Germany challenge terminations in labor court with remarkable frequency, and the downsides for employers who lose can be steep.
If a court rules that a termination was invalid, the employment relationship is treated as though it never ended. That can mean the employer owes full salary for every month between the dismissal date and the court’s decision.
In most cases, it’s not the decision itself that causes issues. It’s how the process is handled. For example:
- Skipping the works council consultation or providing the council with incomplete details regarding the termination
- Sending the termination notice by email instead of a signed physical letter
- Failing to document warnings, performance issues, or the business case for redundancy
- Miscalculating the social selection criteria when making layoff decisions (overlooking an employee’s dependents or disability status, for example)
- Waiting too long to act on an employee’s serious misconduct and blowing past the two-week window for extraordinary termination
By the time a dismissal protection lawsuit is filed, the opportunity to fix these errors has largely passed. Getting the process right from the beginning is significantly cheaper and less stressful than trying to clean it up after the fact.
How RemoFirst Simplifies German Employee Management
Between the KSchG, the BetrVG, the BGB, and the MuSchG, German employment law can quickly feel overwhelming, especially for companies hiring remotely without a local presence in Germany.
If your team isn’t familiar with German labor law, what seems like a straightforward HR process can quickly become complex. Strict requirements, formal procedures, and employee protections all come into play, and the consequences for getting it wrong are real.
That’s where an Employer of Record (EOR) like RemoFirst can help. We enable companies to hire and manage talent in Germany and 185+ other countries without setting up a local entity.
We handle compliant employment contracts, payroll, benefits, and even complex processes such as termination, in line with local law. That means your team can stay focused on running and growing the business instead of parsing complex German legal codes.
Book a demo to see how RemoFirst can help you manage your German workforce.
